Plan Your Escape

I've written in the past about one method which you can use to handle your finances as a couple. Of course, there are other ways to handle the money side of your relationship and depending on your personal situation a different method might work for you. Today I'll be looking at an alternative approach which you may want to consider.

Let's Cut To The Chase

As I frequently like to do, I've put together a simple diagram showing how this particular technique works. Let's take a look before I explain things in more detail.

Finances For Couples II: One approach to managing finances as a couple is to combine all your income and then pay each other an equal allowance.

As with the previous method I described, here we make use of a joint bank account to keep shared finances separate from individual stuff. However, in this method each person deposits all of their income into the joint account directly. Money from the joint account then gets used to pay any shared expenses, such as:

• Rent or mortgage payments
• Utility bills
• Groceries
• Etc ...

Next, an allowance gets paid from the joint account to both people periodically, say every two weeks or something similar. This ensures that each person has some spare funds to cover their own personal expenses such as:

• Hobbies
• Clothing
• Personal Investing
• Etc ...

So, as before, joint expenses are paid for out of the joint account and personal expenses are covered from the individual accounts. The only difference is the regular payments are paid from the joint account instead of into it.

I like to think of this arrangement as a sort of "relationship corporation". The deposits into the joint account are the income for the corporation. It has its expense which get paid from the joint account. It also pays regular dividends to its "investors" in much the same way a real company would. So it isn't that obscure of an idea really.

Some Pros

There are several benefits to this type of arrangement, such as:

• If you choose to limit the regular payments, it can help reign in personal expenses.
• This arrangement is similar to how the legal system views the finances of a married or common law couple. It you separate, you each get an equal share of everything you've brought in.
• It acknowledges the different, yet important, contributions from both people in a relationship, even if one person earns substantially more than the other. An example of this would be one parent staying at home to care for young children while the other parent continues to work.

Some Cons

Here are a few cons that I can think of as well:

• If you don't feel your partner is contributing as much to the relationship, then this could be a frustrating arrangement.
• If your mutual expenses are high, then you might not have much to pay out to each other.

How About You?

So it's an interesting idea. My wife and I don't handle our finances this way, but we've considered it. We're currently using the method described in my earlier post and we find it works well for us.

So how do you handle your financial relationship with your partner? I've mentioned two methods but you may have come up with other interesting ways to handle it, so please leave a comment below to share your thoughts.

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