Should You Keep Separate Finances?
As promised, here’s the post on whether couples should keep their finances separate. If you read Trent’s article from my roundup, then you know he and his wife have finally combined their finances after 11 years of being together (six years dating and five years married). He and his wife took their time and really got to know each other, financially speaking.
Other couples are quick to combine their finances. My best friend that’s getting married has shared finances with her fiancĂ© since the first year of their relationship, and they’ve only been together four years. To my knowledge, they haven’t had any issues with their money with the rare exception that Edward buys something and forgets to tell my friend. Then he gets his butt chewed and he remembers not to do it for awhile.
Even still, there’s a certain amount of risk involved with sharing your finances with someone. It comes down to how well you know them, and even when you think you know them well, they still manage to surprise you. No one expects to get into a relationship only to have their significant other cheat, beat them, or run off with all the money, yet it happens.
Here’s a story from a situation at work. Being in the banking industry, you always know when the husband or wife has been unfaithful because nine times out of ten, the other will come in and clean out the bank account. The drama we witness, let me tell you! At any rate, we recently had a customer come to the credit union to pull out money because her husband was cheating.
Her story goes something like this.
“We’ve been married X number of years and this is the second time he’s cheated on me. The first time he took all the money and disappeared with the girl he was screwing (her words, not mine), yet for some reason I took him back. The first time he took the money, I wasn’t able to pay the bills and my kids went without food for two days. I finally had to call him and beg for the money back.
This time though, I don’t want to be without the money. He doesn’t know that I know yet, but I’m taking some money just in case. I only want $500 because I don’t want to have any trouble with the lawyers when I divorce him.”
OK, besides the lack of confidence this woman has, there’s some very important information she’s missing here. The fact that the account is joint means that she can take all of the money and close the account if she wanted to. She asked us if there was any way that she could freeze the account so her husband couldn’t take off with all of their money, but on a joint account, both parties have equal access to the account. We explained her only options were to close the account or work it out with a lawyer.
Well, somewhere in that advice, the woman seems to think the credit union told her to close the account, take the money, and run. She threatens the cheating husband with just that, saying the bank told her she could. He shows up on our doorstep the next day, spitting mad. Curse words were flung around the lobby and he even threatened to sue for giving his wife misguided financial advice.
I love how people think suing someone is the answer to all of their problems. What I wanted to tell this guy was that if he would keep it in his pants or get a divorce, none of this would be necessary. What I actually told him was that his wife had been advised that her options were to close the account or seek out an attorney, that’s it. If she was under the impression that those words meant she should take the money and run, then the matter is clearly a domestic dispute and not something we will get involved in. I also explained that he was more than welcome to contact an attorney on the matter if he felt it necessary to do so.
My understanding is that he talked to one of our executives and our security guards and was calmed down, though I believe he might have been banned from our branch for his disruptive and rude behavior. What became of them as a couple, I don’t know. But, the woman ended up taking a bulk of the money from the account before the husband realized it. While he was at our branch yelling at us, she was at another branch withdrawing money.
Another incident involved a man in the military. These stories bug me the most because these guys get married right before they deploy and then put their wives on the account to watch over the finances. I know these women are just marrying these guys for that enlistment or deployment bonus, and I’ve only been wrong about that once. However, this story involves a guy who was also a friend. I told him not to put his wife on the account. I told him he was better off giving his mother power of attorney to take care of his finances, but he didn’t listen. He added the wife. They’d been dating for six years and married for less than three months, but he never added her to his accounts because he didn’t trust her - yet somehow he still fashioned himself in love with her.
Anyway, he gets deployed to Iraq and he’s over there a few months when I get a call - from Iraq - and he’s freaking out. His account is overdrawn, yet three months ago he had $17,000 in there. So I pull up his account and what do I see? The wife has spent it all. Not only has she spent it all, but she’s been paying for an escort service. Did I mention they have kids? So, my friend calls his wife and gets one of the kids on the phone only to be told that mom’s in her bedroom with some guy and they’d been in there all morning.
