Call me crazy, but when I got married almost 24 years ago in 1989, I just assumed that couples closed their individual checking accounts and opened up one joint checking account. This account would be used to deposit all salary and wages into, and to pay all household bills from. It never crossed my mind that there should be an account that’s just mine or just my husband’s, other than our retirement funds which can’t be comingled. And that’s exactly what we did within about three months of marriage. Surprisingly, or maybe not, we’ve never had a problem with that arrangement.
As the years progressed and we had more money to save, jointly held savings accounts and investment accounts were created as well. Because this was the way my husband and I handled our money, I always assumed that all couples did similarly. Over the years of being a Financial Planner and asking people about how the money was handled in their marriage, I found out that there isn’t just one way, let alone one right way that couples manage the family money.
In fact, I had to start asking couples to share details with me about how wages and salaries were shared or kept separate, and how bills were divided up so that I would know where their future savings would come from. What I found was that every couple does it differently and for different reasons, so what’s important is finding a way that works for your relationship.
When I ask couples who don’t simply combine their finances, why they don’t, the reasons are varied. Sometimes it’s secrecy and not wanting the other person to know what you’re doing with your money. Sometimes it’s a trust issue, especially if a saver is married to a spender, and doesn’t want them dipping into their separate funds. Many times, especially when individuals marry later in life, it’s simply that each person has gotten used to having their own accounts, and wants to maintain control over them.
Whatever you do in your relationship, I see some pitfalls in both setups. First let me speak to the concerns I have for couples who comingle everything, like I have done. Typically in this scenario, one person takes the lead on doing bills, managing debt, and adding to savings (This would be me!). The downfall of this setup is that many times that person feels the burden of having to make all the financial decisions. In the event something goes wrong, it’s just too easy for the uninvolved person to blame the one making the financial decisions. But even more important, is how easy it is for the one who doesn’t handle the money, to be totally clueless about:
- Where is all the money located and how do I get to it?
- How much are the monthly bills and how much money comes in monthly?
- How much do we save for the future?
- How much insurance coverage do we have and is it adequate?
This can be so detrimental in the face of a family crisis like a premature death or a disability of the person handling the family finances. I’ve been witness to a few too many widows (and I’m not being sexist here, but the statistics are still that women tend to outlive men, and men typically handle the finances) coming to my office absolutely distraught over the loss of their spouse. But equally scary and adding insult to injury is the fact that they also are now worried about if they have enough money. Knowing so little about their money, they have a hard time trusting a financial advisor that they might not have even met before.
There are ways to handle some of these challenges, and I try to do this in my marriage. Having regular meetings, minimum annually, to review the current financials and where everything can be found is helpful. If you use a financial advisor, having both people meet regularly with that advisor so they can form a relationship of trust, in the event they will one day be handling the money for the family. For the person in charge of the family’s finances, try to keep all money centrally located, versus spread across a dozen different places. Try to consolidate retirement funds and other savings vehicles.
Now let’s look at the pitfalls of couples who keep everything separate. The challenges include when one person greatly out earns the other in a two income household; do you still split the bills evenly? And how about when one person stays home and manages the home? Do you give them a spending allowance for groceries and personal items? How about planning for your retirement together? Doesn’t this need to be a group effort and a group decision? How does a couple who keeps their accounts separate pay for vacations and dinners out?
I’ve had so many experiences with couples who have separate accounts. When I ask how they split up the bills, I usually hear, “Well he pays the mortgage and utilities, but I pay for food and everything related to kids”. Then the arguments start over who carries more weight on the bills. The bottom line is our goal is to get away from arguing over money and get on the same page about planning for now and the future.
I’m curious how your family handles money and the good and the bad that come from your strategy. Be looking for questions on my Facebook page asking you to share what works for you in your relationship!