The case for separate (but combined) finances

The case for separate (but combined) finances

In the world of personal finance, the subject of how couples share (or don't share) their money comes up time and time again. It's no surprise. After all, money problems are a leading cause of divorce.

But for some reason, the concept that “personal finance is personal” doesn't always factor into people's opinions about combining finances — especially within a marriage.

Often, people argue that in order to be a team, couples must combine finances fully. Or that separate accounts mean there's some lack of trust within the relationship. Or that you aren't truly committed to each other. Or that you must not be on the same page about long-term hopes and dreams.

None of these things are true. Plenty of committed couples keep separate finances. These couples are teams. They trust each other. They share the same hopes and dreams. But for a variety of reasons, separate finances work well for them.

Today, I want to share an alternative to these two dominant modes of money management. I want to share how couples can both keep their finances separate — and combine them. Confused? Let me explain.

Separate But Combined Finances

My husband and I have been married nine years, and we've never fully shared our finances. Nor do we ever intend to. We've also never had a major disagreement about money.

This isn't to say that we haven't had our fair share of arguments, because any couple that has been together for nine years certainly has. But for us, money has never been a serious source of contention, which seems to put us in the minority. Perhaps that doesn't have anything to do with whether we've combined our finances, but I think it does.

Oktoberfest 2018 was definitely a joint decision

This past fall, my husband went on a week-long hunting trip. In preparation, he purchased a new camp mat, a new jacket, and a $300 tree stand.

We do a lot of camping and hiking as a family, so we already had plenty of gear. Most of it gets used frequently. The $300 tree stand, on the other hand, has so far collected dust in our garage.

My husband's plans for hunting changed after wildfires spread through our state before his trip. The stand was no longer helpful for the location he intended to go. Did he return it? No. Will he use it in the future? I sure hope so! But if he doesn't, it ultimately doesn't matter to me.

This is because, for as long as we've been married, my husband and I have carried significant savings in our own individual accounts that the other doesn't see or have access to. This is a policy we plan to always maintain.

We were just 21 years old when we got married. I'd just graduated college and he was a corporal in the Marine Corps. Unsurprisingly, we didn't have any real money to our names. Plus, I was $24,000 in debt thanks to student loans. Fortunately, my husband did have a small nest egg and a slowly growing Thrift Savings Plan retirement fund.

We did, however, open joint checking and savings accounts while still on our honeymoon. (How romantic!) We deposited all of the cash we'd received from our wedding in order to start a nest egg that might serve as a down payment on a future home. Not long after, we opened a joint credit card — the first credit card that either of us ever had — in order to build a solid credit rating for when we'd eventually buy that house.

10 years ago, a few months before we were married

Coming into a marriage so young and so broke would have been the perfect time to fully combine our finances, had we been so inclined. We both owned our cars outright, and the only debt we had was my student loans. We were fully invested to the marriage, and my military-dependent ID card even showed his social security number, not mine. In the eyes of the military, we were certainly one. And in all ways other than finances, we have been ever since.

All the same, I still had significant student loans to my name.

Student Loan Repayment

To make ends meet, I was earning $750 a month at my first post college internship, plus $8.50 an hour at a second job. My $24,000 of student loans at 8.5% was daunting debt! But it was mine, not my husband's.

Even after we were married, I didn't feel like it was his responsibility — nor did I ever want it to be. I accepted the loans as part of my college education. I've never regretted the debt (in part because the payoff process is what introduced me to the financial independence community).

I put my head down and paid off my loans in three and a half years. At the point I sent the last payment, I was earning $40,000 per year. Because the payoff journey was mine alone, I felt a tremendous sense of accomplishment that's been hard to match since. I was so proud of myself and it was something I could claim as entirely as my own.

Could we have repaid the loans a bit faster if we'd treated them as “our” debt? Certainly. Would my husband have had to make extra sacrifices to get there? Absolutely. And that's something I'd never have ask of him. I feel like it would have been entirely unfair to do so.

And because I tackled the student debt myself, that meant that if I wanted to skip a meal out, a new outfit, a fancy new fill-in-the-blank, I could (and did). But my husband was able to make his own choices for his money beyond what was required to pay our base expenses, and he wasn't required to live quite as frugally as I did while I paid off those loans — my loans.

How Do Separate Finances Work?

Over the years, we've traded bread-winning roles based on our life and career situations.

Initially, when my husband was enlisted and I was working two very low-paying jobs, he covered a significant portion of our regular expenses. When we moved home after his military service was finished, he started college and I was the one with a career. It was my turn to pick up the bulk of the costs.

