Which practice to keep finances after getting married: joint, or separate?

Question

My wife and I have been keeping our finances separate for a long time. Some of my friends just put everything in a big pot. We each have our own pot, but then we have a common pot where we put all the common expenses money, and we pay all expenses from that joint account.

We decide what type of expenses will be paid with the joint account which are:

Food, bills, cars, rent, cellphones

I would like to know what is the most common approach and the best one for married couples' finances.

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It seems that this boils down to preference, believe, fairness and age within the couple. I think all answers have been great. I think we are taking the approach that we both feel comfortable, but we don't have kids now, and we don't know if we both will be working once we do. I am trying to say that our way might change depending on our future self.

To answer the latest comment below. The only problem we have encountered is that I am more a saver and she is more a spender, so when we want to do things that we need to put more money from our pots, usually she will not have enough. We have minimized this by opening savings account for her, but we are still learning through the process.

Again thanks all for all your good responses.

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I wish I can pick more than one answer. All were good.

Answer 1

If you ask ten different couples what they do, depending on a variety of factors, you'll get anywhere between two and ten different answers.

One personal finance blogger that I read swears by the fact that he and his wife keep their finances totally separate. His wife has her own retirement account, he has his. His wife has her own checking and savings, he has his. They pay fifty-fifty for expenses and each buy their own "toys" from their own accounts. He views this as valuable for allowing them to have their own personal finance styles, as his wife is a very conservative investor and he is more generous.

My spouse and I have mostly combined finances, and view all of our money as joint (even though there are a smattering of accounts between us with just one name on them as holdovers from before we were married). Almost all of our purchasing decisions except regular groceries are joint. I couldn't imagine it any other way. It leaves us both comfortable with our financial situation and forces us to be on the same page with regards to our lifestyle decisions. There's also the ideological view that since we believe marriage united us, we try to live that out. That's just us, though. We don't want to force it on others.

Some couples find a balance between joint accounts and his and her fun money stashes. You might find yet another arrangement that works for you, such as the one you already described.

What's going to be important is that you realize that all couples have the same six basic arguments, finances being one of them. The trick is in how you disagree. If you can respectfully and thoughtfully discuss your finances together to find the way that has the least friction for you, you're doing well. Some amount of friction is not just normal, it's almost guaranteed.

Answer 2

Echoing Justkt, different approaches will work for different couples. It also depends on your background, life experience, age, maturity....

• If you're both older and have both earned an independent income for many years, and neither has any intention of giving that up, then it makes sense to maintain separate accounts.
• If one spouse is going to be a home-maker, then needlessly separating accounts creates profits for bankers but doesn't reflect the actual source and make-up of your income.
• It also may not make sense to divide expenses 50/50 if the one spouse earns significantly more than the other.

Irrespective of the structure, any agreement must be based on a thorough understanding of the mechanism by which responsibility and accountability is apportioned.

As in any financial relationship, when money is plentiful and covers all ends, then conflict hardly ever arises. Problems only turn up when money vanishes. Business contracts are written with a view to such conflicts and agreements within a marriage must be equatable and based on a shared understanding.

So, don't worry too much about the structure. Think about thinkgs like the following:

• Who is responsible for the physical act of paying bills on time (even if both contribute in some form)?
• If the one spouse loses their income, earns less or suddenly gets a major income, how will that affect their responsibility to joint expenses?
• What is a gift from one spouse to the other, and what is owned by whom when bought out of shared savings?

In other words, given that income between spouses is likely to be unbalanced, how do you manage this within a caring relationship so that neither feels like a charity case, a social worker, or dependent?

There will not be one clear answer except that open and honest discussion on an ongoing bases can only serve to strengthen your relationship.

Answer 3

We've had everything in one pot almost from day one of marriage.

The key ingredients to making that arrangement work is to communicate about the money, and realize that you're in it together. Everything one person does affects the other.

Separating finances compartmentalizes the "affecting one another" part and makes it a little clearer perhaps, but I can also see it creating a sense of entitlement: "This is my money." There should be a place for individual discretionary spending, of course, but I'm not sure that roping off that money is the best way to do it.

It's less likely to be viable if there's one main breadwinner in the house. In our house, this is me. If we separated the finances like this, it would amount to giving my wife an allowance. Since she works harder at home than I do at work most of the time (she keeps the house, does meals and shopping, raises and schools our daughter, etc.) but just doesn't get paid for it, it would border on insult to her to treat the finances this way.

Answer 4

I feel there are two types of answer:

One: the financial. Suck all the emotion out of the situation, and treat the two individuals as individuals. If that works for the two of you, fantastic.

Two: the philosophical. You're married, it's a union, so unify the funds. If that works for you, fantastic.

Personally, my partner and I do the latter. The idea of separate pots and separate accounts and one mixed fund etc makes no sense to us. But that's us. The first step for you in deciding on an approach is to know yourselves as people - and everything else will follow.

