Couples use a variety of methods to manage their household finances. While some prefer to combine everything from the beginning, others are more comfortable with separate accounts or a combination of joint and separate. Here are a few methods that may be helpful when having a discussion with your spouse about how you will be choosing to manage your household finances going forward.

Method 1: Assigned Expenses

• Jill and Joe have their income deposited into their respective checking accounts.

• All joint expenses are documented and assigned to either Jill or Joe in a way that is agreed upon as being equitable (either 50/50 or according to the percentage-of-income*).

* Percentage-of-income method - Add up all income sources. Determine the percentage of income that comes from Jill and Joe. If, for example, it is 60% / 40%, then that is the percentage that each contributes to the joint expenses. Don’t forget to take into account any joint expenses that are also being deducted from paystubs, such as medical insurance premiums.

I was surprised that a few clients used this method because it seemed like a lot of work to me, but they disagreed. They like that they can have complete control and privacy over their income and expenses and that they are paying their assigned expenses directly versus giving their partner money to pay for things. Even with detailed planning, there still needs to be a reconciliation that occurs every month as expenses may vary or one partner may end up paying for an unexpected joint expense, such as a home repair.

Method 2: Yours, Mine, and Ours

• Jill and Joe have their income deposited into their respective checking accounts.

• Jill and Joe automatically transfer a certain amount to a joint checking account (the amount is determined again by either 50/50 or percentage-of-income method).

• All joint expenses are paid from the joint checking account.

For couples that choose to maintain separate accounts, Method 2 is the most common that I see. Both partners are responsible for making sure all of the joint bills get paid (versus just being responsible for your assigned expenses in Method 1).

While not always the case, some clients have expressed their desire to maintain separate accounts because they themselves went through a divorce previously or they witnessed their parents go through a divorce. It is important to understand that while Method 1 and 2 have partners maintaining separate accounts, that does not necessarily mean that in the event of a divorce, you both simply walk away with your respective accounts. Income earned during marriage is community property, even if it is deposited into your separate account.

Still, Method 1 and 2 can be preferable for couples that want to maintain some level of privacy (such as being able to surprise your spouse with a gift) and for those that want a pot of money designated for personal expenses (such as a weekend getaway with girlfriends).

Method 3: Ours

• Jill and Joe have their income deposited into a joint checking account.

• All expenses are paid from the joint checking account.

As it sounds, this method is not really a method - but the decision to combine all household income and expenses.

Important to Note

Even if you choose Method 3, do not co-mingle your separate property. While your income earned during marriage is considered community property in community property states, items such as gifts, inheritances, and assets owned prior to marriage are not. You want to keep these assets separate and in your name only. If you co-mingle separate property (meaning you put an inheritance into a joint account), it is now a joint asset that would be split in half in the event of a divorce. There are exceptions, but these are all things to review with a financial, tax, and estate planning professional before making any moves.

Document and Re-Visit your Cash Flow Method Periodically

What method are you using with your spouse? Email me to share how it works and why you like it.

These 3 methods can be a starting point for a discussion with your partner about how you want to combine finances, if at all. As with all financial planning, it is about the process, not about setting policies into stone. What works well for you now may not work well for you in the future. That is okay. Re-visit how income and expenses are being allocated at least once a year and consider engaging an objective, third party to facilitate the financial discussion.

Linda Rogers, CFP®, EA, MSBA is the owner and founder of Planning Within Reach, LLC (PWR). Originally from New Jersey, Linda services clients throughout San Diego county and nationwide. She leads the design of PWR's investment portfolios which utilize broad, low-cost investments that integrate environmentally, socially, and governance (ESG) factors.

Planning Within Reach, LLC (PWR) is a fee-only and fiduciary wealth management firm offering one-time comprehensive financial planning, ongoing impact-focused investment management and tax preparation services in San Diego and nationwide. PWR is a woman-owned firm that specializes in busy professionals and impact investors. Planning Within Reach, LLC and their advisors do not receive commissions and do not hold any insurance licenses or brokerage relationships.