In this short solo episode, Nikita goes over the topic of combining (or not combining) finances in a relationship. She goes over common approaches to navigating finances in a partnership, and what experts tend to agree on as the "best approach".
Additionally, Nikita covers how to navigate joint finances if one partner isn't working (especially in cases of raising children), when incomes are lopsided, and the logistics of how to split things equitably rather than equally.
You may see this change for yourself & your relationship over time, but this episode covers some questions that might help lead you towards the answer that's right for you in this season of life.
Nikita Wolff:
Welcome to the 3rd Decade podcast, I'm today's host Nikita Wolff. And today's episode is going to discuss the topic of combining finances in a partnership. There are a few different outlooks on ways to approach this. So I'll be going over what those are, how you might make these decisions and how they might change over time. To start us off here are the common options. You could keep things entirely separate. You might do this. If there's financial strain in your relationship or misalignment in being on the same page financially, or if one or both of you just feels protective of your money, we get it. We all have different experiences. Another option is that you could have all of your finances in joint accounts and just keep all of it together and work towards all of your financial goals together. And try to stay on the same page financially with what you both want to do with that joint money. Or you could have some joint accounts and some individual, this one tends to come most highly recommended for dual earning households. As an aside, this fourth option is more specifically relevant to people raising families. You might have one spouse caring for children. Full-time at home where that relational agreement that by doing this one person is okay, splitting their income. 50/50 for the family's general benefit. Meaning ideally, that person is contributing to a Roth IRA for their partner, but that can only be done. If they're filing jointly on their taxes. If they're not filing jointly on their taxes, it can be done for the non-working partner, if they made some money that year and the amount contributed to the Roth IRA, didn't exceed that amount. So you might be thinking to yourself, how do I make this decision? So every circumstance is unique. So you really need to look at the full picture. These are some important questions to ask yourself and can help you in identifying. What's gonna be best for your situation, in your relationship. Are your money philosophies similar? Are one of you going back to school, are you raising children? Is one of you a spender. And the other, a saver are both people's voices being heard in joint financial decisions. Nothing is saying that this can't change over time. There may be some seasons of life where it makes more sense to have your finances combined and others where it makes sense to keep it separate. There are lots of successful relationships and marriages that use different strategies for managing their money as a couple. So this is not a one size fits all type of thing. As far as logistics, go for managing this, you want to have a detailed budget and a way that you're tracking these expenses. If one of you have a significantly higher earning potential, you might split things up based on proportional income rather than even amounts. So the example I'm gonna use here is let's say your household requires about$60,000 a year to live comfortably, but let's say one of the partners only makes$30,000 a year. And the other makes$90,000 a year. It would feel pretty challenging if you just split that 50/50, and that the person making$30,000 a year just basically had nothing left over. Whereas the person making 90k had$60,000 of extra income, it would feel a little bit unfair. So you might instead choose to base contribution amounts off of proportionate incomes. Meaning the partner who makes$30,000 is only contributing$20,000 towards that overall$60,000 annual expense. And the partner who's making$90,000 is contributing$40,000 or whatever feels fair in your relationship up. This leaves the opportunity for both of you to have extra money that you get to decide how to use. So to actually implement this, you're gonna wanna set up a joint account that you both contribute to. That covers your bills directly like your mortgage utilities, groceries, other shared expenses. Like those, you can contribute to this account from your main personal account where your direct deposit is held, meaning that the money comes to your private checking accounts. And then both partners contribute the agreed amount to the joint checking where the joint expenses are paid from. And then basically whatever is left over in those personal accounts can be put towards the personal goals of each person, whether that's socking away, some extra money or buying a buy, you get to decide what aligns with your values and goals. If you have joint goals like buying a house together or going on a cool vacation, you can approach this the same way by contributing from your private accounts into a joint savings account. That's separate from your normal expenses and contribute a set amount every month. The best way to get started is to look at your current budget or create one, if you haven't already and evaluate what would work best for your relationship, we hope you gained some helpful insight. From this episode. We know this can be complicated to navigate, but our hope is that in sharing this, it helps open up the conversation for those of you who might be actively navigating this in your own personal lives. So thanks for tuning in, and we'll talk to you in a couple of weeks.