Couples often ask me whether they should combine finances or not. My personal answer is yes…and no.
In other words, what my husband and I have found (and what many studies show) is not just that money fights can wreck a marriage, but the underlying cause of those conflicts is the result of not being on the same page.
How did we get ourselves onto that proverbial page? By channeling our incomes for different goals. I call it the dual-income system, and here’s how we worked it.
First we agreed that retirement was our primary aim (as well as quality of life now). The strategy that worked for us was to put savings first, and then work backward: So we started with our nest egg. How much did we needed to put aside annually to make retirement a reality by our 60s?
If you haven’t done this, by the way, you’re in good company. More than half of workers—56 percent—say that neither they nor their spouse has tried to calculate how much they’ll need to save annually to retire. comfortably, according to a 2012 survey by the Employee Benefit Research Institute.
But it’s a calculus worth doing—for obvious reasons. You’ll save more (and enjoy more of what you have) if you’ve got a joint plan. There are a number of easy-to-use retirement calculators online. We used the T. Rowe Price Retirement Income Calculator, but the AARP’s calculator and the CNN Money Retirement Income Calculator are also easy-to-use options.
Together, we made a goal of maxing out contributions to my husband’s 401(k), my SEP IRA, and both of our IRAs: $16,500, $15,000, and $5,000 respectively.
On top of which, we wanted to contribute to our daughters’ 529 plans. And we still wanted to take the occasional family trip.
For us, the neatest way to handle these multiple goals has been to divide and conquer using our dual income streams. Translation: We allocated my husband’s salary for daily expenses—our mortgage, car, utilities, etc.—and my income goes toward savings and vacation.
The advantage of our system is that we don’t squabble over who spent how much on what because I know where his money is going and he knows what I’m doing with mine. And as long as we’re meeting our savings targets, there’s less conflict over spending.
This method can also help couples when one of you earns more (as my husband does). It’s rarely practical to divide your expenses 50–50 when you’re not earning equal amounts. This lets each partner “own” part of the household expenses and help keep family goals on track.
Does our system always work? Some years, yes; others, not so much. But we are constantly communicating. It doesn’t matter if our accounts are joint or separate—as long as our goals are on the same page.
Galia Gichon, MBA, is an independent personal finance expert, adviser, the founder of Down to Earth Finance, and the author of My Money Matters.