Should Newlyweds Combine Their Accounts?

February 13, 2019

At Financial Finesse I am often given the opportunity to assist people at the most important events of their lives. We encourage people to make good financial decisions at the outset of a career and on the cusp of retirement. We share in the joy of the birth of a child or the sadness of the death loved one. As such, it is quite common for couples to reach out to us before they marry to get the best tips for handling their finances. There is one questions that is universal:

Should we combine all our accounts or keep them separate?

Marriage represents a joining together of two individual lives and so it is reasonable to question how much needs to be combined. Combining accounts sounds simple, but it can be a shock to your system if you are accustomed to being independent. To help people decide, I like to review three different methods.

Option 1: combine all your cash accounts

Pros

  • Totally transparency
  • Less confusion because there are less accounts
  • Mitigates arguments over who should pay for which expense

Cons

  • Concerns about losing control
  • Requires significant changes upfront to ongoing auto deposits and auto withdrawals

Option 2: keep your accounts separate

There are cases where one person may walk into the marriage with unresolved financial issues from debt or a previous marriage. In those cases it may make sense, even though it may be the long-term plan to put it all together, to hold off on establishing joint accounts and paying bills out of them.

The alternative sounds appealing to couples that would like to enjoy a higher level of individual autonomy, but as noted below separate accounts often call for a much higher level of coordination to make sure bills do not fall through the cracks. Also, there needs to be an agreement on what constitutes individual versus household expenses.

Pros

  • Maintain total autonomy
  • Fewer changes to direct deposits and auto withdrawals
  • Could avoid fights about differing spending priorities

Cons

  • Requires significant coordination of payments for expenses incurred together
  • Requires a common understanding of what is considered joint expenses
  • Could lead to resentment if one spouse appears to have more spending power than the other

Option 3: the hybrid method

The system that worked for me and my spouse, and for many of the couples I work with, is to both combine and separate. It starts with having at least 3 accounts – one account for general household expenses and separate accounts for individual expenses. I have found this method helped us come together on what the joint expenses were. It also took away the 50/50 mentality which can become hard to track and is a major point of contention for many couples.

Over the course of our marriage, there have been years when I have earned more than my spouse and in other years she has earned more than me. Having most of the funds come to one place with one purpose took away our need to attempt to equalize. In the individual accounts we have money for personal expenses. Those individual accounts offered us the proper level of autonomy.

This method can be applied in multiple ways. I have a friend that deposits and keeps over 95% of his earnings in the joint or household account. His wife keeps a lower percentage because they agreed her personal expenses were higher than his. In our family, the percentage that goes to the household account has increased as our family has grown. For others, the individual accounts grow because joint household expenses were a smaller percentage of their overall budget.

There is no one right way

Couples are as different as the individuals they consist of and so there is no one-size-fits-all method to handling joint finances. I have seen couples handle finances in all three ways outlined above and I have seen them all handled successfully and unsuccessfully. The biggest key to success was that they got on the same page as a couple. Take some time to be self-reflective about how you came to your current money beliefs and discuss them together.

Regardless of which route you choose, the road is a lot smoother when there is genuine agreement about the destination. Take the time to get on the same page financially and the choice on how to work together will become clearer.