Matthew Paulson of Finance is Personal asks, “Should Married Couples Combine Their Finances?” His answer is an unqualified yes. One of the things I love about the Finance is Personal site is that it almost always gives me a fresh viewpoint.
I think it’s impossible to give a hard and fast answer here. All the things said in the Matthew Paulson’s article are true, but the reality of marriage is that half of them end up in divorce. Nearly everyone who writes about personal finance agrees in having some kind of emergency fund for, well, emergencies. In general if people plan the rest of their financial spending well, they’ll only need this emergency fund 10% of the time. So why does it make sense to guard against something that’s 10% likely to happen and ignore something just as disastrous that’s 50% likely to happen?
It may sound like negative thinking to be prepared for divorce. It’s also negative thinking to prepare for an earthquake. It doesn’t mean you shouldn’t do it. If both of you love each now, you’ll each realize this and want the best for the person in the future, even if life comes between you down the line.
I don’t really understand the preacher argument in the aforementioned article. Mr. Paulson wrote, “The preacher says, ‘And now you are one.’ He (or she) does not say, ‘And now you’re one – except for your checkbooks – those are separate, go ahead and do your own thing there.'” That would be a crazy long thing for a preacher to say. A preacher can’t say all the exceptions. For instance he also doesn’t say, “You are one… except for airline tickets… you have to each buy your own there, because airlines will consider you two separate people.”
One must recognize that having separate finances is not the same as not having common goals. For instance my new wife and I have been putting money into a joint account each month to use for a home someday. As long as we make this commitment, we stay on the right track to reach our goals. And if she uses the rest of her money to buy 5 jet skis, I don’t have to feel resentment that she’s spending “my” money. I think this works particular well for us because we have similar salaries (though she earns a little more). If we had vastly different salaries, we’d probably have to come up with a different plan.
Good post. There is no hard and fast answer to the question. I don’t see individual accounts as a protection against divorce — I don’t think that actually works in some states. It’s more of a way to bring trust and freedom into the relationship. That might not be right for some couples.
Yes, you are right it doesn’t work in California. However, I’m sure that if it’s an amicable divorce it’s easier to split things up when they’ve been separate from the beginning. I would imagine that a lot of problems arise in a divorce from the confusion that neither party don’t know which assets should belong to which party.
I agree with Flexo’s comment. I guess it is a matter of your preference. Things also depend largely whether you have 2 incomes or 1.
If you have 2 incomes, I can see keeping separate of you want to split bill paying responsibilities and want to each have your private money. I don’t agree with it, but i can see how it is appropriate for some.
If you have 1 income, I think you have to keep everything joint. My wife has a friend who’s husband works and she stays home. He essentially gives her an allowance and thinks he has 100% say in how they spend their money. I just don’t think that is a healthy relationship.
I’ve seen several marriages end because of money. But not in the way most people thing – these people fought constantly over money *because* they kept separate accounts. In my eyes, if you cannot trust the person you’re planning to marry 100% ( and that includes with your finances), then you probably have no business getting married.
I know my wife is a free spender, but we discuss our finances on a pretty regular basis to make sure we’re both on the same page. Any purchases over $100, we always discuss first before pulling the trigger. It helps keep either one of us from going overboard, without separating our finances.
Penny Saved, I think it’s a slippery slope to say that trust meaning having to have combined finances. I will also say that people who keep separate finance can be very much 100% married. We are a living example of that.
I think broknowrchlatr had it right when he said that incomes that vary greatly (or completely in the case of a 1 income family) can lead to problems. That’s why I said in my case – we each earn mostly the same… there’s really no reason to combine things.
Lastly, there’s a Lazy factor involved. I have about 75 things tied to the bank account I’ve had for more than half my life. She’s the same with her bank. It would take two weeks vacation to try to unify on one bank. Plus I have access to bank tellers (through Bank of America) if we need to deposit a pile of wedding checks, which is currently the case. Her USAA account doesn’t have tellers (I don’t want to put thousands in the mail and “hope” it gets there), but helps save on ATM fees when we are out since they reimburse all fees. We get the best of both worlds keeping things separate.
