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Setting Money Ground Rules With Your Partner

This article was written by in Family and Life. 10 comments.


Do you lie to your spouse or significant other about money?

Money may be one of the most popular issues causing strife in a relationship, but deeper issues are usually communication and values. Lying about money is one way to ensure that a relationship will fail over time, but for most people, small, occasional lies do little harm and help to ensure a smooth coexistence. According to a 2010 survey, 80% of married people keep some secrets from their partners about money.

When it comes to frivolous spending, many people don’t want to tell their partner out of embarrassment or because they know that it might start an argument due to a clash of values. 24% of husbands and 43% of wives lie about spending on clothing and accessories, 19% of men and 8% of women lie about spending on alcohol, and 12% of men and 21% of women lie about spending on gifts.

If a couple doesn’t agree on some ground rules, selfish spending can become an issue when it is inevitably discovered. Different couples have different approaches to managing household income and expenses.
When relationships decide to combine finances — or to keep finances separate — setting some ground rules can help.

CoupleIn some states, marriage automatically combines finances from a legal standpoint. While a couple could decide to keep their finances separate, according to the law, all involved money, assets, and debt is owned and owed equally by each partner. The decision has been made for you in terms of the law, but you could still choose to operate finances separately for practical reasons.

If a couple decides to keep finances separate, implicit in this decision is for each partner to allow the other to make decisions with their own money, even if it affects the other partner. Perhaps one ground rule is necessary: keep your partner informed of anything that might affect the other. For couples who agree to keep finances separate, trust inherent must be strong.

For couples who decide to combine finances, the ground rules will be more involved.

1. In two-income households, each partner should contribute to shared expenses fairly. To contribute “fairly” can have different interpretations, so couples should decide what that means. For couples with roughly equal income, it could be fair for each partner to contribute exactly half of the rent or mortgage payment to this particular bill. It could be fair for each to dedicate half of the cable bill and other utility bills.

For a couple with widely divergent incomes, it might make more sense for each partner to contribute a percentage of his or her income to each expense, so the bills are paid according to the ratio of one person’s income to the other. If one partner earns $150,000 per year and the other earns $30,000 per year, should they both need to contribute $1,000 a month to the mortgage payment? It might make more sense if the partner earning more contributes $1,667 and the lower-income partner contributes $333 per month.

2. Each partner should contribute to shared savings. According to his or her ability, some remaining income should be saved in a high-yield online savings account. Whether each partner contributes the same amount or the same percentage of his or her income, both partners should agree on the importance of saving money for future flexibility and financial independence as well as saving for emergencies.

3. Have a debt repayment policy. More often than not, one person enters a relationship with more debt than the other. Decide whether paying off pre-relationship debt is a responsibility of the entire couple or just the individual who brought it in, and debt repayment should be a prioritized goal. Any debt accrued since the combination of finances should be considered joined debt, in line with the ownership of all finances. Debt payment, like all expenses, could be divided equally or by the best of his or her ability to pay back based on income.

4. Do you need a prenuptial agreement? This is something a couple should decide before getting married. There is a stigma with these agreements, and they shouldn’t be used for one partner to establish financial control over the other. Many people would simply be offended if their partner asked them to sign such an agreement, but for a business owner, prenuptial agreements can protect the business and shareholders would expect the owner to take all precautions to do so. If one person wants to sign an agreement and the other does not, there could be a barrier of trust on both sides of the relationship.

5. Set up a Fun Fund and don’t ask questions. If income and cash flow allow for it, even a couple who combines finances could benefit from each partner keeping small, private savings accounts. These can be used for spending on some items that the other partner might judge as frivolous, like hobbies or clothing. It’s also a great opportunity for spending on gifts for the other, as spending from a private account is the only way to surprise your partner. The Fun Fund should be a place where you can have the freedom to spend as you see fit without affecting the finances of the relationship.

Of course, the ability to keep a private fund relies on the strength of the relationship. Each partner must be able to trust the other. If you feel your partner may be cheating on you, it may be difficult to allow even a portion of spending to be undisclosed.

6. Stick to a budget. For a single person, a budget can be simple to follow. Expenses are relatively well-defined, and income can be, too, in most jobs and career paths. Adding a new person to the mix, as is the case when a couple combines finances, is adding another variable. A flexible budget can help a couple feel free to spend on what they want after the needs are covered, and in tight situations, can allow couples to borrow from themselves to cover the necessities. A couple who combines finances should agree to stick to the plan.