Now, I know you’re probably thinking that these stories are rare and the exception to the rule, but they’re not. The happen ALL the time. I’m not saying that you can’t trust people, but I think when it comes to your money you should be extremely careful. What if you found yourself in one of these situations? How would you take care of yourself if everything you had was jointly owned? I think a good deal of people get pressured into joint finances because their partner makes them feel guilty about “not trusting them.” It’s not about not trusting the other person, it’s about taking precautions.
I’m not married or in a relationship so this situation isn’t breathing down my neck right now. However, if it were, I would have one joint account for household expenses and insist that we each have our own personal accounts for our own spending choices. As long as the money for the household bills was transferred to the household account, then each party could do with their money what they wanted. This seems like a fair compromise to me. There’s a joint account to resolve the trust issue and there are individual accounts to keep other finances separate. Just my personal preference, anyway.
If you’re going to join your finances, there are some things to consider. First of all, you have to have open communication about finances. You can’t just combine stuff and not talk about it. It’s best if you have a discussion beforehand and figure out where each of you are in your financial goals, where you hope to be, what your strengths and weaknesses are, and who will be handling the bills. These topics are important and should be discussed in detail.
Next you’ll need to consider whose bank you’ll be keeping, if you have separate banks. Don’t just pick the bank because you’ve been there longer than your partner has been at theirs. Pick the bank that helps you both accomplish your financial goals. Pick the one that makes the most financial sense.
Once your accounts are sorted out, it’s important to consider your credit cards. Will you keep them separate or will you combine them, as well. This is another conversation to have with your partner. Do they carry balances while you pay yours off every month? Are they interested in lower interest rates while you want the rewards? You’ll need to determine whether you have similar goals in mind or if it’s just better to keep separate cards.
I’d actually like to hear some good stories on sharing finances. I get all the negative stuff at work, so I’d like to hear from those of you who have been sharing finances for a number of years. How’s that working out? What challenges have you guys had to overcome to make it run smoothly? If you had it to do all over again, would you keep joint finances or go separately?
For everyone else, feel free to share your thoughts!
You’ve inspired a post over at my site. My thoughts on joint accounts.
http://wideopenwallet.com/2008/09/joint-accounts/
Great article. I’ve seen positive relationships who have joint, and who have separate, and I’ve seen dysfuntional relationships who have joint, and who have separate. It really does depend on the money habits and kind of relationshiop a couple has, IMHO.
My husband and I had separate accounts before we were married. We tried a joint chequing account when we got married but often I would go to pay for my university classes or books only to find the account was in the hole. It caused serious strife between us as he would spend money on ‘wants’ when I expected it to be there for needs.
While we still have a joint account, it truly is ‘his’ as I never add to it nor take out of it. We each pay certain bills out of our accounts and neither of us has to worry that someone’s wants have taken money out required for needs.
It is perfect? nope. we make very different amounts of money and do argue about bills and who pays how much, but that is a function of our relationship more than money. (work in progress, I hope)
His account is constantly in overdraft and while mine sometimes gets near zero, it never goes under.
Out of the different options out there, it works the best for us and causes the least amount of friction.
Thanks for writing this!
How applicable - The Wife has been talking to me about this for a few weeks. We are in the process of combining the finances. I will let you know when I post what we’ve done!
It is a HUGE deal, and in today’s world with automatic payments a complicated mess. However, you have explained the speed bumps extremely well.
I will share with you the details when I get them sorted out in the next day or two.
Wow! What an amazing article. I have been with my girl for over 7 years and thinking about marriage in the very near future and money issues come up all the time. It is a huge topic that needs attention before you get into a serious situation otherwise it will be the topic of discourse way down the road, just like many of the situations you noted. Great post!
In the late 70’s when I married, the thing to do “then,” was combine finances. My husband was paid once a month, and I never saw a check, only what he deposited into our joint account. All my working $ was in the joint account, and he kept a large sum of cash, on the premise that it would last him the month until the next monthly check. Not so much.