Answer 5

My wife and I have a different arrangement. I like to track everything down to the transaction level. She doesn't want everything tracked. We have everything joint and I track everything except she has one credit card where I do not see the statements only the total. She is more comfortable, because she can buy things without me seeing the price for individual transactions.

Answer 6

Here are the main ways of doing this that I've encountered. I've met advocates of each.

1. Keep your finances separate, with your own paychecks going into your own bank accounts, retirement funds and everything. When joint bills come up either pay half each or have one pay, and keep track to make sure they are split evenly overall.
2. Have one joint bank account. All income gets deposited there and all bills come out of it. Usually you would have to make some agreement as to how much money each person can spend without having to consult the other. Optionally each person may have an 'allowance' which they can spend with no questions asked.
3. Three bank accounts. Each person pays their own paycheck into their own account, and makes a contribution to the joint one. Joint expenses come from the joint account.

You might be interested in this set of articles: http://www.slate.com/id/2281885/ which looks at some different ways of doing this and the financial - and other - effects.

Answer 7

This particular topic has probably been beaten to death already. But from the other comments, it seems that splitting finances them is a popular solution on this forum. I can see the individual benefit of this - makes it easy to go buy whatever you want. But it can hurt too. What if the situation changes, and you are no longer employed? Your setup will cause stress because now you are having to ask your spouse to pay for everything. If this works for you - congratulations. But, fights may ensue - divorce may follow.

I would like to offer an alternative. In my situation, I bring home a paycheck, while my wife does not. In this case, each of us paying 50% would simply not work. Not to say my wife doesn't work - she works her butt off cleaning house, raising kids, etc.

What we do is have any money that comes in go into a pot. We budget (Oh no, the B-word!) out regular expenses (lights, gas, rent). Anything that isn't allocated goes towards retirement savings (In the US, an IRA is an Individual Retirement Account), or towards a war-chest for big project (such as home ownership). And each of us gets the same "blow money" allowance every week that we can do with as we please.

Keep in mind, using this mentality allows the possibility of me staying home at some point in the future when my wife goes back to her dream job. And there is no financial stress about "whom owns what", or "who paid for what". We own it because we decided to pay for it.

Answer 8

My wife and I maintain seperate accounts. We have the bills split between us so that certain bills are paid by one of us, and other bills by the other. This is not a perfect 50/50 split as we don't make the same amount of money, but comparable enough that neither feels like they're doing all the bills alone. Our investments are similar.

That means we each have a pool of money that we can spend on toys or entertainment as we see fit without overspending. Once my bills are paid and my savings are paid for the month, if I want to go buy some DVDs and my wife wants to buy a new lens for the camera, we don't have to agree. We just use our own money and do it.

For us that's led to minimal friction or arguments over what to spend money on, simply because we aren't using the same pool. Getting it work requires getting the split right AND having the mindset that the other person is just as entitled to spend their share of the money as you are to spend yours. It really helps to eliminate issues where she spent money that I expected to be able to spend before I could, which can happen in a joint account. (We have no joint accounts, only things like the mortgage are in both our names.)

I've been told by more then one person that how we're doing it is "wrong", but it works a lot better for us then trying to combine finances ever did. I think it also helps that we're younger, and this seems far less common amongst older couples.

Answer 9

I personally think that you should do whatever you believe works best. I am not married but when I get married I would also want to do what you are doing with having a joint account for certain things but also still having seperate accounts. I find this is a good approach so that neither of you is dependent finanically on the other one. Also, if you want to buy a present for your wife you would do it with your own money and not the joint account money. I hope my answer helps.

Answer 10

There is no right or wrong here. Or, to be clear, "right" is what works for the couple.

When my wife and I were engaged, we opened a joint account. We also maintained the 'his' and the 'hers'.

As we discussed the approach, my wife shared with me a number of anecdotes about her parents arguing over a missing check. In other words, they'd work out of one check book, but her mom might take a single check to go out to get her hair done, and forget to enter the amount of the check. Keep in mind, this was over 25 years ago, and the number of physical checks we hand out has dropped dramatically. Our lawn guy, the guy that cleans the gutters, a very short list. 95% of bills are either run though the credit card, or paid directly on line.

Probably one important note - my wife and I are retired, but for the time we worked, her income and mine were within 10% or so, hers being the higher. Many money issues within a marriage come from a combination of income disparity and disagreement on spending. Easy to imagine a scenario where one's income barely keeps up with 1/2 the expenses, and 100% separate accounts would leave that person with no 'spending money'. Our approach was to maintain, say about $1000, in our own account, and the rest went to the joint, where all the bills were paid from.

Some couples have a spending threshold, i.e. they'll discuss a potential purchase above a certain level, but below that, no need. We had that conversation twice, once when she wanted to buy me a piece of art, an original work that she knew I'd love. The other was a new wedding ring for her, to celebrate our 20th anniversary.