What’s mine is yours — a joint finances battle
The right time to discuss finances isn’t on your honeymoon. It’s not while you’re opening up monogrammed candle holders from Aunt Carol. It’s before all that. Preferably way before.
Before we got married, my wife and I talked about how many kids we wanted, where to live, and who was getting cut from the invite list. Yet we somehow managed to actively avoid talking about income, debt, and spending personalities.
As such, those first six months were pretty hard. The next financial royal rumble was always imminent. Sometimes, I would close my eyes and pray the question, “How much do you spend a month on golf?” was directed at somebody else sitting on my empty couch.
We came into the marriage with two different philosophies on finances. Mine — spend freely, make more money. My wife’s — spend carefully, save more money. The next several months were a series of science experiments. We hypothesized, tested, analyzed, and concluded.
Finally, we settled on a solution. Perhaps this can help you start a conversation about shared finances with your partner. We operated under these assumptions:
- Transparency: Good
- Communication: Good
- Independence: Good
- Smoke and mirrors : Bad
First, the solutions we threw in the garbage:
A single joint account. Combine bank accounts and credit cards. Combine everything. This path values transparency and communication. However, there is little to no independence unless you are a master of smoke and mirrors.
For instance, I have a friend who withdraws an extra $40 on every ATM visit up to 6 weeks before a guys trip. He and his wife have a joint account, and he wants a bit of extra spending money. Rather than have the perhaps difficult conversation with his wife, he becomes a money magician. This is broken.
Joint accounts may work for two people who are both savers. Spenders need not apply. This also works when a couple is flush with liquidity, and chooses to operate without a budget. We fell into neither category.
A slightly more complex solution is to keep everything separate. Separate bank accounts and credit cards. This path values independence, but can also be dangerous. There is no financial transparency or need for communication. Partners’ incentives are not aligned to save money. It’s easy to pass the buck.
Another problem with keeping everything separate is joint expenditures. Let’s say we take a flight to New York for a wedding. Who pays for the airfare? Hotel? Wedding gift? Should this be split down the middle, or should the person closest to the bride or groom pay the tab? Does this make Venmo and Paypal the relationship’s third wheel? Every joint transaction will be a mess of invoices, calculations, and difficult discussions.
This solution might work for dating couples. If you’re married and have pulled this off, please leave a response. I’m struggling to imagine how this could work once children enter the equation.
We discussed both solutions above at length. They didn’t work for us, but led to a hybrid approach that, so far, has worked.
We achieved transparency by having a single joint account. All our income is deposited here. My wife and I also have individual accounts for discretionary personal spending, and an allowance. Each month, the joint account automatically transfers an allowance to each of our individual accounts.
The joint checking account and credit card is for all finances related to our relationship. This covers rent, romantic dinners, vacations, car payments, groceries, etc. If the purchase is on behalf of the couple, the money comes from the joint account. If both partners are working, arrange for direct deposits into this account.
Personal expenses — girls night out, a bachelor party, new shoes, lunch at the office, a gym membership — come out of our individual accounts. We consider these to be purchases in which the other person doesn’t directly benefit.
With financial security as our ultimate destination, we set realistic budgets for both individual accounts and our joint account. Our approach was to look at historical spending for both sides, and use that to determine a monthly budget. Mostly, we searched for places where I could cut back, since I spend a tad more freely 🙈
After we established our budgets, we didn’t have to discuss if I could afford a round of golf. It’s my money. I don’t have to explain every purchase. My financial responsibility is clear — stay within the budget.
Sometimes life happens. I bought a new laptop, and blew through my entire budget in one purchase. This is where communication comes in. Large purchases should warrant a conversation. Can we afford this? Why do I need this? Is this a prudent decision right now?
One note: Checking accounts don’t return interest, so make sure that any extra joint money sits in a savings account (aim for 1% interest) or an investment account.
This approach helped us relieve much of the financial stress that plagued our marriage throughout the first six months. We have a mutual understanding of our financial responsibilities, both as a couple and as individuals.
I know there are several ways to approach joining finances. If you have found another approach to be helpful, or foresee pitfalls in our approach — leave a response. I’m here to learn.
Have some feedback! Share with me — andrew [at] pennyapp.io.
Andrew, I write for Penny.