I was catching up on some blog reading and caught an old post from Plonkee about the different ways that couples can manage their finances. The three different methods were categorized as communist, socialist, or capitalist. Rather controversial, eh? Don’t get too excited folks, just read on:
Communist: One Big Pot
According to Wikipedia, communism is a social structure in which classes are abolished and property is commonly controlled. Thus, no matter what each person earns, all their income is deposited into one central joint account, from which all expenses are paid from as well. All assets including property, investments, and cash are owned together.
Socialist: Earn More, Pay More
Under this structure, common shared expenses such as rent and utilities are paid via a joint account. Let’s say one person makes $75k and the other person makes $25k. Then if the monthly shared expenses are $1,000 per month, they would pay $750 and $250 respectively. The contribution is proportional to income.
Separate expenses such as entertainment, gifts, or clothing are paid for out of personal accounts. This allows each person to retain some individual control of their money.
Capitalist: You Pay Yours, and I’ll Pay Mine
Finally, we have the option where purely shared expenses are simply split straight down the middle. Differing income levels don’t change anything; If you make more then you keep more. Everything else is paid directly by each individual. Theoretically, each person is thus incentivized to keep their own expenses down, as nobody else helps to pay for it. There is “my money” and “your money”. This is often how platonic roommates manage their finances.
Just Call Me Karl
Although I usually don’t align myself as communist, I must admit that that is mostly how we manage our money as a married couple. It’s also helpful that we both work and earn comparable incomes (a least for now). We do add in a small “adult allowance” fund where we can spend money on whatever with no questions asked. Besides that, while we definitely don’t always agree on things, I think the combination of open communication and the passage of time has gotten us relatively comfortable with the “one pot” setup.
Now, I don’t think any one type is necessary better than the other, and know couples of each persuasion. I do have one question for the capitalist-types, though: What about retirement? Do you split that too? What happens if one person doesn’t invest adequately in retirement?
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Well according to you I am a communist :). However, we progressed along your scale as our relationship matured.
When we started dating – going out for dinners etc – we would take turns picking up the tab, probably close to your capitalist model. We were both students at the time so we both had zero income.
When we graduated, I made 4x of what my now wife made, so we used the socialist model. I would pay for the lion share of things given my higher income, including things such as rent.
When we got married, we just pooled everything – sounds like we behave very similar to you – communist model plus adult allowance.
I find very different structures among my friends utterly fascinating.
Couple A: Ultra-capitalist model: separate accounts for everything, they do not know what the other has. However she pays for groceries and all other “small” regular bills. He pays for large bills such as buying a car, house etc. Both have their own retirement. What I find the most bizarre is that they do not share information.
Couple B: Capitalist model: separate accounts, but information sharing. However, EVERY cost is split 50/50. What makes it weird is that he earns 5 times what she does, so their spending behavior is entirely driven by what SHE can afford, and he is not allowed to help her out – so they never really go on nice vacations that they could easily afford – and the situation is made worse by the fact that she is a new mom and not working 100%. This is actually driven by HER – she wants to be able to be financially stable in the event of a break-up, and does not want to be reliant on a guy.
Can’t believe I’m about to type the following, but “I’m a communist.”
I’m a capitalist. As far as retirement, we are both contibuting to our 401K’s thru work. She has a more conservative approach and I have an aggressive one. She sometimes asks for advice if that is what she should be contibuting or is she should buy more shares of the company (she works for a non public traded company that pays good dividends).
You left out one important thing. You are a “communist” willingly and of your own choice. True communism is forced at the end of a gun barrel.
We’re definitely communists. My hubby and I have always shared everything. In fact, a few years ago he worked a job where he earned tips and he would give me half of his tips! We are in sync with our goals and spending, but not investing- I want to and he doesn’t. So we compromised, the amount of money that we invest is not as much as I would like but its an amount that he’s comfortable investing and we’ve decided to increase it next year.
We would fall under communist in our family. We treat all money as ours and sit down each month to figure out how we are going to spend it. In doing counseling with couples we find that people who work together make their money go much farther than those who separate their money in to different accounts.
