If you plan on getting married someday or are engaged to be married, you will have a talk with your future spouse about merging or combining finances at some point. If you’re already married, hopefully you’ve already had some discussions about money.
I’m going to share with you how my family handles finances and share with you some of the things we talk about to reduce conflict about money. There isn’t one right way to do it. Different things work for different people. My wife and I have been married for just under 4 years now. While we aren’t exactly conflict-free when it comes to money, we found that having a joint account as well as our own separate, personal accounts works best for us. But let’s delve into it a little deeper and take a look at some of the pros and cons of having joint and/or separate accounts. Then, I’ll share with you how we do it.
Having a Joint Account
Promotes trust and communication: Having a joint account requires both spouses to communicate with each other more often so that they are on the same page with finances. At the beginning of a marriage, there may be disagreements about spending as values collide, but consistently communicating with each other about money will foster more trust in the future.
Provides ammunition for money fights: In almost all marriages, there is one “saver” and one “spender.” By this, I mean one spouse will be a relative saver compared to the other spouse. The saver will start scrutinizing the spender’s purchases, and money fights will follow. With joint accounts, all financial transactions are visible to both spouses.
Provides a clearer financial picture: With a joint account, both spouses get a clear picture of the financial situation. They both see what comes in and what goes out, and they will both have a general understanding of what happens with their money.
Allows for easier access: This generally isn’t a concern for young couples, but if one spouse dies or is unavailable, having joint accounts makes accessing money much easier. This will save a lot of hassle for the remaining spouse should such a situation arise.
Having Separate Accounts
Promotes autonomy: Having separate accounts allows each spouse to handle his/her finances in the way that he/she wants. Each spouse can make money decisions without the other spouse’s approval.
Leads to fewer fight: The ability to make purchases without the other spouse’s approval can lead to fewer fights. Although this approach may require less communication, there still needs to be a good level of trust in the relationship.
Allows for privacy: Separate accounts allow for privacy when making purchases. This can be good if you want to buy a gift for your spouse without him/her knowing.
The Best of Both Worlds: Joint AND Separate Accounts
The problem: In our first year of marriage, we had a fair share of disagreements about spending. I was always relatively frugal, so I was the “saver” in our relationship, which makes my wife the relative “spender.” I would scrutinize a lot of her purchases, and she would get frustrated. I just wanted her spending to be predictable so I could get a good picture of our financial situation.
The solution: We had many discussions and came up with a solution: both joint AND separate accounts. This provided us with both the benefits of the joint account as well as the benefits of separate accounts.
Our joint account: All of our income goes straight to our joint account (Capital One 360), and we use our joint account to pay our mortgage, food (groceries and restaurants), charitable giving, gifts, and any other joint miscellaneous expenses.
Our separate accounts: For our separate, personal accounts, I use Bank of America and my wife uses PNC Bank. The joint account automatically funds our personal accounts with weekly “allowances.” Occasionally, we discuss how much we should budget for our weekly allowance. We initially started with $50/week, changed it to $100/week at one point, and recently, we agreed to a reduction to $87.50/week which is where we’re at now. Our personal accounts are our “blow” money which we can spend on whatever we want.
The best of both worlds: By having a joint account, we both understand our general financial situation and see all our income and our joint expenses. By having separate accounts, we each have complete autonomy over a set amount of money, and we can spend it without being scrutinized. By having the allowances distributed weekly and automatically, I know exactly how much I can expect to be deducted from the joint accounts, and my wife knows exactly how much she can spend.
Again, this approach may not work for everyone, but it has served us well. Constant communication is the key to successfully managing your money together. Respect each other’s differences and listen well.
Daniel Lee is a personal finance blogger, realtor, and patent examiner based in the Washington, D.C. metro area. He tracks progress of his goal to pay off his mortgage by 2020 and to achieve a net worth of $1 million by 2025 on his blog at livefrugalee.com.