NerdWallet's Smart Money Podcast - How do we manage money as a couple?

Episode Date: February 3, 2020

Yours? Mine? Ours? Managing your money as a couple can be stressful, and there’s no one right way to do it. Sean and Liz offer some strategies for figuring out what will work best for both of you. As always, send us your money questions! Email [e-mail] or call or text the NerdHotline at 901-730-6373.

Hello, and welcome to the NerdWallet Smart Money Podcast, where we answer your money questions in 15 minutes or less. I'm your host, Sean Piles, and joining me is my new official co-host, Liz Weston. Smart Money superfans will remember her from past episodes, and I'm so excited that she's joining me full-time on the show. Liz is a certified financial planner, and she's been helping consumers tackle their thorny money questions for decades. Hey, everybody. All right, let's dive in. This episode's question is from John. He says, my husband and I have been happily married for a year, but have reached a disagreement on how to handle our finances. I think that we should have a joint bank account only to pay the bills, with each of us putting in a percentage of our incomes

while retaining separate accounts for everything else. He thinks that we should have just a joint account. I'm the main breadwinner, so it's primarily my money that would be going into the account, and I'm just not comfortable having only a joint account. While I have no problem spotting my husband for things, I don't like the idea of his being able to spend my money without my saying so. I'm also concerned that if we have a shared account, we won't be able to surprise each other Oh, wow, Sean. There's a lot in here. Yeah. Yeah. But I really love questions like this because it gets to the personal and personal finance. And it's about balancing disparate incomes, managing household finances, but it's also about communication and how you retain privacy in a relationship. In this episode of NerdWallet Smart Money Podcast, we're going to give you our nerdy advice for how to talk about money with your partner, offer different ways of co-managing

your money, and then suggest a few healthy money habits for couples. Then at the end, we'll leave you with the takeaway tips so you can put all your newly acquired knowledge into action. And before we dive in, a quick plug to send us your money questions. You can text or call the Nerd Hotline at 901-730-6373. That's 901-730-NERD. Or you can email us at podcast at nerdwallet.com. All right, let's get to answering John's question. Okay, I first want to touch on money communication

in relationships. When you've hit a certain point in your relationship, hopefully before you're thinking of shacking up together, I think it's really important for you both to lay out your finances so you know what each of you is working with. That means talking about your income, your expenses, your debt, your credit, any past money troubles you may have had. And yeah, it might be awkward in the beginning, but you'll get over that, I promise. The more you do it, the easier it becomes. But the important thing is that you just have to have a shared understanding of both of your finances so you know what you're getting into have a shared understanding of both of your finances. So you know what you're getting into, what your strengths are, what your weaknesses are.

And that can help you establish shared goals as well. And it's really important for the person who's good with money or making more money to actually listen to the other person. It can be super easy to think, well, I know what I'm doing and they should just do what I want. But that can cause all kinds of problems. Just ask me how I know about that. Yeah, I'm going to guess it's the 20 some years you've been married to your husband. We've learned a lot in that period. And it really took me a while to get over that hump of thinking, well, I'm the money expert. I know how to do this. It's super important to have both people's perspectives involved. And you're talking

about all this stuff. You don't start off just understanding where everybody's coming from. It's your history with money. It's your experiences along the way. It's what's worked in past relationships and what hasn't. All those things can inform where you are today. And John, I think that part of your conversation with your husband should be asking why your husband wants only a joint account and what shared goals that will help you achieve. Since you're the main breadwinner, maybe he feels like he needs your additional income to cover daily expenses. Or maybe he just likes the idea of having absolute openness and honesty with your spending. I want to mention something that's really important, which is John is talking about

my money. And I know some people are going to respond to that by saying, no, no, no, it should be all our money. Actually, that's not realistic. There's no one right way for couples to manage finances. For some couples, having everything together is great. Other couples want to keep everything separate. Most of us are somewhere in between. So keep in mind that what works for your friends or what worked in past relationship may not work for you now. Yeah. It seems like there's a spectrum here, as you mentioned, from totally separate to totally joint. I'm wondering, Liz, how have you and your husband handled this over your two-some decades together? It's mostly joint at this point. We had the issues that John was talking about

where we would spend the same money twice or we would not be able to surprise each other with gifts. So what we worked out was that our paychecks go into a joint account and that's what's used to pay bills and save for the future. But there's also small amounts that are transferred out into separate accounts for each of us so that we have our no questions asked money. That way I can buy him gifts. He can buy me gifts. We can have our little indulgences and it really helps to avoid a lot of

fights and to have some fun with our money. Yeah. Plus you guys are constantly giving each other gifts, which sounds amazing. So love that. My husband's a great gift giver, I have to say. Definitely an art form there. But yeah, my partner and I, we tend to be more on the mostly separate end of the continuum here, which I think really works for us. We're not married, but we do have a house together. And there are a lot of expenses that come with that. There's property tax, there's water, electric, all sorts of things that pop up. And what that ends up meaning is that while I have some bills in my name, and he has some bills in his name, we just end up Venmoing each other a lot. And it's maybe not the most graceful thing when I think, okay, I'm sending him 50 bucks for this, he's sending me 60 bucks for that. It seems a little silly, but it just

