It can be difficult enough to keep track of your finances—but when you’re in a long-term relationship, things become even more complicated. At some point in a relationship, you’ve been together so long and your lives are connected enough that your finances start to blend together. When that starts to happen, it’s time to figure out a financial game plan.
But just how combined should your finances be? When you’re in a couple, managing your finances should be a balance between transparency and simplicity. “By now you have probably figured out that we are big fans of keeping things as simple as possible,” Priya Malani, cofounder of Stash Wealth, a wealth management company, tells Brides. “All too often, we see clients who have hit their 30s and collected a bunch of random different bank accounts which end up just floating around out there- forgotten passwords, empty accounts accruing low balance fees, one linked to Paypal, one linked to Venmo, etc. Too many bank accounts can create a cluttered system that becomes very inefficient and hard to manage. Too few bank accounts and it’s hard to tell what’s what.”
On thing to bear in mind is, if you’re married and don’t have a prenup, laws in your state might affect who actually has a right to the money in your bank account. Just because your name is on it, doesn’t mean that, in the event of divorce, it’s all yours. Make sure you know the law. But for day-to-day spending in a functioning relationship, this is a good outline.
The key is in combining your daily spending and saving, but still giving yourself some options for splurging on the side. Here’s what Malani suggests.
1. One Joint Checking Account
Once you’re at a certain point in your relationship, it makes sense to have a joint checking account for most of your expenses and day-to-day living — especially once you live together. “At Stash we call this your ‘money hub’ because we think of it as the headquarters for you and your partner’s financial life,” Malani explains. “All the money flows into this account and out of it. Ideally, both paychecks (after 401k contributions) should directly deposit into this account. That way you will have an instant picture of the kind of lifestyle you guys can afford together.” This should be the center of your financial world together.
2. Multiple Joint Savings Accounts
Then, you need to start thinking about saving. “To save successfully, the first thing to do is to set up a joint savings account for each savings goal and nickname it according to what your saving for. Trying to save up for a trip to Turks & Caicos, open and nickname a joint savings account ‘Turks & Caicos’. Saving for the sake of saving is a surefire way to never save successfully. When the money isn’t earmarked for anything in particular, it’s much easier to dip into it. By nicknaming your savings account, you’ll be much less tempted to touch it.”
Malani also suggests that your joint savings accounts should be kept with an online bank. This not only means that they are out of sight and out of mind, but they also can earn more interest that way. But, perhaps most importantly, they’re not easily accessible — you’re less likely to get money out of it unless you absolutely need it. (This works really well — my online savings account takes 3-4 business days to get to my check out, which keeps me from dipping into it for impulse purchases.)
You can automate payments from joint checking to your joint savings account, to ensure that you’re saving a certain amount every month without thinking about it.
3. OPTIONAL: One Separate Checking Account For Each Of You
OK, so even though combining your bank accounts might make sense, it feels like a big step — for me, the idea of having all shared finances makes me feel a little panicky. If you feel the same way, Malani also suggests that you may want to keep separate checking accounts. “We dub these as your ‘side stash.’ From time to time, we advise couples to keep a separate checking account for one of two reasons: You want to ensure that gifts you buy your partner stay a surprise, or you and your partner have spending splurges that drive the other person crazy, so it’s better they don’t see the charge come through. It's a judgement free zone.”
But she says ideally these accounts aren’t for your normal spending that just happens to be separate. “To be very clear, side stashes are not meant for purchases on ‘guys night’ or ‘ladies night’ or for blowouts, shopping, etc. The money in these accounts is strictly reserved for those purchases that drive the other person crazy (this doesn’t apply to everyone).”
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So how much should be going into your side stash? Well, Malani suggests that you come up with an amount that works for both of you, and have it automatically transferred from your joint checking account each month. “The money in your side stash is yours to blow, no questions asked,” she says. “The simple concept of having a side stash can be a lifesaver in situations where you and your partner don’t always see eye to eye on money.” This way, you won’t constantly be pulling your hair out when you look over your bank statements.
Sorting out your finances isn’t a fun process, but once you come up with a system that works things get so much easier. So sit down, go over your incomings and outgoings and work out what’s right for you.