As time and years wore on, he would withdraw money in the early days of the ATM, and NOT TELL ME! Too many times I’d go to buy food and there was no money at all, and we were a week from pay day. It never entered my mind to open my own account, because you just didn’t do that…then. When he passed away 5 years ago, I had long since learned to keep a buffer in the account, and when I finally went through his wallet, I found countless ATM withdrawal receipts. Finally, into our 20th year of marriage, along came Automatic Deposit, which he despised because it meant I would know exactly how much he made & brought home, but he was driving long-haul trucking and I told him it needed to be auto deposited so that money would be available while he was driving cross country.
Now, as a widow I have a “joint” account with my 2 adult children still at home; a business account with my daughter on it, and 2 accounts with only myself on it. Emergency fund fully funded and all the “how to get to it” information in a safe place if something should happen to me. Personally, I don’t think couples should join their money at any time. It leads to far too many problems, and I don’t even personally believe you need a joint account for household bills. Just decide amongst yourselves who will pay the mortgage, utilities, food, etc., making it as equitable as possible, based on the income of each individual. I believe that will lead to fewer problems, and then neither party at any time has the right to ask the “where’s the money” question, or “what do you do with your money” question. Keep it simple, keep it separated. Less grief, heartache and you’ll always have trust.
Finances in any relationship are always a cause for great concern. When children are involved it becomes more of a concern. If your money is always separate, and if each personal is financially responsible, the entire family’s needs will always be met. If you combine them, one or the other married partner may feel that since there seems to be “so much money” in the account, why not use a little here and there for things that are wanted, but not necessarily needed. Always know up front and without question who will handle what. In my married life, more than once I went out to get in my car to go to work and my car was gone. The story? “I was going to make the payment today.” Not so much. Now, almost every bill I have is set up as an auto pay through the lender, and I never have to worry about whether my car will be outside in the morning.
A sad lesson to learn all these years later, and only since my husband has passed away. He tended to think that if money was in the account, it was certainly meant for him to spend, regardless of whether the bills were paid. More often than not, he’d spend the money before the bills were paid. If I were ever to remarry, the first thing I’d make crystal clear is that I will not join my funds with his, but I’ll pay this bill and that bill (or whatever), and I’ll be responsible for my car, insurance, charitable contributions, whatever, but no, I’m not joining finances ever again. Lesson learned (the very hard way).
Love your posts; thank you,
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I am in LOVE WITH THIS POST because it’s exactly what I’m going to do if I ever have kids and need a joint account.
It’s not that i don’t trust the other person but it’s just so I can sleep at night. I’ve been there, done that. Phew…. I am so linking to this!
Ah, none of these people (including you in the comments) should be married if you can’t trust your partner. Sharing your life with someone you trust is sort of the whole point of marriage. You’re doing it wrong.
I can’t even imagine any of these stories actually happening! I’m sure they do, but it’s just so deceitful in so many ways.
My husband and I have been together for almost 2 1/2 years (1 1/2 years dating/engaged and almost a year married), and have had at least one joint savings account for the last two years. Initially, we opened a joint savings account and made equal contributions as a way to build up savings for the life we knew we were going to spend together. If things didn’t work out between us, we knew that we could split the money right down the middle (it was an interest-bearing account) and go our separate ways. Yes, there was the risk of one person totally cleaning out the account, but because the money wasn’t necessary for our survival, we both considered it money well spent for never seeing that person again.
Obviously, things worked out, and when we got married, we combined all of our accounts. Then, we sat down one night and hashed out a detailed budget based on family income and expenses, broken down by priority (e.g. clothing, shelter, food, and taxes all take first seat; dining out and cell phones fall into last place). We do a weekly update to track our spending, and adjust our activities to match the money we actually have. We also put away money into savings–emergency fund, travel, IRAs, etc.–and each have an allotment every month for personal spending. It’s up to the individual to keep track of what they spend, but the other can’t dictate how that money is spent. For example, I love pedicures and my husband loves electronics. Neither thinks the other is making a particularly good choice by blowing their money on that stuff, but as long as it’s within our personal budgets, we refuse to make it an issue.
