Family Series Part 2 – Joint or Separate Finances

Probably the number one most asked question in personal finance is whether or not to pay off a mortgage early vs. investing the money instead. Hot on its heels, the seemingly second most debated topic is whether couples should have joint finances or keep everything separate.

As with most things in the world of personal finance, the answer is “it depends”. There isn’t a single solution that will work for all couples, since many factors play into the money dynamic that partners share – i.e. are both interested & willing to participate in household finances, did each partner previously have their own established financial life, are there any money traumas being brought into the relationship, etc.

Instead of focusing on a “right way” or a “wrong way” to handle finances as a couple, the key is to make sure both partners are on the same page and have goals that align. Then it doesn’t really matter exactly how finances are split, as long as it works for the partnership.

Having said all of that, what do each of us do?

Scout

TLDR – My wife and I have joint finances.

We’re Partners, Not Roommates

My wife & I got married fairly early (at least compared to many of our friends and contemporaries). I was 24 at the time and a couple years into my career while my wife was 22 and had just graduated college a month earlier. Being so young we hadn’t really even thought much about money up to that point in our relationship, let alone talked about it together.

It wasn’t until one of my friends casually asked me how we were planning to handle our money that I even started to think about it. That friend got married a year earlier and said that he and his wife combined finances with the reasoning that “they were partners so all things in their life should be united as a team; otherwise it would just feel like living with a roommate”. That made total sense to my wife & I, so that was the path we took.

Upon getting married we opened a joint checking & savings account and immediately started having our paychecks direct-deposited there. A few months later we bought our first house (well, technically a condo since that was all we could afford at the time) and put both our names on the title. Some utility bills were in my name and some were in my wife’s name – no real thought behind it, rather just whoever had the time to call and initially set up each account. When we bought new cars a few years later, both our names were on the titles & registration.

The only financial accounts that are separate are our workplace retirement accounts and IRAs. Although these specific accounts are in each of our individual names (due to the very nature of them), we still both have awareness of the balances & contents inside them.

So since the very beginning it has been one pot of money that we each contribute to, draw from, and manage. This isn’t to say that we equally share financial responsibilities in our household or that we’re equally enthusiastic about managing our money (in both cases that’s me), but at the end of the day we still do everything together with combined finances.

Why Joint Finances Work For Us

One of the benefits of having combined finances is that there’s nowhere to hide. For some, this may be a bad thing, but I like the transparency that it provides to go along with accountability. Neither my wife or I are big spenders, so we’re not too concerned about the accountability aspect – we trust each other to be prudent with our spending. But having transparency is nice because it allows us to feel more comfortable – it’s harder to miss things when there are always two sets of eyes on our money instead of one.

I know that some couples could use increased transparency and/or increased accountability. I’ve heard of many people who’ve been in a relationship for a very long time and still don’t know how much income their partner brings home or even how they spend & manage their money. To me, this is completely mind-blowing!

Both Methods Can Work

I think because we’ve had combined finances from the start, there have never been any huge issues or really even any inkling that we should try something different – perhaps because this is all we’ve ever really known. Of course having joint finances also makes planning and working with our money much easier, since everything is always in one spot all the time.

Although joint finances have worked for us, I can understand instances where couples get together later in life with each person already having their own established financial background. This would make it very cumbersome to try and join finances. Aside from logistical hassles, I can also see it being a huge mindset shift going from total autonomy with a very specific way of doing things to having to work with someone else and most likely making compromises along the way. I’ve seen numerous examples of couples with separate finances that make it work just fine, so while this concept seems foreign and confusing to me, I wholeheartedly believe it’s a viable option.

I think the key to financial success in all relationships is that both partners need to have shared goals to go along with good communication. Then however they decide to handle money is fine, whether via joint or separate finances, as long as it works for them.

The Squire

TLDR – My wife and I have separate finances.

Joining Forces, But Separately

My wife and I started dating in our late twenties and were about thirty by the time we got married. She had a condo and everything was under control financially. Although I had saved some in my retirement account, I didn’t have much in my checking account. When we got married, we agreed that we would share everything from then on, but how to do this we weren’t sure about.

One of the first things we did was look at our bank accounts. I realized I liked one of her banks more, so I closed my checking account and opened an account at her bank that she could access, and I started depositing my money there. Rather than change and combine everything all at once, we made a simple spreadsheet showing all the regular payments that needed to be made and started tracking the payments every month.

At first we tried splitting up who took on which payments based on which interests each of us had, and of course factoring in our paychecks if needed. It worked out well for us. In fact, we haven’t really changed much since, other than when paychecks and priorities have changed. We now have two kids and a house, and we’ve modified the spreadsheet only slightly over time.

How We Divide & Conquer

My wife felt good making condo payments and saving up for a down payment for our house. Once we got the house she took charge financially of house payments, along with home improvements. She spends the rest of her paychecks on other priorities, fun activities, saving, along with whatever fun things she wants to buy.

I’ve enjoyed taking advantage of using credit cards and their benefits. So I try to pay for most utilities, insurance, health expenses, vacations, food, and other various needs and splurges that come up. What I enjoy the most though is investing. Whatever extra money I have at the end of the month I enjoy throwing into IRAs, college savings accounts, and brokerage accounts.

Why Separate Finances Work For Us

This method happens to work well for us for several reasons.

We live below our means, so after we pay for all needed and fun expenses, we have extra money to do with what we want.
We both like to put extra money into savings and investing.
We are both pretty frugal and don’t buy many unnecessary items. In fact, we are constantly encouraging each other to go get an item the other has been considering.
We have a central spot where we keep track of our regular expenses and balances. We also keep track of other notable expenses like travel, medical expenses, kids activities, extra car and house expenses, sporting events, concerts, and other big ticket items.
We both contribute to the family in ways we are passionate about, and don’t mind the responsibility involved.
We are both good at looking over our expenses and sharing with each other anything out of the ordinary.

I don’t know if there are any advantages to our method. We spend when we want on things that are important to us, without judgement. For example, if every week each of us has an extra $100 that doesn’t need to be spent on expenses, I or she might feel like spending it on new or used clothes, going out to lunch and coffee every day at work, donating to a good cause that comes up, or maybe one or both of us puts our extra money into college savings for the kids or sets it aside for a future adventure.

As mentioned before, we keep track of our bank account balances, paychecks, big expenses, and credit card expenses every month, so we always know what’s happening. We will sometimes transfer money to each other if it makes sense. For example if we have a big house improvement coming up that she’s going to pay for, I might hold off on contributing toward college savings that month in case I need to transfer money over to her. Or if it’s taking longer to fill up our Roth accounts than I was hoping for and her checking account has more than it needs, I might ask for her to transfer extra money over to me so I can invest it.

Cutting Edge or Crazy?

I can see how this method could sound quite strange and non-efficient to most people. We’ve talked about combining everything into one account or even writing down every single expense into their own categories and comparing every month to decide how much better or worse we’re doing over time. But honestly it just doesn’t seem worth the time and energy to either of us to change what’s working so well. Perhaps when we get closer to having just one or no incomes coming in, we’ll start looking at expenses differently and change our ways. We shall see…

Reader Questions

Do you and your partner have joint finances, separate finances, or perhaps a combination of both? What do you like & dislike about your current financial arrangement?

Leave your answers or comments below – or email us directly at info@epicfinancialjourney.com