Money Match-Up: Should Married Couples Combine Finances?

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Here’s the latest post in the Rockstar Finance Money Match-Up series where two money bloggers argue opposite sides of an issue.

Today’s issue features another interesting debate — whether or not married couples should combine finances.

We’ll begin with Cody from Femme Cents who is in favor of combining finances…

Why you Should Combine your Finances when Getting Married

There are many, many different ways to manage money when you get married, but I believe the best way for a married couple to handle money is to fully combine their finances. This means all money is deposited into a joint account, which both spouses can access equally. If you are unsure whether you agree with me, read on to find out why this is good for married couples.

Combining finances makes money more transparent and encourages communication

When your pool money and both spouses have equal access to it, it forces you both to talk about your expenses and spending.

This is where arguments can occur most frequently, but it is also the greatest chance for you to learn about your spouse and grow together. The key to making this work is continual communication. How you spend your money reflects your values and it’s important to express how you want that reflected in spending. It also helps you and your partner build shared values.

My husband is a spender and I am a saver, but we still pool our money. Our different spending habits force us to talk more openly about what our priorities should be each month. We also benefit from each other’s strengths – he helps me to live a little more and I help him save more.

Each spouse can still have their own spending money when finances are combined

Even when using a joint account, it’s important that both spouses are able to spend at least something without having their spending questioned.

We call this our “fun money”. You can both spend it out of the joint account or deposit it into separate accounts (this makes surprises more possible around holidays). Either way, the fun money should really be the only thing that is separate.

When making our monthly budget, we allocate our fun money last because we focus on our joint priorities first. For example, if you’re both working toward paying off a large debt together, you may each get less fun money. Sometimes, you may get more.

This can ebb and flow depending on your needs each month. Sometimes my husband gets more fun money if he needs something for his boat, and sometimes I get more fun money if I have a trip with friends planned. Both spouses should just agree on the amount.

Her monthly hair appointment may be very important to her personally and he may never understand it. However, it’s still important to respect each person’s little splurges. I don’t understand my husband’s video games, but the fun money allows him to buy games without me questioning or criticizing.

Combining finances encourages you to jointly contribute to goals

If you’re going to combine your life with someone else, then, hopefully, that naturally leads to developing goals together. Whether that includes retirement, raising kids, or taking vacations, many of those goals will be influenced by finances.

Combining your money encourages both spouses to contribute to those goals and to make financial decisions that influence whether you reach those goals.

Your income is your most powerful tool to use toward building wealth. So, imagine how much more successful you can be as a team if you both are pooling your incomes and working together. Simply sharing household expenses but nothing else diminishes your ability to powerfully harness your income toward long-term goals.

It is extremely rare that both partners will bring the same financial contribution to the table

Even if this is the case at one point, it will likely change over the course of a lifetime. How will you split things when one spouse loses a job for a period of time, or leaves work to raise children, or becomes disabled?

A successful marriage requires an ebb and flow of supporting your spouse (both financially and otherwise) and then receiving their support at different times.

Fully combining finances allows you to be prepared for these life transitions before they occur. It also allows you to take risks (like starting a business) that you wouldn’t be able to do if you’re worried about covering your half of the bills.

Fully combining finances does mean one spouse should takeover and one should be uninvolved

On the contrary, fully combining finances means that both spouses are fully involved in the decisions about how that money is spent, invested, and the goals you are working toward.

If one person is unengaged in managing money, simply making them have their own a separate account will not make them more engaged. However, having pooled money and joint discussions about its use can help encourage them in the right direction.

If you have reservations that combining finances will mean you lose control over your money, then I encourage you to reconsider whether you should really be getting married to this person at all.

Debt shouldn’t keep you from combining finances

“But my husband/wife has huge loans from before we got married!”

Yes, that may be very likely. Many people do have debt and you should know about it before getting married. Debt demands a discussion but it is not an excuse to validate your selfish advantage if you have less debt.

