Joint expenses & separate goals: How couples should plan financially

They should work as a team and plan for their retirement by saving money together

Every family wishes to reduce its financial burden and generate savings for long-term benefits. When running a household as a couple, it is important to have discipline, trust and strategic thinking. With shared needs, financial goals and responsibilities, couples need to discuss and create a framework to manage the family’s finances effectively. This will prevent disagreements and help achieve the common goals with ease. In this article, we bring some practical tips for couples to plan their money better. 

Money decisions couples should combine

Couples, after getting married or moving into a house, embark on a journey for life. The initial stage involves planning for the future and setting up their financial goals. This is the stage when a couple should openly talk about their incomes, spending habits and shared goals. After some years, conversations among couples mostly revolve around children and securing their future and retirement plans. 

 

Set financial goals

Couples must define their financial goals into short-term and long-term goals. Short-term goals may include planning an international holiday or purchasing a vehicle, which is meant to be accomplished within a year or two. However, long-term goals are the ones that require planning and are often achieved in over five or 10 years’ time. These include children’s marriage or higher education, buying a house or retirement plans. Based on these goals, the couple can decide whether to have a split or combined budget. 

Create a joint budget for shared objectives 

Couples with shared dreams often plan for major milestones such as purchasing their first house or car together. Opening a joint bank account is a practical way to meet the family’s shared expenses. Some expenses couples must think of sharing are:

• Emergency fund: Couples should create an emergency fund, which can be sufficient for three to six months. 
• Joint fixed deposits: Opening a joint fixed deposit (FD) can help couples build savings together. 
• Home loan: Joint home loans will increase tax savings because both the husband and wife can claim tax deductions separately.  
• Children’s education: Investing in systematic investment plans (SIPs) and contributing together is a smart strategy couples can adopt to secure their children’s future. 
• Retirement planning: Couples should work as a team and plan for their retirement by starting to save money together. They can create a joint retirement budget to manage expenses related to healthcare, insurance, etc.

How to split shared costs fairly?

If both spouses are working, it may mean better financial stability for the household. However, it becomes necessary to split the financial responsibilities and decide who will contribute to a specific goal, say, household expenses, savings, or investments. Contributing to shared expenses equally is not a good idea if the incomes differ. Instead, contributions towards shared costs should be proportional to the income of each person. For example, if the husband earns more, he can contribute to the household expenses while the wife can focus on savings.

 

Splitting expenses works when there are personal expenses and individual investments. At an initial stage, couples may be more comfortable handling their expenses separately, as they were used to earlier. So, keeping separate accounts makes more sense. Moreover, expenses can be split based on who is earning more. The one earning a higher income can pay for higher costs like rent and EMIs, while the other can handle minor expenses. 

How to handle transparency, conflict and planning?

Timely review of financial plans

Couples go through life changes. Responsibilities increase after children come into the picture. So, it is important to review the finances and investment strategy regularly. 

When spending habits differ

Differences in spending habits of couples are a common cause of conflict. Instead of blaming the other person, it is necessary to work out a solution. For example, having separate personal accounts for some expenses. 

Balancing separate and shared goals

Couples must know how to balance their shared goals and individual financial needs. Adopting a hybrid approach can work here. A separate account for personal expenses can eliminate the chances of conflicts.

FAQs

Should couples merge accounts fully or only partly? 

Couples should not merge accounts fully, especially when incomes differ and individual financial needs have to be met. It is better to adopt a hybrid approach where there is a joint account for most common goals, like children, house purchase, retirement, etc. For minor lifestyle-related expenses, they can maintain their individual savings account. 

How should shared costs be split when incomes are unequal? 

When incomes are unequal, shared costs should be split depending on who is earning more. A 50-50 split can cause financial burden on the person who is earning less. Alternatively, a joint account can be created and each individual contributes based on their individual capacity and the money from the account can be utilised to meet shared costs. 

Which goals should be planned jointly and which individually? 

Typically, shared family goals include purchasing a house or paying rent, funding children’s education and future, building an emergency fund, etc. A couple should contribute to these goals jointly. On the other hand, spending on lifestyle and hobbies and family obligations can be handled individually. 

What money conversations are essential before a major life step?

Before a major life step, such as children’s marriage or retirement, couples should have detailed conversations about planning their finances. They should discuss their incomes, existing debts and plans for savings. Accordingly, they can come up with a solution that works for both of them and avoids the chance of any disagreements.