Choosing the Best Financial Arrangement for your Home

It may not be the most romantic part of married life, but financial arrangements indeed play a significant role in whether a couple lives happily ever after or not.

“Money problems can be a real headache, especially in a marriage,” admits Citibank’s Vice President for Consumer Education Aneth Ng-Lim. Individuals naturally have their own way of spending, treating, and valuing money; but once they’re in a relationship, these differences can be a problem.   

“Financial friction can lead to all sorts of problems, like irritability, rudeness, paranoia, loss of social interaction, depression, increased risk taking, and the like,” enumerates personal money management coach and author Alvin Tabañag. “Disagreeing about money is one of the most common causes of marital problems.”

How can a couple keep the peace, as well as their savings? “It is indeed a communication gap,” clarifies Ng-Lim. “But like most gaps, this can be bridged if both parties acknowledge the problem and make an effort to address it.” Tabañag agrees, “It’s critical for couples to talk openly about their finances and find solutions together. In other words: ‘Talk money with your honey.’”

Budgeting Basics
Before you, as a couple, can begin planning how to spend your money, you must first know just how much moola you can spend. The best way to do this is to account for how much each individual earns - and spends - for a good two to three months. This will give you a pretty good idea on how your money is spent, as well as the areas where you can make adjustments.

Next, you should sit down as a couple and openly discuss money matters. “This is a good time to share exactly what money means to you, and focus on your financial goals for the family: Is it to save for an emergency fund, for retirement, or for a new home?” enumerates Ng-Lim.

You must not only agree on the financial goals you will pursue, but also set concrete steps that will help you reach these goals together. Marriage is a union; any decision, whether financial or otherwise, should be mutually agreed upon.

“It’s not wise for only one parent - even if he is the only one earning an income - to come up with a budget and force it upon other members of the family,” warns Tabañag. “The input of other family members should always be taken into consideration. When everyone is involved in creating the budget, they’re more likely to follow and stick to it.”

1. Separate responsibilities
Managing one’s family finances can be quite an ordeal. An arrangement wherein the financial tasks (e.g. paying bills, making deposits) are divided between each spouse is generally a good way to help lighten the overall load. This can be done either by both spouses contributing a set portion of their own salaries to the monthly expenses, or simply combining all family income into
a common joint account.

PROS
- “This is the most practical way to go about managing the family budget, as purchases and disbursements can be assigned based on the spouse’s convenience, ease of execution, proximity, availability of funds, etc.,” reveals Tabañag.
- Since the burden of the entire family’s finances is divided, each spouse will be able to concentrate on his designated responsibilities. This helps ensure that the agreed-upon budget will be more easily followed.

CONS
- If a spouse regularly does not accomplish his assigned tasks, the family budget could get messy and off-track.
- Even the most effective finance plan won’t be achieved if nobody is willing to take the lead. One spouse should still spearhead the planning and asking for input from his partner. However, both spouses should work as a team in the execution, based on the assigned responsibilities.

IS IT FOR YOU?
“As long as both spouses are physically, mentally, and emotionally able to take on the financial responsibilities, then it’s best for the couple to follow this arrangement,” advises Tabañag. Make sure that each spouse regularly updates the other as to which responsibilities have been carried out. A good idea would be to print a list of all financial tasks, on which the husband and wife can simply sign off on as soon as their task is completed.

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2. Combined responsibilities (personal and joint bank accounts)
When a couple is married, a certain amount of money from each spouse is usually considered as conjugal. Rather than just “his” money” or “her money,” there is also “family money.” This can be easily managed if the spouses share a joint bank account, in addition to having their own personal accounts. “Each personal fund can get a certain amount or percentage of the individual spouse’s salary. He can then spend it on whatever he wants,” explains Ng-Lim. “The joint account will be used to pay household expenses and may also contain the family savings.” The amount contributed by each spouse into the joint account - whether equal or not - depends on what is needed to run one’s household and must be previously agreed upon.

PROS
- By having his own personal bank account, each spouse can still enjoy a certain level of financial privacy.
- Both spouses will have equal responsibility in managing the family budget.
- Maintaining a joint account is a wise choice as it keeps the family expenses separate and accounted for, and enables either individual to easily access the funds in case the other is unable to.

CONS
- The unmonitored use of a personal account may lead to irresponsible spending of one or both spouses.

IS IT FOR YOU?
This setup is ideal if both spouses are responsible money managers. Remember that, “only a minimal amount should go into each one’s personal account to minimize reckless spending,” says Tabañag.

 

3. One spouse responsible
These days, it’s common to see either husband or wife holding the household purse strings. The best person to take charge of finances, of course, would be the one who is more responsible with handling money. He will be responsible for most or all of the family’s finances, including keeping total spending within budget, distributing money to family members, paying bills on time, and the like.

PROS
- Planning, executing, and monitoring the family budget will be easier.

CONS
- All financial responsibilities may be tough and taxing on the spouse in charge.
- “Not having any financial responsibilities may also be tough for other family members, especially if the one in charge acts like a dictator and rules with an iron fist,” opines Tabañag.
- If the spouse in charge is unable to control the finances, the budget might not be strictly followed.
- This arrangement may result in a decreased self-esteem of the spouse not involved in managing the family budget due to feelings of uselessness.

IS IT FOR YOU?
Placing one spouse in charge is recommended in situations wherein only one spouse is present most of the time (e.g. the spouse is an OFW or frequently on provincial assignments).

This arrangement may also be beneficial “when one spouse is physically, mentally, or emotionally unable to assume any financial responsibilities,” explains Tabañag. “In all other cases, I strongly recommend against having only one spouse control the family’s finances even if he is the only one earning. Managing the family budget should always be a team effort.”

Sources
* Alvin Tabañag, personal money management coach, founder of Pinoy Smart Savers Learning Center, author of Kaya Mo, Pinoy! 12 Steps on Any Income, www.pinoysmartsavers.com
* Aneth Ng-Lim, vice president for consumer education, Citibank Philippines, ww.citibank.com.ph

Photo by Jun Pinzon