How We Manage Money as a Couple: A Clear and Practical Approach

Every couple handles money differently, and sometimes it can even cause tension in a relationship. In this post, we’re going to share how we manage our finances as a couple. Hopefully, some of these ideas can help you in your relationship too.

First off, there’s no “right” or “wrong” way to manage money in a relationship. Every couple has their own way of doing things, and what works for one might not work for another. This is just how we do it, and while it may not be perfect for everyone, it could serve as a helpful conversation starter for you and your partner. The goal is to find what works best for your relationship.

For many couples, money can be a major source of stress, but we believe most of these issues can be avoided with open communication and clear expectations between partners.

The problem is, money often becomes a topic people avoid because it can lead to uncomfortable or tough conversations. But avoiding the issue usually only makes things worse in the long run.

We’ve found that clear communication and agreed-upon guidelines about money have improved our relationship by greatly reducing any potential conflicts. This allows us to focus on other aspects of our relationship that are more important to us.

Over the past 9+ years together (5 of them married), having open communication and a system in place has helped us avoid arguments or issues about money.

How we manage money as a couple

When we first got together, we kept our finances separate. Each of us had our own paycheck, and we split common expenses. We also had individual investment accounts, contributing to our financial growth separately.

This worked well for a few years, but as our lives and goals evolved, we decided to reevaluate and change the way we handle our money as a couple.

It’s important to note that when your life circumstances change, it’s a good idea to adjust your financial approach as well. Our current system grew out of our changing needs and goals and was designed to simplify things.

Here’s an overview of our system:

The flowchart below shows how we manage the money we earn, from the moment we receive our paychecks to its final destinations. It might look complicated, but it’s actually quite simple once you break it down.

To keep things straightforward, we’ve divided this flow into four levels:

Level 1

All of our income, from paychecks or other sources, is combined into one pool. Each of us contributes what we’ve earned into the same “funnel.”

Level 2

The next step involves three outputs: investments, travel, and the continuation of the flow to the next levels.

Investments are our top priority, and we aim to invest 40-50% of our total income. This percentage only changes if there’s a significant shift in our income. For example, if one of us stops working, we might adjust the percentage to 40%. Otherwise, it remains a fixed portion. Finding the right balance for your own financial situation will depend on your priorities, fixed costs, and flexibility. It’s important to be ready to adjust these figures as circumstances change.

Travel is also something we’ve prioritized by assigning it a fixed percentage of our income. Since we want to travel as much as possible before settling down, it makes sense for us to allocate a portion of our money toward this goal early in the process.

The third output in this level moves the rest of the money on to the following stages.

Level 3

This is where we cover all of our fixed expenses, like rent, utilities, internet, transportation, and more. Think of this part like a bucket: we use it to pay our fixed expenses, and whatever is left over flows to the next level.

One thing we’ve worked on over the years is reducing our fixed expenses. Keeping these low allows us to allocate more to higher-priority items like investments and travel. We consider ourselves to be minimalists in this regard.

Level 4

In this final level, any money left after covering our fixed expenses is split equally between us. It doesn’t matter how much each of us contributed at the start, the remaining amount is divided 50/50.

This gives us the freedom to spend on whatever we want — whether it’s clothes, dining out, or personal hobbies — without feeling judged. Having some personal spending money helps maintain our individuality within the relationship.

That’s basically how we handle money as a couple. It does require discipline and organization, but managing finances well takes effort. Without these, money issues can easily lead to conflict in a relationship.

The benefits of our approach

Here are some benefits we’ve experienced by managing our money this way:

1. We prioritize what matters most

Each couple has different goals. For us, investing comes first, as it gives us more freedom in the future. We also value travel and have set it as a priority early on in our money flow.

2. We feel like we’re working as a team

When we had separate investment accounts, it sometimes felt like we weren’t fully working together. Sharing one account and working toward the same goals has strengthened our sense of partnership.

3. It simplifies things

Managing two investment accounts with similar portfolios was redundant. Combining them into one has made things simpler.

4. Clear expectations for new money

If one of us gets a raise or an unexpected windfall, we know exactly where that money will go in our system. This avoids any confusion or disputes about how to handle extra income.

5. Freedom to spend without judgment

In the end, each of us has a portion of money to spend on whatever we like. This helps us maintain our individuality and spend on what’s important to us — whether it’s gym memberships or electronics, for example.

A practical example

To make things clearer, let’s walk through a practical example using some rough numbers.

At the end of the month, after receiving our paychecks, we total our revenue. For simplicity, let’s assume one partner earns $2,000 and the other earns $3,000, making a total of $5,000.

Now we’re at Level 2.

We first allocate 30% ($1,500) to investments. Next, 5% ($250) is set aside for travel. The remaining 65% ($3,250) moves on to the next level.

At Level 3, we subtract our fixed expenses (let’s say they total $2,250). This leaves $1,000 to move to the final level.

Finally, at Level 4, we split the remaining $1,000 between us, with each person getting $500 to spend however they like.

This flow has worked well for us, and we hope it provides a useful framework for you to manage money in your relationship. It’s all about finding what works best for you and your partner, and having open conversations about your priorities and goals.

Happy budgeting!