This is the third post in a series about how to manage your money as a couple. Previously I discussed options for managing money separately or jointly.

Last week I started outlining some methods to minimize your risk regarding joint finances. I’ll continue with that analysis today. 

First, here are the general risks I will be discussing:

Joint money management

  1. One partner may assume control of all financial decisions and steamroll over the desires or fears of the other. (See last week’s post.)
  2. An uninvolved partner may not be capable or willing to take over money management in the case of death, disability, or just busyness of the other. (See last week’s post.)
  3. Differing styles of spending, tracking, investing may result in unnecessarily arguing.
  4. In an extreme situation one partner may abscond with all the money if they have full access to all accounts.
  5. One partner may work less or stop working altogether, intending to live off of the other’s income.*
  6. A more spendy partner may affect the other’s saving or debt level.
  7. One person may take over money management and then use that power to hide income, spending, or debt.

Separate money management

  1. You might not discuss your goals and may have different plans for spending, retirement, etc.
  2. One partner can more easily hide excessive spending or risky investments from the other.
  3. You may not be working as a team regarding your asset allocation, retirement planning, etc.
  4. You can potentially from your partner inappropriate gifts or loans.
  5. You may not have a plan in place in case one partner can’t work due to illness or disability.
  6. If one partner dies you may not be aware of the locations of all of their money, or be surprised by how little or how much they have.
  7. Your partner may not be paying their taxes or other obligations.

 

What are ways to decrease the amount of risk in these situations? Let’s continue on with this discussion:

3. Differing styles of spending, tracking, investing may result in unnecessarily arguing.

  • Frequent discussions about money are imperative in a serious relationship, prior to marriage/cohabitation and continuing afterwards. I’d be extremely wary to join finances in any way with someone who refuses to openly discuss money with you.
  • Jointly managed finances work best when both parties feel similarly about spending and investing decisions, or when one party needs the other to help them be a better money manager. Remember, completely joint finances aren’t necessary in a healthy relationship. Some couples are just better off managing their own finances.
  • Try to compromise with your partner if your styles differ. Decide what elements are most important to you, and which you can give up.
  • Make all big decisions jointly. Don’t pressure your partner to make a quick decision.
  • If you disagree with a money management method be honest about this. Hiding things is never a good solution.
  •  Have rules in place that you will discuss plans prior to actually carrying out any actions. Your rules may include areas such as:
    • purchases over a certain amount
    • changes to asset allocation
    • beneficiaries
    • insurance
    • registered/retirement plans
  • Allow your partner some freedom. They won’t want to do everything exactly the same as you. Allow them to be an adult and make choices. Put your relationship above your personal preferences, as long as the decisions aren’t putting you into financial jeopardy.

4. In an extreme situation one partner may abscond with all the money if they have full access to all accounts.

  • Discuss with your bank the restrictions on your accounts. When are two signatures needed? What is one person allowed to do by themselves?
  • Even if you aren’t the daily money manager remember to check your accounts periodically, and make sure you understand any large transactions.
  • Be alert for signs of unhappiness or control issues in your relationship. Try to deal with issues before they become serious.
  • Consider each having some money in a separate account that is only accessible to you. In a trusting relationship there shouldn’t be any concern with your partner having their own money.
  • If you are in a precarious situation, see a third party, such as a lawyer, about potential risks of theft from your account.

5. One partner may work less or stop working altogether, intending to live off of the other’s income.*

  • This topic is one that is especially important to discuss prior to living with someone. Discuss your mutual obligations for the bills. Consider what you would do if situations were to occur, such as:
    • Involuntary job loss
    • Illness of self or a family member
    • A horrible job situation
    • Voluntary quitting a job
    • Mental illness or incompetency
  • Set a time frame for supporting the other person.
  • Discuss a dollar amount that you would be willing to contribute to a partner’s needs. For example, you may be fine covering their basic expenses such as food and shelter if your partner is not working. But what if they are spending their money on drinking or expense hobbies? It’s completely reasonable to only choose to pay for their needs, not their every want.
  • Discuss your insurance needs. Do you have disability coverage?
  • Make sure the same criteria apply to both people fairly (with accommodations for different education levels, salary expectations, and health). For example, do you think it is okay for one person to only work part time, but the other has to maintain a full time job? There are some cultural and gender differences that may come into play here. Make sure to discuss your expectations with your partner.

I’ll continue this discussion about risk in another post…

Read Part One

Read Part Two

 

* I’m not referring here to mutually agreed-upon decisions for one partner to not work for money.

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