Choosing to get married should mean that you are willing to join with your partner, debt and all. If you are not willing to tackle the other partner’s debt together once married, then you will not be successful in achieving other long-term financial goals together.

Financial equality is not everything

It is true that money is power. Keeping your money separate can encourage power struggles or feelings of inadequacy and resentment if one spouse makes significantly more.

There are many ways the other spouse may be contributing to the relationship and the life you are building together even if they make less money. That may include housework, mental work, taking care of pets, raising children, etc.

Combining finances recognizes the contributions that both you and your spouse bring to the relationship, both financial and non-financial, and helps encourage a more equal marriage.

The act of getting married already combines your finances legally

Marriage is a legal union. Any compensation and salary you receive after getting married is considered “community property” (property that belongs to both spouses) in the eyes of the law. There are nuances to this and exceptions, of course, and getting into a detailed explanation about the legal implications of marriage on your money is beyond the scope of this article. However, the important takeaway is that most money you earn from the day you get married is legally shared with your spouse, whether or not you keep it in a joint account.

Conclusion

I believe the only time finances should not be combined is when one spouse recklessly gambles or can’t control their spending to the point that it risks the family’s ability to pay their basic bills.

If you’re considering getting married, I encourage you to talk openly and often about money with your spouse long before you walk down the aisle. Marriage can be a beautiful experience and hopefully merging your finances will help you be successful in your life together.

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Now let’s hear from Melissa Blevins who thinks separating finances is the better option…

Married with Separate Finances (The Case for Protecting Yourself)

Many people believe that holy matrimony means two people should automatically combine all finances including assets and liabilities from the day they say “I do” ’til death do us part. In a perfect world, that would be glorious. But we all know that this world isn’t perfect, and there are extenuating circumstances to consider before merging your money. Sometimes, being married with separate finances is the right choice. Here are six reasons you gotta keep ’em separated. (Thanks, Offspring!)

1. You’re a Blended Family

If you’re blending families and bringing kids into the marriage from a previous relationship, you’ve got a few things to consider. Sometimes, child support income is required to be set aside for the children’s education and/or support. In this case, many times a separate account is set up specifically for child support.

Life insurance beneficiary changes must also take place. Many times when a couple is divorced, the divorce decree requires the plaintiff and defendant to carry life insurance (usually a minimum policy amount), and they are to name the other parent the beneficiary for the benefit of the child or children. This can get tricky if you were to have more children in the future. Here’s an example of this:

  • Jane and John have a daughter, Sam.
  • Jane is required to carry $100,000 term life insurance policy on Sam, designating John as beneficiary for the benefit of Sam.
  • Jane remarries Jake, and they have a son, Luke.
  • Jane has a $500,000 policy with John (ex-spouse) as primary beneficiary 20%; Jake as primary beneficiary 80%. I
  • Jane doesn’t specify exact percentages, the insurance company will likely assume the policy should be split in equal shares.

See how complicated things can get when you’re merging families? Sometimes, in these situations, you’d want to be more careful before throwing all of your eggs in one basket. Always consult an attorney or financial advisor just to be safe!

2. You’ve Been Through Some Nasty Divorce(s)

If you’ve been married once, twice, five times (hey, who’s counting?), you probably have your guard up going into a new marriage. Maybe you’re a bit older and wiser, and now that you’ve experienced the crushing defeat of having to rebuild after your ex-spouse took half of your retirement, savings, and equity in the home, you’ve vowed to always protect yourself “from this day forward”. This means keeping separate bank accounts, managing your debts separately, and protecting your retirement accounts.

3. One Spouse is a Spender, The Other is a Saver

I know a couple who married later in life. She had been married and divorced twice before, and he had never been married and never had kids. Her kids were adults, so they fell in love, got married, and decided to keep their finances separate (mostly because of #2 above).

They were a “Keeping up With the Joneses” kind of couple.