Neither of us has ever harbored any resentment regarding income or spending. Though our money is separate, we are a team. We've shifted percentages as our situations have changed. No matter what, though, the individual leftover money was ours to do with as each of us pleased.

Now that we have similar incomes, splitting costs is easy. At the end of each month, I tally our joint expenses, subtract our income for that month, and give my husband the amount left over from his income to do with as he pleases. That money is transferred to his personal account, and I never see it again. The leftover on my end goes to my personal account, and he never sees it again.

While he may choose to spend it on a $300 tree stand that never gets used, I've dropped $400 on yoga classes in the past. We each have things we value that the other may not understand. But as the money comes from our separate accounts, we have full autonomy over those savings. There are no “allowances” set at the beginning of each month, and we don't have to check in with each other before we spend $500 on something the other may deem frivolous.

Something we will always agree on is travel – though camping is cheap

Of course, neither of us would spend much more than that without checking with the other first. We may have separate spending money, but the big things are ours jointly.

We've always seen ourselves as a partnership — a team — in all aspects of life. That means big financial goals as well as big hopes and dreams for the future: saving for a house, having a child, investing in real estate, pursuing financial independence. None of these are individual things, and they're accomplishments we've tackled together as partners.

But the little one-off things? Those are completely ours to choose. As long as we come together and agree on the Big Stuff, we've seen no issue with having our autonomy with the edges. As a result, there's no argument, no discussion about who blew $20 last week, because that $20 ultimately doesn't matter.

The Importance of Separate Funds

Beyond the desire to have separate spending accounts for one-off purchases, having some money that's fully separate is an important individual emergency fund.

Earlier this year, Tanja at Our Next Life described her feelings about true financial independence in a partnership:

It was when I realized that we had enough saved that, if we had to split things up, my share would make me financial independent on my own, and Mark’s would make him FI on his own.

I hadn’t realized it before then, but up until that point, I wasn’t actually financially independent, I was financially dependent. So was Mark. We were both financially dependent on the marriage. We were FI together, but not separately, and that’s a very different thing.

Nobody goes into a marriage planning to get a divorce. Still, divorce happens even to committed couples. And when it happens, one partner is often left financially vulnerable, struggling to come up with even basic money to get by. Separate emergency funds (albeit small ones), in the guise of our individual checking and savings accounts, means that my husband and I each have some financial security outside of our marriage. We feel that's important.

While we're still a long way from financial independence (either separately or combined), the basic financial runway we each have is a real and comfortable thing. It brings us peace of mind. We know that each of us wold be fine if we had to part ways, and that means there's zero pressure to stay together because of money. When you know that there's no financial need to stay together, there's no financial cage as part of the relationship.

Marriage (or any long-term relationship) is difficult enough on its own. By removing money as a possible point of contention, we feel like we have a stronger baseline partnership.

The kid doesn't have to worry about finances quite yet

Personal Finance Is Personal

Personal finance is personal. Just because our system works for us, that doesn't mean it will work the same for anyone else.

Our system has worked so well for us in large part because we're both generally on the same page with the larger financial picture. We come from frugal families and we've continued that lifestyle in our marriage. We live in an older, smaller home. We drive older cars. We generally don't buy new furniture. We don't have consumer debt.

If one of us was prone to spending, this system might not have worked so well. We feel that there's ultimately more trust in the way we spend our money, joint and separate, because each of us could rapidly spend a significant amount of money on a joint credit card, and we'd both be on the hook.

Fully joint finances, with specific budget bumpers in place, works really well with two people who adhere 100% to a strict budget plan for all of their money. For those of us who prefer flexibility, and have never done well with rigid budgets, joint-but-separate finances work extremely well.

My husband and I will almost save half of our incomes in 2018. Could we have pushed this to 55% if we were fully combined with a strict budget? Probably. Would we have been a lot less happy? Absolutely.

Not everything about your financial life has to be optimized to perfection. I'll take happiness over that last dollar every day of the week.

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Lora Garrett
Lora Garrett
1 year ago

Is that picture the Ozette Beach? My husband and I hiked the OB Triangle when we visited three years ago, it was amazing. Nice article. You have to find what works for you.