Yeah, I know one married couple where the guy was investing, and the gal was paying off high interest credit card debt. He was earning a lot less on his investments than she was paying. Still, his logic was somewhat sound as I can understand him not wanting to be an enabler as that might hurt them worse down the road. It was an interesting situation.
One pot for our family… I trust my wife completely with our finances which is nice. We are both pretty cheap.
I would say that I’m between a socialist & a capitalist. I believe in splitting joint cost equally, but using a joint account to pay those bills. I am also for a joint saving account for vacation & other large shared expenses, such as purchasing home furnishings, completing a renovation, etc. However I would always keep your own personal savings and/or checking out for your own discretionary spending. Obviously if you are in a committed relationship a larger portion of your income would go towards funding the joint accounts, but I would ignore your personal accounts. As for retirement, it is far enough away that I will take some time to figure out what would be best. 🙂
Looking at this list. I am definately a Capitalist !!
But there is that saying “socialist when poor, capitalist when rich”. It all depends what side of the coin you are on.
I’d have to say my wife and I are communists in spirit. While we share everything, technically not everything is “jointly” owned. Part of that is due to certain accounts being opened for incentives and such. She actually greatly dislikes this though and reminds me all the time “Make sure you’ve updated the ‘just in case’ file.” so she’ll know where everything is at (and remind her why it’s there) when I go ;-).
That’s really funny, I just got married 2 months ago and I feel like we’re 100% communist, but I am politically libertarian and a strong capitalist for everything outside my marriage. Luckily, we’re both pretty frugal, and right now were grad students making practically the same. I keep track of all the money and pay the bills because I enjoy it, it’s a hobby for me. I give her updates every month or so and we can basically buy whatever we want, but we are contentions and let each other know when we bought something small and we discuss at length any big purchases, like our new puppy or the big screen TV I really want.
My SO and I (we live together) are capitalist. I make more than her, but he doesn’t want to split expenses any way than 50/50. Maybe if we get married we will become socialist.
Socialist – financially anyway.
I think a lot of it is living in a community property state – it’s not like separating out our money makes a difference if we were to split, etc. We married together, young, with equal assets and wages. (Since then my spouse has not worked almost a decade – to raise kids – but hasn’t changed our philosophy). I’ve always realized that it was easy/logical for us to share everything because we came into the marriage on such equal financial footing (& also because we see very eye-to-eye financially). BUT, on the flip side, I can’t see marrying someone that I don’t trust 100%+ and that I can’t have the same money relationship with. I am just used to being completely on the same page to my spouse.
P.S. We didn’t physically combine all of our assets until we had kids. I think having kids just adds another layer. Even our cars used to be very his/hers, before kids came along. We had never bothered to make all our accounts joint before that – even if we treated them as “one.”
My spouse and I are not communist, we are a single financial entity. I think it’s a deceptive idea to confuse a true partnership with communism. (I do understand that this is just a though provoker).
It probably makes a difference that when we got married we were 21 and 22 respectively and completely broke. She was just graduating college and I had five years left. She put me though college and I have earned almost all the income since. In the 28 years since we married I have never thought of money as mine or hers. It has always been ours.
I’ve been living with my girlfriend for a couple years now. We keep a tab for groceries and household expenses so that gets split. We used to split rent, but then I bought a house with my money, and she pays me rent, but even with me getting the benefit of paying off the mortgage she’s not paying half. I’d rather split things 50-50, but she can’t really afford to, so it’s not much of an option at the moment. To keep things simple I’m paying for all major house expenses…therefore the house itself is “mine”.
I don’t know how people keep things separate if kids are in the picture. Pooling money would make it more difficult for me to be frugal. I have a lot less incentive to buy in bulk or to buy a cheaper but effective product if I’m only getting half of the savings. It’s a less efficient system in that the other person is an intermediate in the cause and effect equation.
Essentially sharing all your money and resources works out pretty poorly if you get divorced (half the people do) and keeping things separately might become nonsensical when hypothetically you are looking into retirement homes or taking trips, and one partner would basically have to leave the other one behind to not share the money.