She is a saver and has always saved a large amount of her income into retirement. She has had the same Financial Advisor for years, and after 37 years with the same company, was let go.
With plenty of money between retirement accounts, pension, and emergency fund, she’s in great shape to retire early!

Her husband, on the other hand, has a spending problem and has said for years that his retirement would be his “toys”. He buys depreciating assets on credit (cars, trucks, boats, campers, motorcycles) and does not have a 401k, Roth, or any other investment accounts. (Those toys don’t sound like much fun all of a sudden!)

What he needs to do is download a debt snowball spreadsheet and start demolishing these debts once and for all!

Fun Fact: When you don’t have debt, you have money to invest in retirement!

The couple love each other very much, but there is no way I’d advocate for them putting their money together. When you’ve worked hard to build a good nest egg, it’s so important to protect it by having separate finances altogether and/or signing a prenuptial agreement.

4. Either Party Has an Addictive Personality

If either you or your spouse has an addictive personality, it’s best to keep your finances separate. I’m not just talking about gambling addictions either.

Consider the average, middle-class family whose husband and wife both work outside the home. A wife that is addicted to shopping can completely blow through combined bill money, and before you know it, the cars are being repo’d, the house is being foreclosed on, and the kids are going to stay with Grandma and Grandpa while Mom and Dad work through their issues. Likewise, a husband who’s addicted to alcohol or drugs could wipe out the savings account in just a matter of time to feed his addiction.

According to CNBC, only 39% of Americans have $1000 to cover an emergency should one arise. When you have an addiction, you can’t control the urge to get your next “fix”. Oftentimes savings accounts are depleted, friendships are destroyed (from borrowing or stealing), and marriages are in shambles.

The solution in these types of situations is to seek professional help and keep your funds separate while you sort things out. If nothing else, the responsible spouse can manage and maintain the family funds while you work through these issues.

5. You’ve Received an Inheritance

If you’ve come into an inheritance, it makes complete sense to want to keep those funds separate from your family funds. Don’t feel obligated to add your spouse to all of your accounts, especially if the money is from a relative for a specific purpose, such as college funds from your Grandparents for their Great-Grandchildren.

6. You Have a Reason Not to Trust Your Spouse

If you’ve got the feeling that something fishy’s going on and you don’t trust your spouse, it might be best to keep your money separate. Likewise, if your husband or wife has cheated on you in the past, you might feel the need to protect yourself from a potential disaster. When I worked as a banker, we could always tell when spouses were having problems because one would start making moves and opening new accounts without their spouse’s knowledge.

Now, I’m not an attorney and cannot advise on if, when, and how you can move money to new accounts to protect yourself. But if you question the fidelity of your loved one, you might want to talk about separating finances while you two sort things out.

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So, those are the two sides of the issue. What do you think?

8 thoughts on “Money Match-Up: Should Married Couples Combine Finances?”

  1. Interesting view points! I really enjoyed the one with the spender vs saver who are later in life – definitely a new perspective for me there.

    My girlfriend and I have talked about money at length, probably until her ears drums wanted to hear me stop talking about it lol! We’ve landed on in the future combining our income into a family account, working on a budget, life goals together, and then each of us having a separate “fun spending” checking account. We both wanted this to be separate so there was no way we could judge each other for it. If she wants a massage every month – she can do it. If I want a new MacBook then I can save up then get it. We both want to be wealthy in our lives, so we balance each other out with the ways of how!

    Great post and will be sending the link to her!

  2. There are reasons. Then there is reality.
    It comes down to comfort and personal happiness.
    What works for one couple may not, and probably does not, work for other couples.

    My wife and I have been married twenty years and we have separate finances. In reality, her income was so lower than I (she previously emigrated here from another country), and my income was so much higher that hers that it was normal for me to carry the financial responsibilities. She likes having her own finances, and so do I. So it works for us.

  3. Really love this series and this is a topic that is about to hit close to home for me.

    I’m 47, a high income earner (physician) and have gone through a DEVASTATING divorce (no lie, the senior judge said it was the worse one he has ever seen)that decimated my finances and emotions right before I turned 40.