All of the combine or not to combine discussion flows from a spirit of “talk about money when you’re married”. If you’re talking about money and working toward your common goals (house), I think it matters less if you’ve combined or not. If you’re not talking about money and working toward common goals, the choice you make won’t matter and money will be a thing regardless. But, back in the olden days, I’d wager that most houses were single income or very asymmetric income (one person made much more than the other). This made the mine, yours, and ours much more difficult to implement when one party didn’t have a ‘mine’ fund. Most of the replies to the older The Simple Dollar article that were not co-mingling (or had yours, mine, ours situations) seemed like dual-income (relatively symmetric) households.
On the practical side, throw in some life situations (have a kid, one parent stops working), and it gets complicated to keep adjusting how funds are moved around. My honey and I throw all the income into one pot and handle our situation by budgeting based on what income is available.
I would never pool all my money with someone else. I think a shared account for shared expenses and maybe a shared account for shared goals (like a house or holiday) is plenty. Just because you are a couple doesn’t mean you have to merge everything. People who are independent are far more attractive to me.
I disagree with you. First off – the 50% of marriages ending in divorce stat is kind of skewed – 50% of ALL marriages end in divorce, that includes 1st, 2nd, 3rd (4th, 5th…) marriages. Since subsequent marriages are much more likely to end in divorce this does not mean that statistically all first marriages end in divorce. And this does not mean that YOUR or MY marriage will end in divorce – for us it’s either 100% or 0% chance. What a way to go into marriage – assuming that you have a pretty good chance of failure so you need to keep it easy since it probably won’t work anyway. I guess I’m glad I didn’t marry you ;)
Where I have seen this attitude really fail is when kids enter the picture. There is no way that things can be equally divided when a woman has a child. Even if she continues to work she’s taking at least some time off. I feel that combining finances sends the message that we are a team, we are in this together and we will support each other no matter what happens.
My perspective on this is different than yours because I stay home with my children while my husband earns the income. When my husband and I moved in together we combined finances. We knew we were going to get married and we both agreed that “what’s mine is yours” and that we were in this together as we came together to form a new family. We had a MUCH easier transition to parenthood financially than our peers who had had separate finances and split things 50/50. In fact, a friend of mine is considering divorce because of the extreme inequity that has surfaced now that she is a mother and her husband still expects her to contribute 50% financially…she has way more than 50% of the childcare burden (and women DO get stuck w/ more than 50%. My husband is a saint but he can’t do 50% of the pregnancy and 50% of the breastfeeding. Biology conspires against him) and quite frankly she just wants to feel safe and accepted and doesn’t have the same drive to earn money that she did before becoming a mother. I fail to understand why her husband can’t say “this is OUR family and we’ll work together to take care of all of us” It bothers me that he insists on separation at the expense of his wife and child.
Clearly a very complicated, multi-faceted subject. But bottom line for me is that I can’t understand going into a marriage and not giving it your all and doing what you can to function as a unit.
I think that if *you* believe that not having shared finances mean that you don’t trust each other then that will be true for *you*. But not necessarily true for anyone else. I think its kind of a self-fulfilling prophecy thing.
And another thing on trust. You could easily argue that you *really* don’t trust your spouse if you don’t want them to have access to money that you can’t see i.e. you don’t want them to have a separate bank account.
Nicole has a good point about the second marriages and such, but I really don’t see a lot of people on their third marriage. I think it’s amounts to a drop a in the bucket.
Nicole also said, “What a way to go into marriage – assuming that you have a pretty good chance of failure so you need to keep it easy since it probably won’t work anyway. I guess I’m glad I didn’t marry you… ;-).” This may have been in jest, but I think there’s a bit of truth behind Nicole’s comment here. I could similarly say, “What a way to go into a life – assuming that there might be an emergency down the line. I guess I shouldn’t be living.” I say you can’t ignore the possibility of divorce just like you can’t ignore the possibility of an emergency.
