Cash is King.
You’ve probably heard that before, but not in this context. By “King,” I’m slipping down to MerriamWebster’s third definition: “a (thing) that holds preeminent position.” How you manage cash may play a role in creating or crushing marital harmony.
You may be thinking that’s a stretch, but as many marital arguments center on money, it’s quite likely those arguments could focus on how you, as a couple, manage your income and expenses. Here are four approaches and some insights I’ve garnered after working with hundreds if not thousands of couples over my twenty plus years in financial planning:
Do everything together. On the surface, using joint accounts indicates a healthy relationship. With this approach, you have a single account that serves as the hub for all your month-to-month finances. Over my 20-plus years in financial planning, this is what I’ve seen most often. However, it’s not always the best approach. Your spouse may want the freedom to go on a shopping spree, buy gifts or just have some fun money that’s all his or her own.
Keep some and contribute. Sometimes dual-income couples set up a joint bill-paying account to which they will each contribute a specified amount. The household bills are paid from this account, but they keep the rest of their cash in individual accounts. I’ve noticed this approach has worked well for couples on their second (or third…) marriage. While they are embarking on a new “merger,” this approach seems to appeal to couples giving marriage another shot.
Divide and conquer. Here, you each manage your own accounts and agree on how you’ll split the bills. Essentially, each spouse controls his or her own cash, and together, a strategy is developed to meet joint obligations. This approach provides the maximum amount of individual autonomy, and I’ve seen it most often in couples that married late. Typically, they were well into their 30s or beyond with their own professional lives, financial habits and obligations that they each brought to the marriage.
The Chief Financial Officer. In some cases, one member of the marital team holds sway over everything. That person’s name is on the accounts, he or she pays all the bills and manages the money. I’m not a big fan of this because, in my mind, money management is a team game. However, if this is your chosen approach, it’s important to ensure that the non-CFO is involved and understands what’s happening on the financial front.
As I’ve learned, there’s no right answer to how you manage your money. We switched from doing everything together to a keep some and contribute the rest approach that has served us well. You’ve got to find your own sweet spot and as my experience shows, your first approach may not be your last.
What works for your family? Share in the comments!
About the Blogger: JJ Montanaro is a Certified Financial Planner® professional and part of the Military Affairs team at USAA. He’s a graduate of the U.S. Military Academy and has over 20 years of financial planning experience.
Disclosures: "Certified Financial Planner Board of Standards, Inc. owns the certification marks CFP® and CERTIFIED
FINANCIAL PLANNER™ in the United States, which it awards to individuals who successfully complete the CFP Board’s initial and ongoing certification requirements."
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