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Tuesday, August 08, 2006

Financial Model For Couples

I just came from reading Sesame's post on Women, don't shortchange ourselves and since I have too much to say, I decided not to comment and write another post myself.

One of the things a married couple must handle together is money, naturally. I believe there are clearly 3 ways one can choose to manage the money. To me, there's no right or wrong way. What works for one couple may not for another. What works for each couple is the right way for them as long as they (both) are happy with the arrangement. As a couple we can choose to manage the money either:
  1. Separately - I earn, you earn. I pay my bills, you pay your bills, the rest we divide and pay separately. I have my bank account, you have yours. I don't ask about yours, you don't ask about mine. This works fine for many couples but I personally don't like it, but thats just me. I think it works well if you both have lots of cash to spare so theres no need to worry about money. Otherwise, it can give rise to potential problems if you can't agree with how the money is spent.
  2. Jointly - You pool your resources together, then prioritise where and how the money should be spent and you try to stick to those priorities. We do this, even though I don't contribute to the finances. Well, even if I were earning, I still like this arrangement. Although not everything should be pooled jointly, there should be some degree of autonomy ie having separate as well as joint accounts but the idea is to share and discuss the financial responsibilities. We prioritise our money in this order, making sure we can pay the monthly household bills and mortgage, investments and savings for the future for the kids and retirement, little things to make the kids happy, and lastly ourselves. As for investment decisions, I like to give my opinion but generally I don't mind leaving that decision to hubby.
  3. One party manages - To me, this is the worse kind of arrangement but then again, thats just me. Unless you have a responsible partner who knows how to save for the future as well as relax a bit when called for, having one person manage the finances fully either places too much burden on one party or it can give rise to mismanagement.

Just like everything else in a marriage, money issues should be handled with care, consideration and lots of give and take. We are afterall very different creatures and the way we have been brought up shapes to a certain extent the way we spend our money, ie whether we are spendrift, savers, frivolous or careful with money. When we are very different in our spending behaviour it can lead to potential conflict so we have to discuss it and come to an agreement on the preferred way to manage our money.

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