Love is grand. Love and money — eh, that's a little less grand. Hell, most of the time it's super complicated. Talking about your finances with your partner — whether you're quibbling over who paid for dinner last or deciding to make a big purchase — can be super stressful. And things get even more complicated when you start living together. When, how, and why you choose to combine your money is a tough decision, and every couple handles it differently.
While your friends and family will offer you plenty of dating advice, we tend to be less forthcoming with information about money management. And it's not so simple as just copying our parents. We're coming of age in a very different time: We’re the first group in the modern era to have higher levels of student loan debt, poverty and unemployment, and lower levels of wealth and personal income than our parents and grandparents had at the same stage of their lives. But it’s not all bad news. With more women working than ever before, 80% of millennials report being part of a dual-income couple. And we’ve found new ways to cobble together a living wage, with 38% of people under 35 relying on freelance work to contribute to their income.
So if you're not using your parents model for managing money, and you probably shouldn't demand to see your friends’ bank statements or 401(k) contributions, where do you go for real info? Well, we did the legwork for you, rounding up four young couples* — all somewhere between marriage and kids — who were willing to share the details of how they make their money work, individually, and as a unit. To help make the conversation as educational as possible, we asked Priya Malani, a financial planner and founder of Stash Wealth, to provide advice for each pair that’s also widely applicable.
*Names have been changed.
Peter & Kelly
Peter, 30, works as an editor for a major sports website, and he does some freelance sports writing for other high profile sites. Kelly, 29, is a full-time bath designer, who also does some kitchen and bedroom design on the side. She has aspirations of starting her own company one day. Kelly and Peter recently married and own a condo in Jersey City, NJ. Together, they make about $80,000 annually.
The couple moved in together after a year of dating, immediately opened a joint checking account, and got a shared credit card. From the beginning, they have contributed the majority of their paychecks to the joint account — putting about 60% of their individual incomes into the joint account and keeping 40% separate.
Peter is the nervous one about their finances, admitting money was tight when they first started dating. “I was probably over-anxious, he says. “But we didn't spend outside our means in the early days, and we both made a conscious effort to not fight over finances.”
Living within their means worked well for them, and they’ve managed to put down financial roots, even in New York’s insane real estate market. In February 2014, Peter and Kelly bought a condo in Jersey City. It’s a long-term investment they hope to rent one day, to help offset the cost of a home large enough to accommodate a growing family.
Peter and Kelly don’t have too many immediate money concerns. “The only thing that would worry me is if one of us died, because we don't have life insurance,” Kelly says. “Otherwise, we have health insurance, we have savings, and we're okay.”
As their careers have evolved, so have their money management skills. Although a majority of their income still goes to the shared account, they’ve also opened individual credit cards. This allows Kelly to cover business expenses like design materials, without bogging down their joint credit limit. They’ve also been able to grow their side gigs: Peter’s freelance writing and Kelly’s interior design work. In the future, they’d like to be able to focus even more on these professional pursuits, but both are concerned about financial security.
“At the end of the day, we want to do what is best for ourselves — as that will lead us to what is best for our family,” Peter says. “Kelly has thought about trying to build her own business, but the stress of an uncertain financial future, particularly when we are preparing for a bigger space and kids, is enough to keep us doing what we are doing.”
Financial Feedback:
Priya Malani was super impressed that Peter and Kelly are able to live within their means in such an expensive city. But, she urged them to open a Roth IRA as soon as possible.
“Saving for retirement when you’re young is much easier than when you’re older — each dollar counts a lot more,” she says.
Regarding Kelly’s concern about not having life insurance, Malani recommends looking into a term policy versus a whole life policy.
“As long as you keep up with your savings goals, you will do much better in the long run not to invest in a whole life policy,” Malani says.
For more information of the difference between term and whole life insurance, check out this story on Stash Wealth.
Illustrated By Mallor Heyer.
Wendy & Summer
Wendy is a 31-year-old attorney with a base salary of $170,000 and an annual bonus usually around $20,000. She also makes an additional $10-15,000 per year from an adjunct teaching gig. Summer is a 29-year-old fellowship and administrative coordinator for a major hospital unit with a salary of $47,000. They live in Philadelphia and would like to stay in the city long-term.
Summer and Wendy started dating in college, but they didn’t begin seriously discussing finances until after grad school. These days, they make use of both shared and individual accounts. Money is automatically deposited into their personal account, and from there, they each transfer an amount into their joint checking that is proportional with their income. While they’re both contributing the same percentage of their income, Wendy allocates a larger dollar amount toward shared expenses.
The split works well for their overall bottom line — and just last year they bought a place in the city — but Summer sometimes struggles with what she perceives as an unequal contribution, worrying that she doesn’t “deserve Wendy’s share.’”
Wendy doesn’t agree and “doesn’t believe that contributing to the household is generous.” But she’s suggested trying an inverse of their current system in which all income is first deposited into the shared account, and then a percentage is reallocated from there into personal funds.
“We have not moved in that direction yet,” Wendy says. “For now, the current system works very well to pay all bills, build savings, and still have enough left over for fun and travel with minimal fights or money discussions.”
Summer and Wendy don’t generally fight about money, but there is sometimes annoyance when deposits into the joint account don’t happen in a timely manner.
The couple has recently started thinking about expanding their family, and the financial obligations that will go along with that. They both intend to keep working, so they’ll have to contend with childcare costs, but they’re also concerned about the education options available in Philly.
“We live in the city — and really like living in the city — but the city schools are failing. As such, we will either need to move (unlikely) or foot the bill for expensive private school," Summer says.
Financial Feedback:
Since raising a child in the city can be very expensive, Malani suggests Summer and Wendy start saving soon.
