Valentine’s Day is a big day for wedding engagements, and while having separate or combined finances as a couple isn’t a topic that’s likely to be discussed on that romantic occasion, it is worth talking about before getting married.
Whether a couple shares or hides their finances from each other, or at least each person has a separate account for discretionary spending, finances can be a big part of a new relationship.
A recent survey by Citi found that 24 percent of Americans in a committed relationship have a private account that their significant other doesn’t know about. That’s a fair amount of hiding something from someone you plan to spend the rest of your life with.
Many more, however, share finances, with 82 percent saying they share their financial life with their significant other, and 88 percent of couples having complete access to at least one of their partner’s accounts, the Citi survey found.
The good news, whether they have separate or combined finances as a couple, is that being with someone can change your financial habits. The Citi survey found that 82 percent changed their financial habits, 60 percent are more careful with their discretionary spending, and half are more focused on long-term financial planning.
Dealing with finances as a couple
There are a number of ways to deal with finances as a couple, especially as an engaged couple planning on getting married who have some time to work things out.
“Getting to know each other fiscally is just as important as getting to know each other sexually,” says April Masini, a relationship expert at AskApril.com.
Here are some things to consider when deciding if you should have separate or combined finances as a couple, or a combination of both:
Spender or saver?
Are your financial habits compatible? “When a spender and a saver marry, the idea of a ‘mixed marriage’ takes on grand proportions,” Masini says. “This can be a huge conflict, so try some fixes.”
“Don’t pass judgment on how your spouse likes to spend,” she says. “If he loves video games and she loves shoes, make an allowance for those fun items.”
Consult on big purchases
Pick an amount, such as $500, and agree to consult each other before making a purchase greater than that set amount, Masini recommends.
If $500 seems to big, lower the threshold to $50 or $100. Whatever amount you set for your separate finances as a couple, be sure to discuss the expense when it gets to the level you agreed upon.
Combine all accounts
Danny Kofke, a retirement consultant in Georgia, says starting to combine all accounts on the day couples get married helps the couple as a team, and has worked in his marriage.
“This has worked well for me and my wife and enabled her to be a stay-at-home to our two daughters for nine years despite living off my $42,000-a-year teaching salary,” Kofke says.
Combining your finances as a couple helps “accomplish more together than they would ever be able to accomplish individually,” says Ken Rupert, a life and financial coach who has been married 22 years.
“Combining finances creates communication, trust, and a sense of collective accomplishment,” Rupert says. “Money is a trust issue. If trust is an issue before marriage, it will be an issue after. A lack of trust in marriage results in hurt feelings, deceit, and eventually divorce.”
If you’re joining every other part of your lives, why not finances? That’s the thinking of David and Jill Ilgenfritz of Hamilton, Montana, who married in November.
David, who started a business called Citizen Threads Co., isn’t drawing a salary yet, so the decision was easier for him.
“In the end I think it comes down to trust and transparency,” he says. “When people maintain separate checking accounts, credit cards, and sign prenups before marriage, it starts you out on rocky soil.”
Combined banking accounts required them to be completely transparent with their spending habits, David says, and ensure they’re both held accountable while allowing them to save for things like trips, savings and investments.
Major assets or debt?
If one person has significant assets or debt before getting married, such as through an inheritance or large credit card bill, they may want to consider keeping them separate among their finances as a couple, says Sandy Arons, a financial divorce specialist.
“If either spouse has significant separate assets, it is best to keep premarital funds either separate or make copies of monthly statements at the time of the marriage,” Arons says. “Put those copies in a safety deposit box for safe keeping. If a divorce should happen in the future, the value of the premarital funds is known.”
Totally separate finances as a couple
Doing the opposite of combining finances as a couple may be best for some people. Michael Greaney, a certified public accountant at Equity Expansion International in Washington, D.C., says mistakes happen, even with the best of circumstances, and “overdrafts are too easy if two or more people are writing checks on the same account.”
“Speaking strictly from an internal control point of view, a married couple should always maintain separate checking accounts, although each one may include the other as an authorized signature for emergencies,” Greaney says.
After two divorces, Debbie Curtis, a freelance writer in Ithaca, N.Y., says she recommends not combining accounts when married.
“Thank God my checking account, and my credit rating, were my own,” says Debbie Curtis, who has divorced twice.
Curtis’ first husband was vindictive, she says, and tried to run over her with her own vehicle that were registered under his business name but that she had bought.
“Thank God my checking account, and my credit rating, were my own,” she says. “I didn’t take a thing in the divorce settlement because I was afraid of him. But I had what little money I’d saved, a job, and my credit rating, and I did get my vehicle back eventually.”
Separate and combined
As Masini suggested at the start, a combination of separate and joined accounts can work well for couples.
A joint account can be used to pay household bills, and each person can have a separate account for individual expenses.
“Whatever system you choose, choose it together and make sure both partners know what’s where, and what the priorities are,” says Kevin Gallegos, a consumer finance expert and vice president of Phoenix operations for Freedom Financial Network.
Keep your own credit card
As anyone who has gone through a divorce and dealt with finances as a couple probably knows, each person in a marriage has their own separate credit score, based on accounts in their name.
A credit score involves three scores from the three major credit reporting agencies, Gallegos says. Both people in a marriage can access their credit reports for free once a year.
“If one member of the couple has an account in good standing, with a good history, adding a credit score-challenged spouse as a joint account holder will help the latter’s score,” he says. “Having the credit score-challenged spouse on the account will not negatively affect the former’s score.”
How you deal with finances as a couple may not matter
Even if you don’t decide to combine finances as a couple when you first get married, you can choose to combine accounts years later, Gallegos says.
Kelly J. Sullivan Noah of Thomas L. Sullivan Financial Services in Roseville, Minn., says it really doesn’t matter if couples have joint or separate checking accounts.
“People often associate joint accounts with traits like trust or accountability, and separate checking accounts with traits like security or independence,” she says. “The truth is that the structure of your bank accounts can neither create not prove any of these elements in your relationship.
“Either you will make decisions to spend your time, energy, and money with respect for your partner and your shared values, or you won’t,” she says. “Either you will struggle with control or you won’t.”
What matters, she says, is finding a style that works for you as a couple and makes communication simple.
“As long as you agree on the bigger picture of your spending allocation, and have a system that works for managing the rest, that’s the right system for you,” she says.
24% are hiding accounts? That’s crazy!
We bought a house together when we were dating and opened a joint account for house stuff, but kept our own chequing accounts and credit cards. When we got married, we went the joint route. Now that we’re parents and I’m a stay at home mom it’s definitely the easiest solution.
For simplicity, I agree that combined accounts is the best way to go. Though, as many experts said in the story, having a separate account for your own purchases is a good idea too.
My wife and I were married later in life (both were in our mid-30’s) and since we had some assets of our own, we kept everything separate at first. It wasn’t a big deal and made things easier at first. But now that we have been married over a year, it is becoming more problematic.
First, it takes more time every month to figure things out. Second, keeping things separate makes it feel like we are more roommates as opposed to a married couple. We have since combined most of our accounts, but still keep our own play accounts so we can buy things without having to “get approval” from the other person.
‘Play’ accounts are a smart way, I think, of keeping some finances separate for whatever spending habits a spouse has. I agree that having everything separate can be a hassle, especially when figuring out bills and living like roommates. Thanks for the insights!