Basically, good communication and trust are the bases of our financial planning, and so far, it’s worked remarkably well. As for those folks that have financial issues to accompany their domestic issues, well, it’s not the joint bank account that is really the problem here.
Interesting article and the comments are even more interesting.
DH and I have been married for 6 years and dated for 3.5 years before that. When we first got engaged, we opened a joint checking account to be used for wedding expenses. Each of us contributed a certain amount each month. After the wedding, we both closed our individual accounts and combined all of our money into the joint account.
The first year we made a lot of mistakes. We bounced so many checks it was ridiculous! There were also a lot of arguments about who had made “stupid” purchases and who’s fault the bounced checks were.
After a year, we sat down and had a very frank discussion. It was decided that an excel file would be created to keep track of spending. We were both responsible for writing our purchases (by check, debit card, and etc.) into our checkbook ledger and the Excel file would be updated at least once a week. That way we both could see how much was really in the account instead of relying on the ATM reciepts. Also, it kept us both honest since the purchases recorded in the Excel file could be reconciled with the purcahses that showed up on the banks website at any time.
During that talk, we also decided that any purchase over $40 had to be okayed by both of us before it was made. Lately, we’ve been consulting each other for purchases above about $25. I don’t really know when we started doing that. It just sort of worked out that way.
It took us a while to work out the kinks in our system but it works well for us and there is no more fighting.
Hi,
That was a really interesting article.
However, my experience has been quite different.
I am from India and mine was an arranged marriage ( quite common in India). We had known each other for about 3 months when we got married and we have our finances combined since then. Its been two years and we did see a lot of ups and downs money-wise during this time. First we ran credit card debts because of the expenses we incurred during our wedding, then we had to move from India to US and it required a big initial expenditure ( although we got reimbursed for it but it took a couple of months for the money to come through) so we again went into debt. Then my spouse couldn’t work for about 6 months due to visa issues. Initially my income was more than my husband’s, now he’s earning more. So we have been through quite a bit. The good part is that we both live frugally. Still we both had to catch up with the other one in a lot of areas - my husband was very careful about the cash inflow, he used to watch every penny he was supposed to get and made sure he got it. He’s also a genius at filing taxes. As for me, until we got engaged, I didn’t even know that I wasn’t claiming about 20% of my monthly salary, it was just getting accumulated somewhere - I think this example shows how careful I was about my income. But outflow was a totally different matter, I had every expense jotted down in my notebook, with every receipt kept carefully whereas my husband often ended up spending all his money on frivolous stuff. Marriage was a real eye-opener for us. Not only did we learn each other’s better habits, but also learned that we need to aggressively save if we want to make progress in life and at the same time lead a comfortable lifestyle. Now, I know every component in my salary, and my husband maintains a real nice excel sheet to log our daily expenses ( with pie chart, sub-category totals…the whole nine yards). The only long term issue we have had so far is his tendency to trade in stocks ( I am not talking about long term investing), but now that he invests relatively smaller amount of money I have just learned to take it in the stride. Nobody’s perfect, Right?
My fiance and I have decided to have one account for household expenses and our own accounts for everything else. We are both too independent to have to ask the other if it’s ok to spend money so keeping most of the finances separate totally resolves this. As for the household account, it will go on percentages. For example, if he makes 75% of the total household income and I make 25%, then he would put $750 in the account and I would put $250 per month or what have you. You can’t go and combine everything 50/50 if both partners are not earning equally…That is bound to cause problems. If it works on percentages, it’s fair and there is no fight to be had. This also eliminates the need for those extensive Excel budgets that all you combined-financers need to avoid fighting. You are married to a partner, not a parent so why should you want to answer to a partner like a parent? #1 rule - don’t lose yourself in your marriage.