“If your mortgage is currently set up so that you’re paying down the principal as well as the interest, and you’ve locked in a low rate, we would leave that payment as is (not increasing it) and put any additional savings towards preparing for the baby,” she says.
Once the baby is born, Malani suggests taking advantage of an FSA offered by your employer(s), as well as signing up for a 529 plan, a college savings plan that allows parents to make after-tax contributions that can be used toward their children’s higher education costs. Both will be integral to Wendy and Summer saving smartly for their growing family.
For a small fix that could alleviate the timeliness issues around contributing to the “joint” account, Malani says it might be worth exploring an automated set up so that the percentage of their monthly contribution gets directly deposited into the communal account.
Illustrated By Mallor Heyer.
Keith & Willow
Willow, 28, is an executive assistant for a private equity fund, and Keith, 32, is head of photo at one of the top tabloids. They live in New York City and their combined annual income is over $200,000. They got married this past year, but are saving to have a reception on their one-year anniversary. Willow is nearly done paying off her student loan debt, and Keith’s parents are taking care of his.
When the couple first moved in together in 2012, they decided to keep their finances separate. While they both have access to each other’s checking account, they don’t access them. "We make our money and spend our own money,” Willow says.
They split their living expenses according to income. Now that one of them makes more money (they wouldn’t share who), they no longer split the rent 50-50, and they split utilities by bill: Willow covers the internet and Keith covers electricity.
“We like to treat each other and not keep an exact tab; but it is also important that we feel like we are both contributing,” she says.
Frequent and open communication keeps them both comfortable with the arrangement. Whenever they disagree about money, Keith usually gets a pen and paper and writes things down as they discuss. Willow likes to pull out a calculator and shows how things balance.
“We make sure we listen to each other and try to find a compromise we are both happy with.” Although they’ve discussed opening a joint account down the line, they’re maintaining separate accounts while they save for the upcoming wedding reception.
They decided to get married legally last year, because Keith is Canadian, and they wanted to clear up his immigration and permanent residency paperwork. They’ve been saving for a big reception ever since.
The reception will be upstate in Cooperstown, NY. It’s more central for both their families, and it allows them to avoid the city’s markup on wedding costs. Their working budget is $30,000, and they’re both aiming to put about 10% of each paycheck into the wedding fund, with a head start from Willow’s year-end bonus. “Anything we get from our parents is just a bonus to make it bigger and grander.”
After the reception, next October, they’d like to start putting that 10% toward retirement and savings. But they’re not in a hurry to change up their lifestyle.
“We make enough money to get by; but we live in New York City and it’s not easy to save extra,” Willow says.
Financial Feedback
Malani recommends Keith and Willow break down their financial goals as follows:
Short-term: saving to finance a wedding reception.
Mid-term: building an emergency fund, paying off student debt.
Long-term: saving for retirement.
“The first thing to do is to see if your general spending habits are within reasonable limits, because then you can find ways to optimize your income to line up with your priorities in a better way,” she says. “At Stash, we use the 50/30/20 split as a healthy budget guideline.”
Assuming you’re making $200k, it would breakout as follows:
No more than 50% (or $100k) of your income should be going toward your fixed costs (housing, bills, student loans, etc.)
No more than 30% (or $60k) of your income should be going toward your flexible costs. (daily expenses and the fun stuff like dining out, etc.)
No more than 20% (or $40k) of your income should be going toward your future costs (retirement funds, etc.)
Malani also recommends the couple looks into opening an account at Capital One 360. They could take advantage of the sub-accounts feature, as well as earn higher interest rate on the cash, instead of if they left it in a traditional bank account.
Illustrated By Mallor Heyer.
Leo & Christina
Christina, 28, is a nanny and makes $50,000 annually, with an additional $20,000 in overtime. One perk of her job is free housing (in a New York suburb) and no utility bills. Leo, 32, is an IT professional for a large company and makes $90,000. They currently have a little more than $40,000 in stocks and close to $50,000 in Leo’s 401(k). Christina and Leo have saved nearly $100,000, and paid off all their student loans since they don’t have any living expenses. They plan to use the savings to build a house in the next year.
When they first moved in together, after just four months of dating, Christina and Leo opened a joint checking account, and started contributing equally to cover the cost of living expenses. After they got engaged, they started sharing a savings account — once they got married, they closed their individual accounts and began contributing solely to the joint checking and savings.
“Combining everything has always made the most sense to me,” Christina says. “That's how my parents did it. It just feels weird to share everything else once you are married and to keep separate finances.”
They’ve been very lucky in recent years that Christina’s job provides them with free housing, and Leo can work remotely, which allowed them to follow the family Christina works for out of the city. Since they don’t have to pay for housing, they’ve worked hard to just live off of Christina’s salary and save everything Leo makes. That will change this year, as Christina plans to leave her job, and Leo will become the sole breadwinner for a while. She’d like to start her own nutritional therapy business once they’re settled in their new home, and they’re also hoping to save money by prioritizing a less consumer-based lifestyle.
“I would say we are moving toward a simpler life,” Christina says. “We are planning to grow as much of our food as we can, including raising chickens, hunting, etc. This is not just to save money. I think it's important for our health and developing our [future] kids’ work ethic.”
Financial Feedback:
Malani suggests Christina and Leo should make sure they’re getting the best interest rates on the cash they're saving for their down payment.
“For sums over $20,000 to $25,000, the dollars you’ll earn in interest really start to become significant,” she says. “We recommend CapitalOne360 because of its user-friendly system and money-management tools, like sub-savings accounts, as well as its higher interest rates.”
Next, Malani suggests Christina and Leo look into investing. “One thing we’d suggest is to find an advisor who prioritizes your goals and uses investments as a solution to achieve those goals within a given time frame,” she says.
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