Find the approach that’s best for you
The decision to combine finances is a big step for any couple, and it can be both exciting and nerve-racking.
As with many other big transitions in life, there’s no “one-size-fits-all” approach to combining finances that works for every couple. The key is to communicate openly with your spouse or partner, explore your options together, and remain flexible as you work toward finding the best solution for you.
To help you get started, we’ve laid out four common approaches to merging finances, along with some basic pros and cons of each.
1. Fully combined
As the name suggests, this method involves fully combining all of your finances with your spouse or partner. Each person contributes everything they earn to a joint fund, and nothing is kept separate. All bills and expenses are paid from joint funds, all credit and debit cards are held jointly, and all investments are made collaboratively.
Pros: Couples may be drawn to this approach because it’s relatively straightforward and easy to apply; there’s no need for complicated math or extensive record-keeping. Some couples also prefer this method because it helps them feel more fully united, and because any income shifts for one partner can be balanced out and shared equally by the other.
Cons: Complications can arise if the partners differ significantly in their income or spending habits, potentially creating feelings of resentment or indebtedness. Some people may also miss the sense of independence, autonomy, and privacy that comes with having their own source of funds.
2. Set amount
Another approach is for each partner to contribute a set dollar amount to the joint account each month, regardless of how much they make. Shared bills and expenses are covered from the joint funds, and the rest of the couple’s money is kept separate.
Pros: Since both partners are contributing equally to cover their shared expenses, feelings of resentment and indebtedness may be less even if there is a significant difference in income. And because each partner has discretion over their own separate funds, they may feel more buffered from any differences in spending habits that may exist between them.
Cons: Some couples feel this approach to be too impersonal and disconnected from one another. Also, if one partner earns significantly more than the other, it may be difficult for the lower earner to keep up with their share of the contributions. The resulting difference in discretionary income could impede their ability to live the same lifestyle and share experiences together.
3. Set percentage
Similar to the previous method, this approach involves each partner contributing a set percentage of their income — such as half or two-thirds — to a shared fund, while keeping the rest separate. In this case, the dollar amount may change over time as each partners’ income rises and falls, but the percentage stays the same.
Pros: With this method, neither partner has to worry about making their payments to the joint funds, since it’s based on a percentage rather than a dollar amount. Even if one partner earns significantly less, they’ll always have some money left over for their own use.
Cons: As with some other methods described here, this approach can lead to differences in lifestyle and discretionary spending that may not feel sustainable for some couples. Also, if there is a significant change in income for either partner, there is a chance that the joint funds may no longer be enough to cover the joint expenses, in which case it would become necessary to re-evaluate and choose another approach.
In the proportional approach, each couple contributes toward their joint accounts and expenses in proportion to the amount they earn. So, a partner who makes 40% of the couple’s combined earnings would cover 40% of their shared expenses, while the partner who makes 60% of their combined earnings would cover 60%. The rest is kept separate and controlled individually by each partner.
Pros: Because contributions are calculated based on expenses and income, couples can rest assured that their bills will be paid even if one partner earns less or experiences a drop in income. Additionally, many couples feel this method to be fair and balanced because each partner’s contribution is based on their ability to pay.
Cons: As with other methods, if one partner earns significantly more than the other, feelings of resentment or indebtedness may arise — especially if a sudden change of income means one partner is left covering most or all of the couple’s joint expenses.
The information provided here is general in nature and may not apply to your specific situation.