The Rational Investor: Financial Strategies for Couples

By Teresa Conley | November 04, 2017

For many couples, finances serve as a source of disagreement... or even contention. 

Teresa Conley is a CFP, Certified Financial Planner and a 401(k) Financial Advisor with Premier Financial Group in Eureka Humboldt CountyIn fact, a 2014 study of more than 1,000 married couples — all with household incomes above $50,000 — found that money matters took the top slot in the "source of contention" category, with 70 percent of respondents argue about finances; that' more than anything else, including distribution of chores, time spent together, even snoring! Money issues such as spending, debt, frivolous purchases, and savings are among the top issues couples tend to argue about. 

When it comes to dealing with finances as a team, there are several schools of thought as how to best approach this potential minefield, each with its own pros and cons. Here are three wealth management approaches to consider. 


Financial Strategy #1: Equal and Joint Control of Finances

This first — and traditional — strategy is based on a joint approach: both parties have access to finances through joint savings and checking accounts. Both take an equal role in making investment decisions and both participate in strategic financial planning. 

This approach emphasizes unity and requires a modicum of trust between the parties. Sharing budgeting, planning, and the paperwork that comes along with it requires cooperation, as well. Sharing joint income and expenses also means sharing past debt, which may become a source of contention. 

While joint finances may be practical, it can also get complicated. Joint Teresa Conley is a CFP, Certified Financial Planner and a 401(k) Financial Advisor with Premier Financial Group in Eureka Humboldt Countyownership may lead to complex legal and financial situations that, in turn, lead some wealth advisors to suggest a cautious approach. Joint finances may also mean that both parties are exposed to past debt, past creditors, and past credit history, which may affect qualification for certain income-based programs like Medicaid or federal student loans. Plus, very different money management habits may become a source of contention within a relationship.

Financial Strategy #2: Keep Income Separate and Divide Financial Obligations Equally

In this second school of thought, the joint finance approach (and the minefields that may come with it) is avoided altogether. Instead, couples may choose to keep their incomes and accounts separate, and split up financial responsibilities equally. 

For instance, one party may pay the mortgage and the utilities, while the other partner may make the car and cell phone payments, and pay the grocery bills. By allowing for control of personal income, this approach may remove contention over how each person chooses to spend their money... as long as the household bills are paid.

Teresa Conley is a CFP Certified Financial Planner and Financial Advisor with Premier Financial Group in Eureka Humboldt CountyIn a time when the average marriage age continues to rise and people spend a longer portion of their lives managing their own finances, this approach may make sense. However, cons to this approach may include:

  • "Gray areas" of responsibility or bills falling through the cracks
  • Lack of transparency about how much a spouse is making and/or spending
  • An "unfair" situation for the party that makes less but has the same level of financial responsibility
  • Questions of ownership, e.g. whichever partner paid for it, owns it.

Financial Strategy #3: The Triple Bucket Approach

If neither of these approaches sounds like the ideal solution for you, consider an alternate that seeks to find a happy medium: The triple bucket approach. While this system may require a bit more planning, it focuses on equality.

This approach requires each spouse to have a separate checking account for their income, while a third joint account is created for household bills and joint financial obligations, such as mortgage, utilities, or groceries. The couple must sit down and determine how much is necessary to cover all these expenses (with a cushion built in). Then each party contributes an equal percentage of their income to the joint account. 

While this system requires a bit more organization and planning than the other approaches, it does tend to be more "fair." However, potential pitfalls may include disagreement as to how each party gets to spend the rest of their income. 

Whichever system you choose, open communication is key. Sit down with your wealth advisor and determine which approach is best for you.

Posted in Financial Planning, Investment Guidance