7 ways couples can manage their money without fighting

Couples often prefer to manage their money like how their parents did. However, a couple's unique situation may require a style different from their parents'.

Here are seven ways of managing couple finances:

1) To Each His Own

Each person handles personal finances in separate accounts.

For example, Barry is a widower whose ex-wife had cancer. To pay for her medical expenses, Barry depleted his savings, borrowed heavily on his credit cards, and took personal loans. While paying off his debts, he enters into a new relationship with Iris. They want to buy a property together. However, Barry might be unable to take any loan, having maxed out his borrowing facilities. Barry and Iris keep their finances separate until his finances become healthier.

This also works when:

- One party's finances are much more complex than the other, such as when there are multiple sources of income.

- One party has secrets to hide. mutual trust is lacking.

- Both parties spend money very differently or are unsure of their long-term commitment to each other.

What it requires:

- Simple financial planning.

- Sophisticated estate planning, due to individually owned assets.

4 ways to manage your money as a couple in Singapore

  • 1. Individual Accounts

    If the salary difference between the two of you is wide, keeping individual accounts may make things look 'fairer'. It's also great for couples who may not share similar spending patterns so each can still have the autonomy to spend on themselves without going through unnecessary conflict.

  • 1. Individual Accounts

    You will need to agree on how you should split the bills - are you going 50/50 or by percentage proportionate to each's earning power?

  • 2. Share A Joint Account

    In this situation, both of you will combine your income into one single account which will be used to pay for all expenses, big or small.

  • 2. Share A Joint Account

    This can make paying for bills a lot easier and can make couples feel closer due to a shared responsibility. However, you will still need some rules or this arrangement can incur some resentment from certain types of people.

  • 3. Sharing Some Expenses

    This could be the best sort of compromise, as both sides share some responsibility while they still retain autonomy over their individual wants.

  • 3. Sharing Some Expenses

    You can decide on a fixed monthly contribution from each person into a joint account which is used to pay for shared expenses such as mortgages, household bills and perhaps holidays and other big-ticket items.

  • 4. Sole Bread Winner

    While this situation may not be as common these days, there could be times where one half of the couple becomes unemployed for various reasons - sickness, retrenchment, taking a sabbatical, etc.

  • 4. Sole Bread Winner

    If the other has to shoulder the entire financial responsibility of the family for a while, there has to be a clear guideline on what to spend on so as to reduce feeling of unfairness.

2) What's Mine Is Yours

Combine all finances in joint accounts.

Young adults Harry and Gwen have been dating for years. They have similar personalities, hobbies, and life goals. They do almost everything together. Each cares deeply for the other's family. As they make similar financial decisions, they decide to combine their resources in a single account.

This works when a couple:

- Want to seal their long-term commitment to each other.

- Have shared hobbies, combined financial goals, and straightforward finances.

- Are close to their families.

- Have mutual trust.

What it requires:

- Sophisticated financial planning.

- Simple estate planning with joint ownership of assets.

- Open communication about each other's spending.

3) You're My Equal

Each person owns an account and contributes equally to a joint account.

In Diana's family, the women are strong-willed. In Steve's family, men make the decisions. Unable to agree on their money management, Diana and Steve hold separate accounts. However, they need to pay for their house and daily household needs. They pay for these expenses from a joint account to which they contribute equally.

This works when a couple has:

- Some combined financial goals, but want some independence.

- Roughly the same income.

- Moved in together and have shared household expenses or shared savings goals.

What it requires:

- Complex financial planning and estate planning.

9 money mistakes married couples make

  • Couples should talk about where they got their financial values from to better understand each other's attitude toward spending.
  • Financial disagreements often result from not understanding each other's values. For instance, Sally grew up the youngest of 12 children and was always told to wear hand-me-downs. As a result, she feels happy every time she gets a new dress. While it is not right to spend excessively, her husband can work towards communicating a financial understanding with her by knowing her money story.
  • Couples may avoid any form of financial discussions because they are afraid it could lead to a fight. However, pretending the issues doesn't exist will not make it go away.
  • Couples should seek financial advice together, and make it a point to discuss their mortgage, expenditure, insurance, loans, savings and other financial concerns regularly.
  • Money troubles and a bad credit history cannot be kept secret for long. The truth will eventually come out if you are living together with your spouse and making joint plans for the future such as housing or car loans.
  • the relationship will turn sour when money secrets are brought to light simply because there has been a loss of trust between two parties.
    Always be open and frank about debts or loan issues you are facing. The couple should work together to address these issues, instead of keeping secrets from one another.
  • When you start a new life together, it is important that you both talk about how much you expect to spend and contribute every month. Set aside a certain amount for expenses, and discuss if there are any exceptions to the rules you set.
  • Most importantly, stick to the budget and rules you set. Each person has to help the other stick to the budget because it surely isn't easy to stick to tight routines month after month. Make sure the burden distribution is equal as well, to avoid any cause for argument. Just remember to keep your financial goals clearly set so achieving them will be made easier.
  • So you're both bringing in a fair amount of money to the household each month, but are you factoring retirement into your finances? You may be able to sustain your standard of living with the current income, but if you want to maintain it in old age, you will have to think of ways to finance your expenses when you're no longer working.
  • As a couple, you should talk about your career plans and share your thoughts on retirement with each other. At what age would you like to semi-retire? What will you standard of living be when you stop working? Will you have a car even when you're much older?

    It's good to start thinking about your golden years so that you can actually enjoy it by the time you get there. Some couples make the mistake of planning to pay for their children's education, but neglect their own retirement completely.
  • Most couples would have already discussed the possibility of having children before they got married. Your choice will affect the way you set your budget and the way you save money significantly.