Angela @ Tread Lightly Retire Early
Angela @ Tread Lightly Retire Early
1 year ago
Reply to  Lora Garrett

That is the Ozette Triangle hike! About halfway between Sand Point and Cape Alava 🙂

kg
kg
1 year ago

I agree with you. We are happily married for 34 years now. We work our separate and joint accounts a little bit differently. We use the clipboard method* for our joint expenses and planned savings which pay for expenses like taxes, insurance, vacations, next vehicle, and medical. We each get a decent allowance that is part of our spending plan (some people call it a budget). However any extra money like overtime, bonuses, etc. goes to the person who earns it. We do not put it into our joint account. We are working class with working class wages yet always… Read more »

Eileen
Eileen
1 year ago

Thanks for this. I come at this from a different perspective and story, but ended up in the same place. After 25 years of combined finances/accounts, we opted to separate them about 5 years ago. It came about because my husband (works for very small company) had work expenses he was using our debit card for (and getting reimbursed). I kept the check book so a few times those charges caught me off guard in regard to cash flow. Anyway, we decided he should open a separate checking account and he’d put a pre-determined amount into our joint account (effectively… Read more »

Brooklyn Money
Brooklyn Money
1 year ago

Great article. I’m not even in a partnership, but I still found this perspective valuable.

Brian
Brian
1 year ago

I recently created https://budgetduo.com to help couples split up their shared expenses (based on income, 50/50, or a more grab bag method). It’s basically an online version of a spreadsheet that my wife and I have used for years. It’s especially helpful in situations where couple have disproportionate incomes. Anyways, check it out!

Jennifer
Jennifer
1 year ago
Reply to  Brian

Just checked out this resource and it is really nice! Thanks for creating and sharing it!

Ms. Mod
Ms. Mod
1 year ago

Great article Angela :)!

Mr. Mod and I have a very similar system for almosy the same exact reasons : I came into our partnership with debt, he had a nice nest egg, he has more expensive hobbies, I have expensive pets lol.. etc.

It really works well for us. Like you mentioned, as long as we are aligned on the big financial goals and hopes & dreams, we’ve never seen any issues with the autonomie with the smaller things.

JanBo
JanBo
1 year ago

Great ideas! The most important part that I read- being on the same page. The second most important is deciding how much each person puts in. As long as equal money and effort is put into childcare and retirement, it works beautifully. It is fantastic that you can pay your share of the bills while being able to stay home full time. Will you have a major slush fund when you do buy a house–for repairs and such? What happens if one of you is unable to work because of illness? Do you share in vacations ever or always visit… Read more »

That Frugal Pharmacist
That Frugal Pharmacist
1 year ago

Interesting. I’m trying to play out how that would work in still feeling like we split the expenses years into marriage. I don’t think I can personally wrap my head around that. Pretty much all of our accounts are combined, but, luckily we’ve also NEVER had a fight about money. We sometimes laugh about it later when we do fight, that, at least we we’re fighting over something stupid not something big like money.. I guess? We’ve also never really had a budget. When I met my husband, even though we was making blue collar wages in the teens, he… Read more »

DA Early
DA Early
1 year ago

Hers, mine and ours. My wife and I have been together for over 40 years and when we got married she was a professional woman earning about the same as me. She had her own savings, credit cards and assets (car, condo, etc.). She also had a career based on “HER” name. At that period it was “normal” for her to take my last name and for us to combine our finances but the name thing would have set back her earned reputation. We also realized that combining finances actually meant abandoning her financial identity and living under mine (not… Read more »

SavingNinja
SavingNinja
1 year ago

Perfect article! I agree 100%, I actually wrote an article about this topic the other month -> https://thesavingninja.com/why-you-should-split-your-expenses-equally-with-your-partner/

Splitting your finances 50/50 can actually help you achieve financial independence because it’s much easier to avoid lifestyle inflation! If one partner simply can’t afford it, it grounds the higher earner, and they can invest the extra.

Cubert
Cubert
1 year ago

I want that BACON shirt.

S.G.
S.G.
1 year ago

The point where I always break down on the split finances is that my value to my marriage and in my household has nothing to do with my value to my employer. I definitely believe in yours/mine/ours because having two people 100% on the same page is rare. But I don’t understand why taking even amounts out as “personal money” is so often dismissed as an “allowance” as though we were children. I don’t give my husband an allowance any more than I take one. Our budget simply has a line item for personal money for each of us, and… Read more »

Tricia
Tricia
1 year ago
Reply to  S.G.

I agree with this. My husband and I are a team and everything is combined. We tried separate finances during our first year of marriage based upon the advice of some family members. It seriously over-complicated things. We realized it was bad advice for us and combined everything. It is much easier and works much better. He makes more than double what I make, because he’s in a more lucrative field and I am not quite full-time, so that I can be here for the kids. I may not be bringing in as much money, but by me being home… Read more »

Eric @ Flip n Finances
Eric @ Flip n Finances
1 year ago

Hey Angela,

Great article from an awesome perspective! My wife and I got married last year and are about 90% of the way combining finances. It’s how we decided to do things and what works best for us.