7. No lying about finances that affect the relationship. The Fun Fund allows for expenses that don’t fit into the couple’s financial plan. That should alleviate the necessity for the small lies that happen when one partner doesn’t want to admit to a financial decision for fear of disappointing the other partner or starting an argument. Keeping the Fun Fund relatively small means that spending in this fund shouldn’t affect the overall relationship and should prevent one partner from single-handedly making a decision that causes trouble. Still, with both partners having access to the couple’s money, there’s an opportunity for lying. By setting a ground rule to avoid this practice, couples would discuss the important spending decisions in advance and learn how to agree on the important financial values, like saving for retirement, paying for a child’s education, or supporting an elder relative.

What other ground rules do you or would you set with your partner?

Money Magazine

Updated September 8, 2011 and originally published August 26, 2011. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 10 comments… read them below or add one }

avatar SteveDH

No Lies, No Secrets, & No Respect. These ground rules worked for us (#3 means each has the absolute right to say no, while each has the absolute obligation to respect that no). Please don’t take this as a criticism of your prose, but the use of the word popular in the first sentence prompted a chuckle.

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avatar PK

I’d have to say some of you points when the expenses are combined don’t make any sense. When you combine finances, there isn’t any more splitting of bills between the two individuals; that only occurs when you keep separate accounts.
Also, savings and debt repayment are part of the package once you decide to combine finances.
At least in MN, once a debt has begun to be paid from a joint income source, or when a paycheck is deposited into joint tenancy account, if the relationship is severed the funds or debt are split 50/50.
Yes that means you could be on the line for your roommate’s debt if they even once paid for it from your joint rent payment account.

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avatar Luke Landes ♦127,500 (Platinum)

That’s a good point. But some couples don’t combine finances in the most obvious way (joint accounts for everything), and in that case, it’s good to set a ground rule about how expenses will be handled. I’ve seen some couples who divvy the expenses differently — for example, “You’ll pay for the cable bill, I’ll pay for the groceries.”

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avatar Financial Samurai

Flexo, when ya pulling the trigger? What do you and your gf do currently regarding expenses? Will be interesting to know since you share with all of us your balance sheet. Cheers

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avatar 20 and Engaged

These are great points! I think there should also be a discussion about retirement too. Planning for retirement is huge and should be discussed early.

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avatar Cejay ♦1,521 (Half-Dollar)

Money is what hubby and I argued about so much in the early years of our marriage. Entirely different money styles and I was horrible with communicating what I needed and thought. So we almost divorced. I would add that it is important that couples set a date for monthly or quarterly summit meetings. Make sure that they are still on the same page as far as wants, needs and money managment. We have done this for the last 18 years.

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avatar DonnaFreedman ♦90 (Newbie)

I’m not planning gettin’ hitched any time soon. Been there, done that. If I remarried it would have to be for something really romantic, like health insurance. But if I decided to cohabit again, it would be with the request that each will provide a credit report so there’d be no surprises.
Sure, I *say* that I don’t have any debt (and I don’t), but how would my sweetheart know that unless he sees it on paper? And vice versa. I’ve heard grim tales about people who got married and THEN found out that dear wife or dear husband was carrying $50k in consumer and student debt.
It’s hard to talk about money. But it’s important.

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avatar tbork84 ♦1,867 (Half-Dollar)

The lying would be a huge issue, and it would not pertain to only financial information. I can’t imagine asking to see a credit report rather than actually having an honest discussion with someone that I trust.

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avatar Van Beek

Never lie and be completely open. Major spending are always common decisions of my wife and I together.

However, I want to be able to make my investments in the stock market without having to discuss this every time in advance. Therefore we have agreed which part of our savings I am free to invest without having to discuss every buy or sell in itself. She trust my strategy and this approach is working well.

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avatar qixx ♦1,895 (Half-Dollar)

I’d say the hardest part of combined finances is keeping my wife involved and getting her to make some financial decisions on her own. We track out budget on mint and instead of checking to see how much is left in a category she might wait 2-3 days until she remembers to ask me if there is anything left in category x to go pickup some item.

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