The Three Bucket Strategy

Modern times need a new approach to specific areas within old relationship structures. One such area that is being challenged by modern times is finances in a relationship.

The Traditional Relationship

In the old world, marriage had clearly defined roles. The traditional “husband” of the marriage worked outside the house and generated money. This out-of-house work was complemented by in-the-house work by the traditional “wife”. Both contributed their time to marriage to make a better life for themselves and their family. Work roles (funding the household or running the household) were clearly demarcated and assigned to specific marriage roles (husband or wife). Times were simple and solutions were simple.

However, as social progress happened (slow as it may seem, it does happen), education became non-gender specific, conveniences of technology (meaning appliances like washing machines, refrigerators, etc.) saved time and economic demand required a more skilled workforce.

The once clearly demarcated roles have started to overlap. This is great social progress! It means the only difference between genders is biological and the traditional social “roles” are melting away!

However, the old structure of marriage (as understood by the previous generations) still self-propagates and often causes some unresolved contradictions in how to go about certain areas of marriage.

One such area is finances.

The Modern Couple

Today both partners in a relationship contribute to in-the-house work and carry on with their out-of-house work. Both partners are well-functioning individuals who can support themselves independently. For them getting together is not about survival, but about thriving.

Each individual has aspirations and goals that they seek to fulfill, but also important are the goals common to them. These goals are what make a relationship interesting.

Each partner has the right to fulfill their own goals and a duty to fulfill the shared household goals.

We are often asked by new couples how to approach the shared finances of the household. Their questions are often the result of traditional systems being forced upon the modern living. It is not that the traditional systems were bad or less useful, it is just that they need to be adapted to modern times. The definitions of roles have changed, and so should the actions required by them.

The few common questions we face by (mostly young) double-income couples are as follows:

  • Who should bear the kitchen expenses (rentals or EMI, utilities, food, entertainment)?
  • Whose earnings should go into investments?
  • Who should fund the holidays and outings?
  • Who should buy the car?
  • Should we invest together or separately?
  • If either party has dependents (parents or relations), is their responsibility individual or joint?

and so on…

There are many answers to these questions. However, the few solutions which are not answer to these questions are:

  • It is not fair that the higher-earning partner should take care of all household expenses.
  • It is not fair that the partner with a lesser individual income exhausts their finances and saves/ invests nothing.

Equality of time

In a partnership, each individual puts in time and energy. This is an area where the partners should strive to match each other. Each partner needs to recognize the time spent by the other to work for the partnership (whether in-the-house or out-of-house), no matter the economic output. When partners put in their time for a partnership, it makes them invested in the relationship, and acknowledgment of this time by the other partner is all that is required.

Finances need not be put in equally, that is a personal decision between the partners. Here is one approach to allocating finances.

Equity for goals

A happy partnership requires both individuals in the relationship to be happy. This means each partner should be able to pursue their individual goals as well. If only one partner earns (and the other contributes by making the household better), the finances are to be allocated for each partner’s individual goals as well.

To this end, we (my co-author and I) created The Three Bucket Strategy in our book, “What My MBA Did Not Teach Me About Money”.

Here is an excerpt:

Instead of expecting the spouse’s approval for every spend, or to limit the money spent on personal shopping, it is feasible to divide the household income into three buckets. Bucket №1 and 3 is each spouse’s individual bucket. Bucket №2 is the family’s common bucket. The common bucket is where each individual contributes towards the family’s present and future needs.

The Three Buckets

Bucket 1 is “Her Goals”. Here she contributes toward her individual goals from her earnings. Bucket 3 is “His Goals”, where he contributes towards his individual goals. Contribution toward one’s own goals is very important as it brings about the satisfaction of doing things for one’s self. This is self-love. Individuals who love themselves have better relationships! That is why fulfilling one’s own goals with one’s earnings is important.

The Other Partner’s Bucket

Another thing partners can do from time to time, is to contribute to the other partner’s bucket as a gift. This gift goes a great way in showing acknowledgment and respect for the partner’s goals.

The gift contribution is not mandatory and it need not be monetary. It can simply be a smaller value item in the partner’s bucket list. A gift is a boost that every relationship needs.

The Cornerstone

Bucket 2 or the “Our Goals” Bucket, is the cornerstone of a modern relationship. It is the common goals that need to be funded by both partners. Goals such as family homes, family cars, funding for children’s needs, etc. fall here.

When both partners fund these goals, there is a sense of strong joint ownership. This joint ownership acts as a cement to relationships in today’s modern times, binding and holding them together in the beginning and making them grow later.

The question remains “How much should each partner contribute to the Our Goals bucket?” The answer is an amount that provides “Equality of Time” and “Equity of Goals”, but both must contribute.

This is an amount that needs to come from discussion and deliberation. It requires having frank, open, and unoffended conversations between the two partners.

Even when investing for this bucket will need to factor in the risk preferences, risk capacity, and risk requirements of both partners (the individual preferences, capacities, and requirements usually differ and can be implemented in Buckets 1 & 3 respectively).

Honesty, trust, patience, and communication go a long way in building a relationship as well as running the joint finances.

The Three Bucket Strategy is described in my book on personal finance titled:

The author of this article and the co-author of the book, Sanjit Singh Paul, is the Principal Officer of a SEBI Registered Investment Advisory firm — Modulor Advisory Services. You can reach him at