Like you said, it’s a personal decision that depends on the couple. One way isn’t the best way for everyone.

Erin | Reaching for FI
Erin | Reaching for FI
1 year ago

I love this joint-but-separate approach but more importantly, I love that it works so well for you as a couple and that it keeps all the money stress out of your marriage!

Chris Roane
Chris Roane
1 year ago

Interesting concept. I think combining finances requires a higher level of communication in exactly where the money is spent. In our case I think it has worked well, but I could see us doing something a little more separate like this later on. But this does feel like less about separating finances than it does having a larger amount in the “allowance” fund that is then transferred to separate accounts? I guess I just don’t see how things are really separate when the main income and expenses are coming out of the same account?

Chris @ Mindful Explorer
Chris @ Mindful Explorer
1 year ago

Great posts Angela and love the hubby’s bacon shirt, is it bad if that is what made me laugh and remember the most about this article 🙂 lol
Well done

Amanda of My Life, I Guess
Amanda of My Life, I Guess
1 year ago

We follow a similar system. We don’t have a joint bank account at all, but what’s mine is his and what his is mine. It can be a little confusing at times to have several bank accounts (like making sure the money is in the right place for any automatic withdrawals), but it works for us!

Kelsey | On My Way to Happiness
Kelsey | On My Way to Happiness
1 year ago

Thank you so much for this!! I’ve seen on the internet some people believing the ONLY way to live is to combine 100% finances, otherwise you must have a sh***y marriage. I am engaged. My fiance and I have one joint account for bills (we live together) that we just opened up after the engagement. For now, all of our other money is separate. We planned on *mostly* combining finances when we got married, but keeping our respective checking accounts open because of what you said – we both work hard for our money and sometimes want to spend it… Read more »

Emma
Emma
1 year ago

We keep most of our funds combined for simplicity in bill paying, but have always kept separate individual accounts for “self-investment”, similar to you. You have to find what works for you.

Interesting points about FI and divorce. Interestingly, in many states all assets count as “joint”, so individual accounts may not help much in a divorce settlement.

Iva
Iva
1 year ago

Until recently, my husband and I (21 years married), have had joint expenses. Here lately, though, he’s wanted to branch off and do a side hustle. We’ve agreed that in order to do that, he needs a separate account. Up til this point, we always pooled and got allowances. We also tackled each others debt together. However, I feel it crucial to point out that we are not financially independent – yet. Together or separately. We’re working on that, though.

Donna
Donna
1 year ago

Interesting approach. The “his money” and “her money” approach is a bit of a fiction if you live in a community property state – unless you have a pre-marital or post-marital agreement – all the money earned by either spouse during the marriage belongs to “the community”. But glad you have found something that works for you. I was married for 13 years where we combined everything and then split everything when the marriage ended. We would do a budget/plan for the next year after each Thanksgiving holiday. With an agreed to “budget”, we never argued about money even though… Read more »

Financial Pilgrimage
Financial Pilgrimage
1 year ago

This is so relatable to me and my wife’s situation. Some of our family members give us trouble about having separate accounts, but it works for us so why change it? Our two rules are that we discuss any big purchases (over $300 or so) and we don’t go into credit card debt. Besides that we know which bills each of us have to pay and our extra spending money is about the same. I will say that starting this year we are using Mint to track our spending so we’ll have more insight into what each other spends. I’ll… Read more »

Sara
Sara
1 year ago

We have had two separate accounts, each with both our names on each, for forty two years of marriage. Though the accounts are technically jointly owned, one is clearly “ his money” and one is clearly “ my money”. When we decide to do something very expensive ( ie.buy a vacation property) we decide ahead of time who will contribute what portion of the expense. We have never argued over money as a result of this quirky system. Though people think it odd, it works perfectly for us!

Dawn
Dawn
2 months ago
Reply to  Sara

Me and my husband decided to keep things seperate. He has been through two divorces and I have been through one where I owned the house with my stepmother and was a bread-winner. I have always handled my own finances. My husband suggests that he handle all of our finances, but I have never done that and was uncomfortable. We know what each other make except for our side jobs. At first we fought over costs for the wedding. It topped off at $3500 with the honeymoon. We lived together for a year engaged before marriage under his house. My… Read more »

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