    If your combined income is not very high and you wish to have children, you must speak with your spouse about adjusting your standard of living so you can accommodate one more mouth to feed in the house.
  • Also, will you be a single or dual-income family after children arrive? How much should you set aside for your child's education and healthcare needs?
  • Taxes play a big part when it comes to expenses, so part of figuring out your married finances is also figuring out how you and your spouse will pay for taxes.
  • Make a systematic plan to ensure your taxes are paid for promptly, so that you are ready to do so when it is time to file taxes.
  • If both parties are concerned about keeping up an appearance, they could end up overspending on things that don't matter from luxury cars to property or fine dining.
  • It is always important to remember that your relationship and family come first in your marriage. Set goals that are family-centric to prevent yourself from going overboard in your chase for a better lifestyle.
  • Newly weds might not like to discuss death and illness but the reality is that you are not invincible. Make sure you have an emergency plan to cover your financial needs in case one person falls ill or passes on first.
  • Such plans range from having a will, buying home and health insurance policies, and also diversifying your income.

4) I Pay, You Save

One person pays for everything. The other saves/invests all of his/her income.

Scott and Jean want to take up a full-time university course, but cannot do so simultaneously. They first accumulate savings, living on Scott's earnings and saving all of Jean's earnings. After building their savings and emergency fund, Jean goes for full-time study. By now, they are used to living on Scott's salary. When Jean finishes her studies, she finds a job with income roughly equal to Scott's salary. Scott then goes for his further studies.

This works when:

- One person earns much more than the other. 

- A couple goes single income in future, as it disciplines them to survive on one person's income.

What it requires:

- An income replacement plan for the one whose income pays for all the family expenses, in case she or he becomes unable to work

- Family emergency fund.

- Disciplined spending.

- Budgeting for leisure.

5) The Fair Treatment

Each person contributes an amount proportionate to his/her income.

Henry, a scientist, earns a stable income. His wife Janet starts an interior design company. At first her projects are intermittent. Some months she earns nothing. Hank contributes more to their shared account. Janet contributes when she can. When Janet's business flourishes, she takes over contributing more to pay for their shared expenses.

This works when:

- One person's income is much higher than the other's, and he/she is uncomfortable with the other contributing the same amount.

- Both have different lifestyles.

- One party is switching career, or starting a business.

6) Pay As You Use

Each person pays for the products/services that he/she use more.

Peter is a photojournalist. Mary-Jane is a fashion model. To look her best, she uses beauty products and services. She pays for their magazine subscriptions, including her beauty magazines and Peter's photography journals. Peter buys cameras, lenses, computers, and photo-editing software. He pays for the family computer and related online services.

This works when one partner:

- Does not want to pay for the other's hobby.

- Has an expensive hobby, like shopping, collecting luxury items, travel or uses a household service much more than the other, such as internet, cable TV, or garden services.

The 4 biggest pitfalls of opening a joint account with your spouse

  • While the administrative convenience of joint accounts is clear-no more splitting bills down the middle, here are some reasons you might want to think twice before giving your other half access to all your money.
  • No matter how well you think you know a person, it's always a surprise to discover he spends $200 every time he goes out for a drink, or that her facials cost more than this year's pay increment.
  • While joint accounts are useful when you've got joint debt, like a housing loan on your marital home, you might not be too pleased when you realise you're contributing to your spouse's study loan repayments for that degree in Egyptology she took 10 years ago, or his credit card debt incurred through all those "business meetings" at KTV lounges.
  • Even if you've been the one contributing 90 per cent of the funds to your account, as a joint account holder your spouse is also regarded as the rightful owner of the funds. This means he or she can legally do anything he or she wants to 100 per cent of the funds in the account.
  • Clearly, joint accounts are a tricky matter, and if your spouse had a nickname containing the word "psycho" back in university, you might want to think twice before taking the plunge.
  • It's probably wise to maintain separate accounts in addition to your joint account, and this is what many couples in Singapore do. Each spouse also gets a little bit of independence and privacy, so you won't find yourself having to explain why your drinks session that night cost $500.
  • This stops either party from treating the account as a subsidised shopping fund and also prevents each stock-taking exercise from devolving into a police interrogation.
  • Decide how much each person has to contribute and stick to the plan.
  • If you've decided to contribute $600 each month and your spouse $300, each party knows what to expect, as opposed to both parties vaguely agreeing to transfer an unidentified portion of their salary each month.
  • For instance, in the event that your spouse loses his or her job, unless you have a hole where your cold, cold heart used to be, you probably shouldn't expect him or her to contribute the same amount as before.

7) The Japanese Method

One person holds all the money and gives the other an allowance.

Clark comes from a rural Indian village. He came to Singapore to work in a tech company. His wife Lois, a homemaker, grew up in Mumbai and immigrated to Singapore. Knowing little about finances, Clark gives his monthly salary to Lois who makes the financial decisions. Lois gives Clark a monthly allowance.

This is useful when only one party knows how to manage money.

Risks:

- If the one managing the money becomes unable to do so, the other could be at a loss as to what to do.

- If the breadwinner manages the money, the other might feel a power imbalance in the relationship.

What it requires:

- An income replacement plan for the breadwinner, in case he or she becomes unable to work.

- Family emergency fund.

- Insurance for the non income earner because if he or she falls ill, becomes disabled or gets into an accident, the breadwinner may have to pay for others to look after the children and household or take time off and a pay cut to do it.

Each couple has to decide which method best suits their preference and situation. A couple does not have to stick with one way all the way, because situations change.

In addition, couples should seek the advice of a holistic financial planner to optimise their assets.

This article first appeared in Consultwho.sg

Daniel Tay founded Master Money Management to provide holistic fee-based financial planning. He is listed on Consultwho.sg, a platform that helps users with their personal finance issues.

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