Remember the old days when managing the financial dealings was left to the family's patriarch? Well, those days are gone. Today, more than ever, women contribute financially to building family wealth. As such, they are voicing their opinions and taking active roles in managing family finances.
Every couple wants what's best for their family; however, debates and misunderstandings on how to combine your incomes, manage your investments, and what your should prioritize will arise. You will agree on some issues and disagree on others. And you will have to compromise often.
How best you navigate these waters will determine how safely you arrive at the shores of financial independence. And to be frank, once you have your finance management figured out as a couple, everything else tends to fall in place.
This article discusses seven ways you and your partner can smartly manage your finances depending on your goals, needs, and income.
Also read: How to Build Wealth as a Couple in Kenya
This method involves the couple managing their affairs by combining all their finances. It is the most common approach couples take as it guarantees transparency and accountability. It is most suitable for couples with the same financial health and goals.
The approach doesn't just involve pooling incomes together to handle your bills. It will require that investments and debts are also combined. For instance, if you or your partner is still paying off their student loans, you will have to commit to helping them settle those debts.
Completely combining your finances will start by creating joint bank accounts where all your incomes will be deposited. All expenses will be deducted from there, and the remaining money will be saved, invested, or used to service loans. Investments, like land, will also bear both your names.
This method involves the couple managing their finances by partially combining their income and investments. It suits couples looking to diversify their investments and lower risk exposure while achieving their shared and personal goals.
The approach will require couples to combine most of their income and savings in one joint account and keep a small percentage of their income and savings in separate bank accounts.
Everyday expenses like food, rent, and school fees will be drawn from the main account, while separate accounts will finance the couple's hobbies and entertainment budget.
The same approach is taken when it comes to investments. You will have both joint investments that you contribute to and separate investments controlled individually.
This approach requires that you don't mix your finances. Every person keeps their money to themselves and does what they see fit. It is the most complex approach to pull because a couple - married or not - will find it almost impossible to keep their finances apart.
It is an approach taken mainly by high-net-worth couples trying to preserve their wealth in case of divorce. Couples separating their finances might have to sign prenup or postnup agreements to minimize the momentary conflicts during a divorce.
Since there is no financial reliance, couples will have neither joint bank accounts nor shared investments. They will run different budgets and contribute to shared responsibilities like educating their children equally.
This approach makes the most sense to couples who make roughly the same money. It will involve contributing equally to every bill you pay, every investment you make, and every loan you take.
Couples will open a joint account and deposit 50% of their income. Money for shared expenses will be drawn from this account. Partners will also have to contribute equal share when making investments like buying a house.
Also read: 5 Daily Habits To Improve Your Finances
Couples will use the money they remain with after equally contributing to the shared investment and bills to pursue their own goals and manage other financial obligations that don't concern their partners.
The downside of this method is that if one partner makes less than the other, they will feel more burdened trying to keep up. That might create a gap in the relationship as one person will grow to be richer.
It is not every day that we get to date or marry someone in the same tax bracket as us. When this happens, one partner brings home more, and the other wants to contribute their fair share; you should split bills fairly.
Unlike the 50/50 method, this approach requires that the person making the most contributes the most. You will have to sum up all your income to determine what percentage each of you contributes.
If your income is 60% of your combined income, you should settle 60% of the bills and contribute the same percentage when investing or paying your offspring's school fees while your partner covers the remaining 40%.
This method ensures that the partner making less money is protected and there isn't any wealth disparity among the couples.
This approach will work best for couples who
Before adopting this method, you and your partner must have a sit-down and agree on who handles what. You can make decisions depending on how much you both bring home or what responsibility you prefer.
If there is an income imbalance and you bring home more, you will have to take on the hefty bills like rent and paying insurance. Your partner will handle the groceries and pay the electricity bill.
Suppose your partner prefers to handle motherly bills like buying food and clothes while you take the fatherly duties like paying for education and healthcare. Bills are shared on preference.
The same approach can also be employed when investing. One partner will invest towards a different goal (e.g., buying a home) while the other partner will invest for a different goal (e.g., retirement)
In this scenario, you and your partner are working and bringing home an income. The incomes can be equal or not. The method will involve you and your partner living on one income and investing the other income.
To accomplish this, you will need two joint accounts. One account will be for your monthly expenses and will hold one partner's income. The other account will keep money that you will be saving and investing.
To make this work, you and your partner must cut your budget and only spend on what matters. You will have to ramp up emergency funds and get the insured adequately so that you don't dig into savings when unforeseeable events happen.
This approach is best for couples who want to achieve their goals faster, save more, and build wealth for their family.
Finding and settling for the right way to manage your finances is complicated. It will take a lot of trials and errors, but you won't have the option of giving up. Adopt and change your strategies as often as you see fit until you find a method you and your partner are comfortable with.
But remember, for any of these methods to work, being transparent and honest about your finances is a must. Talk to your partner about all expenses and stick to agreed-upon budgets.