Married 20 years as communists! I never thought of it that way, I always considered us one single entity but it is a very thoughtful analogy.
We decided for my wife to stay home and raise the kids. As a capitalist should she have starved? Gone on welfare?
I’m single and have complete control over my finances.
Call me Joseph…
…or Adolf.
@simplesimon clever!
Communism and socialism sound nice here, but then I would feel guilty for making a small salary and not being achievement oriented; we’re capitalists.
However, we also have subsidies for when one person (not always the richer one) wants to share something too rich for the other one’s blood. (Maybe the subsidies mean we’re a little socialist; probably it means we’re bureaucrats.)
For us married folk, I think the communist pot works easiest. It also supports your commitment to the partnership. Even if you were to get a divorce, you generally have to split the assets anyway (minus what you had before you got married, lest you have a prenup).
I’m on my second stretch. The first marriage we did thing socialist, me being the lower income and come divorce we had to split things evenly anyway.
On my second marriage I just couldn’t be bothered to do a socialist approach. Knowing full well that our marriage dictate an equal split on a divorce, I opted for communist. My wife makes less than me and prefers a socialist approach. Interestingly enough that is one of the few things that conflict in our relationship.
We’re between communists and socialists. We have been married for 8 months. We have seperate accounts we manage but have everything on Mint so we know what is going on with the other’s accounts and our names are on both even though I generally use mine and he generally uses his. He pays the monthly bills (mortgage, utilities, cellphones), I pay the less regular bills, groceries, taxes, insurance, home improvement and extras like vacations. It suits our personalities better for him to pay the regular bills and for me to shell out the huge amounts for property taxes, new chimney etc. He makes twice as much as I do since I am a grad student but I worked before hand so the house downpayment was all me. We both contribute to IRA’s we plan to use together. He has his 401k and I have one from a previous employer. I contribute to my IRA and when his savings account gets big, nudge him to contribute to his.
I couldn’t imagine really keeping the money seperated. I think it would lead to fights when it is important in marriage to be a team that works together and desire what is best for your partner as much as what is best for you. But having our seperate checking accounts prevents oopses from not knowing when the other is paying the bill and making sure there is enough pulled from savings to cover.
My and my dh of 25 years are communists.
We tried your adult allowance idea 25 years ago as newly weds, but found it wasn’t really needed. Maybe because we are both pretty frigal and didn’t need “blow accounts” as Dave Ramsey calls them.
Here’s my husband’s two rules for happy marriage:
Marry someone cheaper than you are and meaner to the kids. You will have nothing to argue about!
I’m a communist and my wife is a capitalist. We don’t have any conflict about this, curiously. She’s a generous person, she just likes being independent, and she feels guilty when she spends what I view as our money.
There was a great speech by President Reagan where he talked about the evils of communism and the Great American family values, or something like that. I enjoyed the irony, since I’ve always thought of Marxist communism (“from each according to his ability, to each according to his needs”) as a family value.
Interesting, how there is still a viewed “bread winner” role in a majority of heterosexual marriages, and thus Communist model is the default.
To share some insight with you, most of my friends are in committed Gay relationships (10 years +) and all of the relationships are a mix. They are Capitalistic with most of their income and expenses (one person’s name is on the utility bill, the other pays for cable, separate retirement plans, bank accounts, credit cards, etc.) However they are Socialistic on the big items (rent/mortgage/ property, trips/ cruises, business ventures).
None of them–and I really mean NONE are in Communistic relationships outside of MAYBE sharing 1 credit card.
Interesting. For the capitalist couples, how do you file taxes, jointly or separately? If jointly, who pays or gets the refund? And what if your spouse’s money management has incurred taxes that you wouldn’t have if you were managing it? If separately, you are not getting the benefit of filing jointly if ones makes significantly more than the other. And how do you divide housework? Down to the middle?
I used to be capitalist until me and my partner had kids now were more communists although our money is separate we still half with everything and this works well for us.
My spouse and I are not communist, we are a single financial entity. I think it’s a deceptive idea to confuse a true partnership with communism