How to Combine Finances as a Couple (without ending in divorce!)

Hi, everyone.  This is Lara Hammock from the Marble Jar channel and in today's video, I'll talk about combining your finances in a way that is healthy and financially fruitful for your marriage or serious relationship.

I've taken some informal polls and found that couples decide to handle their money in a bunch of different ways.  The methods seem to break down into 3 basic types:

• Traditional - both partners contribute to and take from the same pot.  
• Separate - These partners work their long-term financial relationship as though they are still roommates.  They each have separate accounts and they split the shared bills down the middle -- like mortgage, utilities, and groceries.  Or one person pays the bill and the other Venmos them half the money.  And finally, a
• Hybrid - of those two system.  This involves both partners contributing a certain amount of money to a joint pot.  Sometimes they will each contribute a percentage of their earnings to the pot to make it a little more equitable.  Sometimes they each decide on certain bills that they will pay.  Like one person pays the rent and the other takes care of groceries and utilities.

Here's the thing -- although any of these solutions CAN work, there is a lot of data showing that combining your money can make couples both more effective financially AND happier together.  Let's take a tiny bit of time to break each of these things down:

• Better Financially - Whether you like it or not, when you marry someone, your assets, your debts, and your belongings are all merged (unless you sign a prenuptial agreement, which is a whole other topic).  Instead of individuals, the state now sees you as a joint financial unit.  If you were to get a divorce, the judge would more than likely just divide each of your accounts directly down the middle -- it doesn't matter whose name is on what.  And here's the thing -- if you have debts that you need to pay off, or goals that you are saving for, those no longer belong to you as an individual -- they are now yours as a couple.  And the thing is — pooling your money is the best way to handle each of these financial goals efficiently.  Couples who put their money together pay off their debts more quickly, reach their financial goals faster, and build up more wealth.  After all, money begets money.   Put it together and it works harder for you.  The second point is that couples who combine their finances are generally
• Happier - and by that, I mean happier now and also happier long-term.  Couples who combine their money are less likely to get a divorce.  And yes, I know we are talking here about correlation rather than causation, but let's try to determine why this might be?  Well, one of the main components of a successful marriage is trust.  What can show more trust than pooling all of your money and deciding together how to spend it?  Couples who put their money together have to have more frequent discussions about finances.  Maybe that seems like it's just asking for trouble, but all of that communication, as long as it's done with respect and love, can help to define your priorities, establish your values as a couple, and step by step build a future together rather than one that veers apart.  

Okay -- so now that we've established that combining your money is good for your finances and good for your marriage, let me give you some guidelines to follow that will help to make this successful.  I'll do the quick ones first:

• Communication - For this to work, you really have to communicate frequently.  After all, you are managing your money as a unit, so everyone needs to be on board with most decisions.  Depending on your financial situation, the frequency of communication will be different.  If you are actively squeezing your budget to pay down debt, you may want to have weekly budget meetings.  People who have money left over at the end of the month probably won't need to discuss finances as often.  You should also have a trigger spending amount for when you need to discuss with your partner.  Say any single object over $200 -- or whatever works for you.  In terms of structuring this communication, I don't think anything beats a 
• Budget - I'm a full on budget nerd, but I really think a budget can help a couple to make decisions, plan ahead, and discuss their financial priorities.  I have lots of other videos on budgeting and budgeting apps that you can check out if you are interested.  Next, remember that a marriage is built on
• Trust - this is the person you agreed to spend the rest of your life with, give them some grace and trust that you will make these decisions well together.  If you are the “money person”, try not to micromanage too much -- it'll put a strain on your relationship.  Also, remember, each person has a different
• Style - Some people are savers, some are spenders, some are tight, some are free spirits.  Remind yourself that you were drawn to your partner for a myriad of reasons, don't try to force them into a different style.  And, if you are a budget nerd, appreciate that your partner's more carefree style may help to make your life more spontaneous and fun.  Which brings me to my main piece of advice -- create
• Separate Personal Funds - Okay -- who am I kidding?  This is an allowance.  Each person should have his or her own slush fund to do with as they please.  After all, we are all adults here, right?  Presumably, each person has independently managed their own money at some point without having to check in with another person.  That shouldn't stop just because you are married!  This realization hit me pretty early on in my marriage.  My husband and I have pretty different spending styles.  He buys expensive things and uses them for a long time.  I am cheap, but lose things constantly.  Just because we have different styles doesn't mean one is right and the other isn't.  And he deserves to be able to make his own choices without my intense scrutiny -- and vice versa (although to be frank, he doesn't really care how I spend my money).  So, how is this different from Separate money or the Hybrid model?  It's different because you combine your money and then you DECIDE together how much of your joint money to contribute to each personal fund.  This does not need to be equal amounts.  My husband has a much bigger allowance than I do since I work from home and don't have lunch or travel expenses.  For us, personal funds cover clothing, hair cuts, meals or drinks out (that don't involve the couple or family), personal subscriptions -- you get the picture.  Essentially, anything that doesn't benefit the family or overall household.  Now, there are a couple of ways you can implement these personal funds:
• Separate bank accounts - you can set up separate personal bank accounts for each person.  Then at the beginning of each month, transfer the set amount of money from your joint account into these personal accounts.  Then each person manages that account as they please.  If you are on a tight budget, having separate bank accounts does helps to prevent over spending.  Another way is to set each fund up as a
• Budget Line Item - we use YNAB for budgeting.  You can create a budget line item for each person and budget money for that item at the beginning of the month.  You just need to make sure that your system rolls over whatever is left over at the end of the month since you should be able to save from month to month for bigger events or purchases.  If you like this approach, but don't want to have to every personal transaction come through YNAB, you can set you or your spouse up with their own credit card that you pay off at the end of every month that goes against that budget line item.  Many couples are fine with communicating about household purchases, but really prefer to manage their own personal accounts without a ton of input or commentary from their spouse.  

And that's it.  Let me know what you think.  Comments are always appreciated and thanks for watching!