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communist, capitalist or socialist joint finances

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Over at Ask.Metafilter, there’s a question on how best to organise joint finances for a newly co-habiting couple. As always, there are basically only three options, but I particularly like the way that ohio states them:

When we were talking about this we came up with three basic financial options, which we called communist, socialist, and capitalist, for convenience.

1- Cuban option: all money except retirement and savings go into one account, from which all expenses are paid. This eliminates having to figure out who pays how much when one party earns more than the other. This is only for people who really trust each other (both financially and otherwise) and who are willing to have very little privacy. I think of this as more appropriate for people who are already married, own property together, have kids, etc.

2- French option: create one account from which all shared expenses will be paid, like rent, insurance, gas, cable, car expenses if you share a car, etc. Figure out how much needs to go into that account to cover monthly expenses, and then contribute from your respective salaries in the proportion you think is most fair. We chose this option, and we are contributing roughly in proportion to our respective salaries. If you make $60k and he makes $30k, you contribute 2/3 and he contributes 1/3. Then you keep separate accounts for everything else. We liked this option because we could have some autonomy with our money and we could buy gifts or take each other out with our separate money. At the same time, we are learning how to run a household together and we have to trust each other enough to have a shared account.

3- US option: no shared account. Put the bills in both names and you each pay whatever is fair from that. You pay electricity, he pays gas, you pay rent and he gives you half, etc. If you are early in the relationship this is likely the best choice. More like roommates than potential lifetime mates.

Although I’ve never had the fortune/misfortune to share a home with a significant other, I tend to have opinions on everything anyway. I couldn’t easily do the first option - I’m too independent, and I like a bit of financial privacy. Either of the other two could be fair game though.

I know we’ve talked about this before, but am I right that these are the only options? I think that amongst people I know there’s a fair split amongst them, what’s your experience.

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29 comments for “communist, capitalist or socialist joint finances”

  1. I like the descriptives- I think we fall in between French and US; he pays the rent, and I give him half; he also pays the internet and electricity bill (he earns a bit more).
    We do have a joint credit card though so we can easily split larger purchases like furniture and holidays.
    It’s worked pretty well for four years now so we have no real impetus to go and open a joint bank account at the minute.

    Posted by Looby | September 29, 2009, 2:39 pm
  2. A slight variation on the Cuban option is to give each person an allowance that goes into separate, individual, accounts. This is an equal amount for each adult so it is not like the French option. The advantage of this option is that each adult gets an equal amount and you don’t have to try to factor in non-paid work to the whole equation. (a stay at home parent, for example, earns money by not having to spend it on expensive daycare.) This option gives you privacy and financial freedom while also pooling most of your money for savings and expenses. This option is ideal for a married couple or long term partnership and isn’t quite as good for a new relationship or one where the partners have very different financial goals.

    Posted by Caro | September 29, 2009, 3:53 pm
  3. Yeah, I think there’s another option which is separate chequing/bill paying and joint savings/investments. That’s what we use so I therefore dub it the Irish option. (It’s also the low maintenance option).

    Posted by guinness416 | September 29, 2009, 7:13 pm
  4. I like the Cuban option the most (in terms of managing the family finances), but I think the French option is the most balanced.

    Before my financial meltdown and divorce, we were doing the US option. Total chaos.

    Posted by Lee | October 2, 2009, 2:49 pm
  5. @guinness416 - Going on the headlines in the financial press at the moment, isn’t the Irish option that the Government bails you out? ;)

    Posted by Monevator | October 3, 2009, 4:06 pm
  6. Only if you’re a developer M, otherwise they stick taxes on every asset you have, may have or did have! Hopfully nobody’s in-relationship finances are based on that model ….

    Posted by guinness416 | October 3, 2009, 4:40 pm
  7. Interesting post and discussion thread. But why does it say that there are 9 comments when I can only see six?

    Posted by Niklas Smith | October 17, 2009, 6:49 pm
  8. Niklas Smith - i can only see 7 comments but says there are 9 - where are the others?

    I am enjoying this blog too - personally I always believe your finaces should be your own!

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  10. The US option is by far the worst. Thats the reason there are so many money issues with couples. It’s also tied into the fact that most people do not know how to manage their finances as it is.

    Both people in the relationship must acknowledge that they both carry a shared burden for their living expenses and if one can’t keep up with the others demands (say one wants a lexus, but with their salaries they could only scrape by with a Honda) then they should either come to terms with their differences or have the other person drop the demands.

    Posted by Brandon | November 9, 2009, 9:36 pm
  11. My ex-husband and I had the Cuban option (and yah, we’re Yanks). Problem was, he took control of all the money and wouldn’t allow me to have one single word to say about it. He wasn’t a very good money manager: by the time I left, we were three-quarters of a million dollars in debt, despite twenty years’ of pleading on my part that we get out of debt and stay out of debt.

    Subsequently, a S.O. moved in with me after I bought my own house. He was a very thrifty, debt-free sorta guy. We each kept our own accounts and our own books, but we shared the cost of utilities and food, simply by splitting the costs 50-50. He also paid half the mortgage bill, which I carried on my books as “rent,” converting my house into a gigantic tax deduction.

    Which is better? Couldn’t tell you. IMHO, singlehood is best: take care of yourself so you don’t have to share money decisions and money management with someone else. LOL! I guess that puts me not in a financial Cuba, not in the south of France (darn it), and not in the US but on Robinson Crusoe’s island!

    Posted by Funny about Money | November 20, 2009, 2:29 pm
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