Today marks the 3 months countdown to our big day on 19th Jan 2014! Preparation for our wedding makes me think about another topic relating to both marriage and finances.
How do married couples manage their finances?
1) Joint Finances
This means salaries of the couple will be credited into one single joint-bank account. And from this account, they work out one single budget whereby they co-pay everything from housing loan to groceries, to bills and contributions of saving plans (and this includes personal shopping expenses). They may or may not have a separate bank account for savings, but even if they do, it’ll be a combined one.
Advantages of such an arrangement encourages complete honesty among the couple whereby they are aware of how much each another is earning, and also of their spending/saving habits. However, if there’s a huge disparity in earning powers, one party might feel unfair or feel penalised for contributing the bigger pie in their marriage.
2) Separate Finances
This means their finances will be as per when they were single, with the husband and wife owning and managing bank/ saving accounts under their own names. They will then figure out a way to contribute to the household expenses accordingly to the percentage of their salaries, or on a 50/50 basis. Or they can work out expenses in such a way that the husband pays for utilities, house insurance, property tax, while the wife pays for groceries and other household expenses.
Advantages of having separate finances includes maintaining separate responsibilities of their finances and both parties wouldn’t feel short changed in anyway. The couple does not have to worry or feel guilty about spending money on personal shopping, expense or credit card bills as they are responsible solely for their own money.
3) Semi-joint Finances
Like what the name suggest, this is a hybrid of the Joint and Separate ways of managing the couple’s finances. They may be contributing part of their salaries (ie, 2/3 of their earnings) to a joint account for household expenses and saving plans, while keeping the remaining 1/3 under their own name. Or, they could be contributing separately for household expenses and personal expenses, but have a joint saving account for emergencies, investment, children’s education, common goals, or for their retirement plans.
I personally prefer this method as it allows me the freedom of having my own savings and investments from my husband (well they say a woman always gotta have her own private money), while also sharing financial information with my other half, and having a joint account for household expenses and saving for common goals.
4) Save one’s Salary, spent the other’s Salary
This means saving 100% of one’s salary and using the other party’s salary for all expenses, be it for household or personal expenses. The couple will be operating on one single budget just like joint finances.
My manager is using this method as he feels it is simple, straight forward, and it’s fuss free. And he only has to keep track of one excel spreadsheet or one budget system.
These are the 4 ways a couple can manage their finances that I can think of, and I need to read more, ask around, and discuss with my future hubby to adopt a method for ourselves.
I hope I can get some feedback and suggestions on how families and couples manage their money!