When it comes to managing money in a relationship, it’s important to have a strategy that both parties are comfortable with. Whether you are married, living together, or just dating, there are three common approaches that couples often use to manage their finances. In this blog post, we’ll explore these three approaches and the pros and cons of each. Read on to discover the best approach for managing money in your relationship.
A household account and personal accounts
When it comes to managing money in a relationship, one approach that can work well is setting up a household account and separate personal accounts. This allows both partners to have their own personal finances, but also keeps track of all the shared expenses.
The household account should include all bills and other shared costs, such as groceries and entertainment. Each partner would contribute an equal amount of money to the household account, which can then be used to cover any joint expenses. This way, both partners are financially responsible for the household.
In addition to the household account, each partner can also set up a personal account. This can be used for individual expenses such as vacations or hobbies. The money in this account does not need to be shared with the other partner, allowing each person to maintain financial autonomy.
It’s important to have regular communication about the budget and any changes that need to be made. This will help keep everyone on the same page and prevent any misunderstandings.
The 50/30/20 Rule
When it comes to managing money in a relationship, the 50/30/20 Rule is a popular and sensible approach. This method splits your income into three categories:
- 50%: Needs: Your essential expenses, such as rent, groceries, and utilities.
- 30%: Wants: Things you want to buy or do, such as travel, dining out, entertainment, or buying a new phone.
- 20%: Savings: Money set aside for long-term goals or emergencies.
The 50/30/20 Rule is great because it helps couples identify their needs and wants in order to prioritize their spending and saving accordingly. It also encourages couples to save money for the future and prevent overspending on items that aren’t essential. With this method, couples have a clear understanding of their financial priorities and can reach their money goals faster and more efficiently.
The Zero-Based Budget
The Zero-Based Budget is a method of money management that is gaining popularity in relationships. This method requires each person to be aware of their individual income and expenses. The goal is to have all income equal the total of your expenses, meaning you have zero dollars left over at the end of the month.
To get started, both partners should list out their individual incomes, as well as their necessary and non-necessary expenses. Necessary expenses are items like rent or mortgage, groceries, bills, and fuel. Non-necessary expenses are things like entertainment and restaurants. Once you have a good idea of what you need to spend each month, set a budget for each category.
For example, if you both make $2,000/month and your rent is $1,200, groceries cost $400/month, bills cost $100/month, and fuel is $150/month, you would budget the remaining $250 towards fun activities or any other expenses that come up.
The Zero-Based Budget helps couples to stay on track and not overspend each month. It also provides a sense of financial security since you know exactly how much money you have to spend in each category and what your total expenses are. This method allows couples to be more mindful of their spending and plan for the future.