Which Should You Choose: Joint or Separate Finances?
Several months ago I mentioned in passing that my wife and I keep separate finances. I promised to eventually explain why, and to discuss the pros and cons of doing so.
When I was a boy, my parents fought about money often. And loudly. They had joint finances, but it didn't seem to matter. Each accused the other of being financially irresponsible. (Both were right.) Their example left me disenchanted with the notion of mutual money management.
During the years Kris and I dated, we had our own accounts. From the beginning, I was a spendthrift and Kris was a saver. She always made smart financial decisions. Because my money was my money, and her money was her money, my poor choices did not drain her savings.
When we were married in 1993, it didn't occur to us to combine our finances. I can't recall that we even discussed the issue. It seemed natural to maintain the status quo. Some people find this strange; they feel that it fundamentally undermines the nature of marriage. But it's one of the best things we've ever done. This system works for us because:
- We have no children,
- Our salaries have always been roughly equivalent, and
- We've found a way to split household bills evenly.
This system also works because we trust each other to take care of financial obligations. (Even when I was a spendthrift, bills and household expenses always came first.) Now that I'm making smart choices, we do have one joint account for use solely as an emergency fund.
Pros and cons
Which is better: joint or separate finances? Both sides offer strong arguments. Good reasons to combine finances include:
- Religious beliefs. Some religions encourage joint finances.
- Pragmatism. Some people believe that joint finances make a marriage work more efficiently.
- Convenience. It's easier for some couples to have a central pool of money from which all expenses are paid.
- One partner is better at handling money. I know a couple in which the husband has no concept of money. He deposits his paycheck, and buys the things he wants, but he has no idea how to budget or how to keep track of bills. His wife is the just the opposite. For them, joint finances are a must.
- One partner's income is higher than the other. Nickel recently wrote in the forums: “My wife stays at home and I'm the one that earns the money. However, I wouldn't be able to do what I do without her doing what she does… Keeping separate accounts under such circumstances would just be [wrong.]”
- It costs less. When a couple has fewer accounts, they pay fewer fees. Also, they can sometimes obtain better interest rates.
- You want to combine finances.
On the other hand, there are also good reasons to keep your finances separate:
- Religious beliefs. Some religions encourage separate finances.
- Pragmatism. Nobody enters a marriage believing it will be one of the 50% that ends in divorce, but some people feel that they should play it safe just in case.
- Convenience. It's easier for some couples to have separate pools of money.
- Both partners are capable of handling money. If either partner lacks financial discipline, joint accounts are best.
- Both partners have about the same income. If one person is the primary breadwinner, joint finances are best.
- You want to keep separate finances.
I don't believe there's one right answer to this question. The best choice is the one that works for you and your partner. This is something that you need to decide. Don't let anyone — not your church, not your parents, not your friends, not some personal finance guru — tell you that there's only one right way. Each relationship is different.
The bottom line
I love my wife, and believe that maintaining separate finances has strengthened our relationship, not weakened it. But that might not be true for you and your situation. If you and your spouse are happier with joint finances, if joint finances strengthen your marriage, then use joint finances. But don't combine finances just because you think it has to be done that way. It doesn't..
What's most important is honesty and communication. Any system in which the partners are open about their money habits is a good one. Ultimately, it comes down to this: Do what works for you.
You can find more excellent discussions and advice about this subject at these sites:
- Marginal Revolution: Should couples keep separate finances?.
- 11D: Got my mind on my money and my money on my mind — The comments are the highlight here, not the blog entry.
- The Weight of Money: Avoiding the ‘I' in joint finances — This is a great real-life example of the issues involved with merging finances.
- Getting Finances Done: 3 keys to making your personal finances work as a couple
Do you and your partner keep joint accounts or separate? How has this arrangement worked for you? How long have you been together? How equitable is your income distribution? Who pays the bills? How often do you fight about money? What else can you tell us about the way you handle your finances?