    I have a 12 year old daughter from the marriage. I slowly picked and climbed my way up from the depths I was in (again both emotionally and financially) by discovering finance and making good choices along the way (high savings rate and investing). Now I am sitting on a multi 7 figure net worth and feel the need to protect it having been burnt by the court systems before.

    There is definitely a large discrepancy in salary (close to 19:1 ratio) and she brings 2 adult children into the mix, so definitely would be a blended family.

    The passive income I have created has given me the real possibility of leaving my work (fatFire would be age 53-55 if not earlier) but once I leave it would be hard to come back to work having been out of medicine for any extended period of time. Therefore I feel it is vital to protect this income stream (which would be outstanding for 2 people to live on combined but would be a drastic downward change in lifestyle if it was to be divided equally in divorce for 2 people to live on separately.

    Knowing how the court system has a prejudice against high earning men, I do not want to leave anything to chance especially if I want to leave something meaningful for my daughter.

    1. DO NOT COMBINE FINANCES! I did this in my younger years and it was the worst mistake I ever made. When the partnership was dissolved, splitting everything was even more difficult mainly for the fact that I was the only one financially contributing. But, we learn from our “costly” mistakes and that is what I have done. I have moved on and rebuilt.

  4. This was a great article! I was really wary of the idea of split finances but those are really good reasons. Really eye-opening and informative. Congrats to you both!

  5. I’ve had the experience of both arguements. In my first serious relationship, we pooled our finances. I had no control over my own money, and used to be given an “allowance” of what I could spend. It was an uncomfortable position to be in. It meant that I didn’t really learn how to manage money on my own, and after we broke up I went crazy and overspent to enjoy the “freedom” that I know had. In my current relationship, we have a joint account for our bills/mortgage, but everything else is ours to do what we want. I have a lot of debt to pay off, and it’s not my partner’s responsibility to do this with me. He knows about it, but I will pay it off myself. If we want to go on holiday/buy things, we discuss it and splint it evenly. I feel like I have control, and we still communicate about what we want. I’d say it was the best of both worlds. Thank you ladies- it’s a great post!

  6. Hi
    I see that both types have their merits but realistically couples will need to develop their own financial arrangement that may be a version of either.
    I agree that it is essential no matter what arrangement, that the couple seriously discusses, reach a consensus and be open to reshaping the model as time goes by.
    In traditional Japanese households where the man works and the woman stays home, the woman manages the entire household budget and household expenses. The man may or may not pay his own credit card bills and the woman may have an allowance out of that monthly sum to spend on herself or save, it entirely up to her.
    I believe it gets complicated when both work and have incomes. Of course it’s a great idea to pool all the money, but both have to seriously let go of the self and the “belonging” factor in order for the model to be successful.
    And that’s super hard to do.
    The other annoying thing about household expenses is that it’s a full time job staying on top of it all. The regular expenses, the surprise expenses, the accidental expenses, the plan expenses and so on.
    My husband and I agreed that while I’m working, he devotes 1.5 times of what I put into our joint account. Our household expenses and expenses as a family are set up to go out of the account, but we each retain our own savings and investment accounts cos we have a competition there about who better times the market and uses the better financial instruments.
    My mother who is always very good with practical advice wants me to have my own safety net, and I agree. The day that I quit my job and be a stay at home mom for our children the last thing I want to be is anxious about money.
    Connie

  7. Laura Pilkington

    Love reading both takes!

    We’ve combined accounts and found it to be an easier way to handle our finances and keeps us accountable with spending.

    I think a crucial key for couples, whether they merge it all, some of their accounts, or keep things separate is to approach your finances together. Even if it’s just on a spreadsheet, I feel like part of being a team is working as one with your goals.

    Finances are a tool to help you build the life you want together. It’s tough to be on the same page if you’re in the dark about key accounts.

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