The Secret to Successfully Managing Money as a Couple

Most everyone agrees that money is the number one thing that couples fight about and is a leading cause of divorce. With that in mind, one of the early challenges my wife (fiancé at the time) and I faced as we planned our future together was how to approach the financial side of our upcoming life together. We’d seen how friends and family approach it, including a few instances of how ugly couples finance can be, and wanted to come up with something better. We started out by thinking through what we liked and didn’t like about how others do it, and ultimately landed on a “family income” approach and began using our newly coined “Frivolous Accounts.” Keep in mind that this all took place before we were married when we were both working very entry level jobs and had no children but it has been time tested as we continued using the same approach through the early years of our marriage, through several moves, and for a few years after our daughter was born.

To start, it’s important to understand that we’re skipping past a major step in any financial relationship that I’ll cover separately - having consistent, open and honest conversations about your joint financial situation. I brought over $20,000 in credit card debt into our relationship while my wife was debt free. It wasn’t an easy conversation for me to lay it all out but we wouldn’t be where we are today without being completely transparent, creating a plan, and then reviewing our progress toward our plan very frequently.

Before getting into our own plan, let’s take a look at some of the strategies we’ve seen other couples use that influenced our approach:

The Leave it to Beaver Style - I honestly have no idea if the label is accurate but that’s what it feels like. In this one the man controls the money, period. If the wife has an income, it most likely flows into an account that the man is primary on and she most likely has no idea where it goes from there. She probably has to come to him for “approval” to get what she wants/needs. Needless to say, gender roles in most relationships have changed from what they had been years ago. It undoubtedly works for some but neither I nor my wife could live with this financial lifestyle.

The Seagull Approach (Mine, Mine, Mine) - this one could also be labeled the Roommate approach, or I’ve also seen it labeled the Yours, Mine, Ours approach. In this scenario each spouse covers specific expenses but in general their income is theirs to do with as they choose. There’s very little partnership or joint planning. In most cases there’s also very little communication regarding the actual expenses, savings, or retirement planning. For example, one spouse may be responsible for the mortgage, insurance, and cable and another pays for the car payments, utilities, etc. All income that’s left after the expenses are paid stays with the individual spouse to do with as they choose. Again - not for us, not enough “we.”

The His and Hers - this is one where the couple seems to be in it together but also kind of doing their own thing. This one is the closest to what we ended up doing but still had some areas that we don’t agree with. The basic idea is that the couple sets aside a specific amount from their paychecks that goes to a joint account for their joint expenses. There’s definitely more communication on expenses, which is a positive, and more awareness of where money is going. However the remaining amount is still entirely free for the person to do with as they see fit. We anticipated that eventually my salary would outpace my wife’s and in thinking through it we believed that this approach could be one that would allow animosity and resentment to build.

With all that in mind, we identified what was most important to us:

1. It can’t/shouldn’t matter who the major breadwinner is. The money each of us makes is together our money, not mine and hers. Our thought was that if we start the relationship all-in, together, we’d be in the best position to adjust quickly based on what life throws at us.

2. We agreed to talk through major purchases together - no actual dollar amount was set but a hundred dollars or more seemed about right. Keep in mind that we were making around $60k as a couple and had a good amount of debt. We’d seen first hand what it could be like to have one spouse spending irresponsibly with the other spouse unaware so the intent was to cut that off before it could happen.

3. Even with #2 above, we also didn’t want to feel like we needed approval to spend money on small things we wanted to buy. My wife and I spend money on very different things. For me it’s books, video games, or the occasional casino outing - lots of impulse buys. For her it’s clothes, technology, and experiences with friends. We needed to find a way to balance not needing approval for everything with leaving no opportunity for one side to throw off our balance and progress toward goals. We’d heard from others that it’s easy for couples to build resentment related to what they each spend money on so we wanted to get in front of that before it started.

4. Check-ins - we agreed to check in on our budget monthly and our retirement at least twice a year. These check-ins were thorough, down to the dollar. My wife actually loved the tracking part of our budget process so I created an Excel file where she noted where every penny of our income went each month. We also used the check-ins to confirm our financial plan and make adjustments as needed. Typically tax time ended up being one of the thorough check-ins where we’d formalize new goals.

Interestingly, no system that others were using would fulfill every element that we wanted to include in our own approach. In particular numbers 1 and 3 in our list were gaps based on the experiences of others but to us they were probably the most important parts. We needed to get creative. What could give us the freedom to spend on things we individually wanted to while also making sure we approached our financial lives together as one team? Answer - Family Finance and Frivolous Accounts.

The idea is simple - all of our money is “family money” first and foremost and then each of us gets a very small portion every pay period that we labeled “frivolous.” One of the keys to our set up was that the frivolous money was the same fixed amount for each of us regardless of how much one of us made. I firmly believe that this removed the potential for conflict entirely and reinforced that we were one family with one family income, not two separate people.

To figure out what that small amount could or should be we first went through all the normal budgeting and planning steps, which I won’t cover in depth here. We created a larger plan for paying off debt, established a plan to build our safety nest, and some longer term goals and then figured out how much we could afford to give ourselves to spend on non essentials each month. Our jobs paid us each biweekly so initially we set up automatic deposits to send $50 on paydays into individual checking accounts we each set up and the rest went directly into our joint account. $50 may not sound like much, but given our debt and goals it was perfect. It forced us to save a bit if we wanted to buy ourselves something larger and removed some of the instant gratification element that’s so rampant these days.

My $50 was my frivolous money and I could use my frivolous money on whatever I wanted. My wife could do the same with hers and neither of us could ever give the other any grief over what it was spent on. We included buying clothes as coming from the frivolous account but all other essentials were paid for from the joint account. It actually ended up being fun at times. I remember multiple times where one of us purchased something new and when the other noticed we’d just say “Frivolous!” and laugh about it.

We maintained the Frivolous Account approach for many years, increasing the fixed dollar amount slightly as we accomplished our goals and earned raises, however it always remained an equal amount for each of us, regardless of whose salary was higher. I fully believe that this approach removed all of the stress that might have come from our own unique spending habits and the family money approach overall is the reason we’re debt free and saving well for retirement.

If you’ve tried something similar I’d love to hear what worked for you. Wherever you are on your financial journey, I wish you all Good Luck!