works out for us. And that's where we are right now. And that's fine. Yeah, absolutely. There are a lot of different ways to handle the mostly separate setup. You can each contribute a certain percentage of income or a certain dollar amount. But again, it's totally fine to keep things completely separate if that's what works best for you. If you do have joint accounts or mostly joint accounts, there usually needs to be some sort of what we call an ask limit. In other words, if you're going to spend some money over a certain amount, you need to get the other person's okay. If money's super tight, that might be a low amount, you know, 25 bucks, 50 bucks, 100 bucks, whatever it is. As you get

more affluent, it could be higher, but those ask limits can be really helpful to avoid a lot of fights. And when you're communicating and talking about these different options, I think that it might be a good idea for you, John, to try out a few different ways of approaching having shared and separate finances. So maybe for a couple months, try being entirely separate. And then a couple months, maybe being a little more joint and just dabbling with each part of this spectrum and seeing what you do and don't like. But I really like the idea of doing it for at least a couple months, because then that way you're living in this and it's not just a trial period, you can really experience the pros and cons of each option. And then when you come back together to communicate, you can express that to each other, and then find some sort of middle ground that works best for both of you. Exactly. And you mentioned communication again,

so I will give my pitch about why it's so important to over-communicate. You really do want to make sure you understand where the other person's coming from. And when you're having these discussions, you can ask each other questions like, what was your earliest memory around money? That can be super revealing. How did your parents handle their money? Which can give you some insight into how they've seen couples work this out in the past. Another question that could be helpful, what was your biggest money trauma? A lot of us have these money traumas somewhere in our background, and that can have a big effect on how we look at money today. Just asking these questions and getting the answers that could give you a lot

of insight into why the person is the way they are around money and what they might need to be more comfortable handling money together. Asking each other these really thoughtful questions and answering them earnestly can be really beneficial and honestly really cathartic. Because again, working through these issues is about more than just managing your money as a couple. This is also about having a shared understanding of each other's strengths and weaknesses, and a lot of that is informed by our past. So then once you've dug through your childhood traumas and talked about that time your sister stole your allowance, then you can finally start to be a little more forward-looking and set some shared goals together. Financial planners will tell you the first thing you need to do as a couple is figure out your joint goals. And that takes a lot of discussion.

Is it saving for retirement, paying down debt, buying a home? Those are all big goals. There might be smaller goals along the way that you want to get to, but coordinating your finance is important even if you're keeping things completely separate. And the bedrock of any good goal is going to be good habits. So when you're talking with your partner, make sure that's your first one that you establish. Have regular communication and an ongoing dialogue about what your goals are. And also talk about the daily actions, aka habits, that you're going to enact that will get you there.

If you're saving up for a vacation, how are you trimming your spending on a daily basis to save up more money for that? Or if you're paying down debt, are you making those monthly payments that you need to get debt-free in a reasonable amount of time? And no matter where you fall on the spectrum of joint or separate finances, the one area you should overlap is your shared understanding of each other's money

and your goals and how you're both working on a daily basis to build that life that you want together. It's also okay to have one person be the chief financial officer and handle most of the money issues. That's what we do in my household, but the other person needs to be in the loop. You need to have regular money dates where you're talking about money and you need to make sure the other person knows how the bills get paid. So if something

happens to you, they can step in. So again, it's okay to have a CFO, just make sure the other person is in the loop. Yeah. And it's important for that CFO to keep compromise in mind throughout the entire conversation, because it is pretty easy for someone who knows the most to just say, okay, here's how we're doing things. Get used to it. But again, that doesn't, to me, seem like a very open and honest and trusting relationship. Yeah. Great. Well, I think that about covers it for this episode. Let's get to our takeaway tips. Liz, do you want to kick us off? Yes.

Again, the most important thing, communicate. If you haven't done so already, you want to lay out your finances with your partner. If you're frightened by that prospect, ask yourself why. Probably the best approach is just to rip off that bandaid and get going. You will feel a lot better. I promise. And when you do communicate, align on those shared goals, be upfront about your histories, and set goals that you can accomplish together. And when you're working out your finances, try out different methods of having shared and separate finances.

Experiment for a couple months, see what you do and don't like, and at the end of the period, go back to that money date and communicate again. It's really a cycle of communicating, trying things out, communicating, trying things out until you find what works best for both of you. Exactly. Lastly, focus on your daily money habits. Work on the actions that will help you and your partner meet your shared goals so you can have the life that you want together. All right, that is all we have for this episode. Do you have a money question of your own? Turn to the nerds and call us or text us your questions at 901-730-6373. That's 901-730-NERD. You can also email us at podcast at nerdwallet.com. Also visit nerdwallet.com slash podcast for more info on this episode. And remember to subscribe, rate, and review us wherever you're getting this podcast.

And here's our brief disclaimer, thoughtfully crafted by NerdWallet's legal team. Your questions are answered by knowledgeable and talented finance writers, but we are not financial or investment advisors. This nerdy info is provided for general education and entertainment purposes and may not apply to your specific circumstances.

All right. And with that said, until next time, turn to the nerd.