Seven essential components to managing finances in a relationship
When it comes to managing our family finances, my husband and I have different roles. I handle the daily work of it. I like to look at our accounts, track our spending, and review our progress. While I enjoy being in the weeds, my husband much prefers the 10,000 foot view. This allocation works for us.
The economic principle of specialization suggests that this is an efficient way to handle our money – I am good at the small details and he is good at big picture thinking. By having our own roles, we’re efficient and effective.
What else makes our joint management work well?
Here are the main components that are critical to managing finances together. These work if you’re managing money with a partner in an intimate relationship or as business partners.
A single bank account: All of our income goes into one bank account. We don’t have separate accounts. We treat our incomes (regardless of who earns it) as a joint income from which we base all of our expenses.
Intention: We decide, ahead of time, what we need to accomplish and how we’re going to spend our money. There are the obvious necessary expenses like our mortgage, utilities, groceries, and car maintenance. And there are the less obvious – how much to spend on clothes, hobbies, fun money, and our kids’ activities.
Open Communication: We have regular, open communication about how we intend to use our money. We have periodic conversations about where we are now and where we want to be together. Our conversations help us ensure we’re making intentional choices that can help us create the future we desire.
Sense of Fairness: Fair isn’t always equal, especially when it comes to who earns what and who does what. We each aim to contribute to the household in good faith and with the underlying interest of supporting our family. If it ever feels unfair, we go back to number 3 above – regular conversations.
Respect: We support one another’s goals and values, and we build those things into the budget. When there is just one pot of money, we must acknowledge both individuals’ interests and make space for them.
Common Values: We understand the bigger picture and the long-term goals, and we understand what every decision means within that context.
Clear System: We divide other tasks that help us stick to the budget we set. For example, we prefer to use our resources to eat at home, so meal planning and grocery shopping is a must. I enjoy these things, so my husband takes on the kids during those times. Certain other house tasks I don’t enjoy (like organizing), so my husband is in charge of those. We share this load as fairly as possible.
Do you manage your finances with a partner? What works well for you? Are you on the same page? Who handles which responsibilities?