I understand that things may change when/IF we have children. However, I’m likely to be the one giving up the income to take care of the children. My wife makes a little more than me and my career choice, software engineer (as well as this blog) can be done from home a large percentage of the time. Obviously adjustments may be made at that point, but that’s down the road.
Plonkee has an excellent point on trust. I guess there’s really no answer for what has the most “trust.”
“though she earns a little more”
Oh… so you found yourself a sugar mama, heh?
plonkee:
Trust but verify?
Nicole, I don’t think LazyMan is trying to suggest everything be split 50/50. The point of having separate accounts is to maintain a certain amount independence. I make a alot more than my girlfriend, and if we were to get married, I would expect the burden of buying a new home, paying for the kids, etc would fall on me. I think that’s only fair. However, I think it’s important still that both of us have our own accounts. I don’t want to feel guilty about splurging on trip with my buddies pulling from the joint account, nor would I want her to feel like she couldn’t do the same.
Obviously different things work for different people, but I think when most people argue for separate finances they are not arguing to split cots equally as much as maintain a certain amount of indepedence.
I reguarly have this argument with my husband. I don’t understand why he wants a seperate account, considering I’m the one who pays the bills and if I left it up to him things would never get paid. Pff..I came from a tradiaitonal family where both my parents worked, mom took care of the bills, and they had a joint account. Dad’s pay went to bills, mom’s pay went to savings and other fun things. Mom made more than Dad. Perhaps when I get out of school and begin making an income, I’ll set aside some blow money for my hsuband, and hopefully that will quelch his “seperate” account anxiety.
Lazy Man, I think your argument about not combing your accounts is you just being lazy. It would not take two weeks of vacation to unify accounts. my wife and i unified when we got married and it was painless. second, USAA has [email protected], so there is no “hoping” it gets there scenario, which has the added the benefit of being immediately available, whereas BofA may put holds on some of the checks, or they aren’t immediately available. of course USAA has $5k daily limit on using [email protected] now we do still have separate accounts as an easier method of financing individual IRAs. the checking and savings account, though, are joint accounts.
i think the underlying premise is commitment and trust. no slippery slope in it at all. why the heck do you need separate accounts if you are married anyways? why allow money to become an issue? i don’t get why people split bills or alternate bills in the first place. his and her money seems odd to me when you are a “them” in a marriage. i can see having separate accounts for ease of transactions for things, like funding IRAs in different financial institutions, or if you are geographically separated and want convenience for transactions like the bank teller scenario Lazy Man mentioned. all our pay that isn’t going into 401K goes into one account, then gets distributed to other savings and bills.
besides, i don’t see how maintaining separate accounts can shield you from divvying up of assets in a divorce anyways.
I think it is fine to keep separate accounts after a recent marriage. My wife and I kept 3 account, a his, a hers and a joint account. This allow each of us have some independence over the money in our separate accounts. We paid the bills out of the joint. The had the 3 account for 7 years until we had children and now we have combined the whole lot. We have been married 12 years and I can only remember a couple of fights about money. We also have a rule that if we are going to spend more than $100 we talk about it together.
“. For instance he also doesn’t say, “You are one – except for airline tickets – you have to each buy your own there, because airlines will consider you two separate people.” ”
Loved that!
Personally, I would feel offended if my boyfriend (likely to be engaged soon) wanted to keep things separate upon marriage. Besides the fact I’ll be making more than him for the next few years (grad school), I just think it would complicate things, and we’d probably have more conflict about who is paying for this dinner or that joint item. I still think we may give ourselves an “allowance” of an equal amount and have some separate accounts… But for the most part, things should be one!
The $100 rule probably wouldn’t work for us–I rarely buy things over 100, but I sure could rack up a lot of 20 items!
I don’t think it makes a big difference one way or the other, so I took the laziest route: For the first 10 years or so my wife and I were married, we had separate accounts since we didn’t want to bother with merging them.
Recently we moved across country, closed our accounts with our old bank and opened a new account. This time we opened a joint account because we didn’t want to bother with creating two accounts. So lazy!
Seriously though, as long as you trust your partner, I don’t think it makes a big difference.
Looks like my article sparked quite a debate…good discussions everyone