MarketWatch recently ran an article highlighting what it called the Worst money mistakes you can make at any age. Sitting near the top of the list was a financial trap that would hinder even Houdini, a misstep so severe that anyone taking it would surely never be able to recover (okay, I’m embellishing just a bit). What is this major money miscue? It is for married couples to combine their finances.
The article was aimed at women, and cautioned that many…
…make the mistake of combining all of their income, investments and financial accounts with those of their spouse or partner. If those relationships eventually come to an end, they often end up less financially secure than they would have been if they had kept some of their finances separate.
MarketWatch quoted Certified Financial Planner Wendy Weaver, who advised:
“Keep your own checking account and deposit your income in it. Then you can share expenses out of a joint account into which you both contribute proportionally.” She also recommends keeping any investment you bring into a relationship in your own name.
The MarketWatch article reminded me of a Today Show segment I saw a few years ago about “financial infidelity.” The host mentioned the results of a Money Magazine survey in which:
- 71 percent of married Americans acknowledged keeping secrets about their spending from their spouse
- 44 percent said keeping secrets about money is acceptable under certain circumstances
- 40 percent admitted that they tell their spouse they spent less on purchases than they actually did (women lied mostly about clothing, shoes, and things for kids; men lied mostly about things for the car, entertainment, and sports tickets)
When the Cure is Worse Than the Disease
For help interpreting the survey’s results, Today turned to two financial experts.
Expert number one, host of a cable TV show about money, said, “I don’t think financial infidelity is all that bad. I mean, women need to have independence in their relationship and they need to be able to have private numbers that they can do whatever it is they want with.”
Expert number two, Today’s resident financial authority and a personal finance author, tempered things a bit by saying, “I agree, except that let’s acknowledge that we’re each going to have this pool of money that we can do with what we want and we don’t have to talk about it.”
She believes couples should keep three bank accounts: “One for me, one for you, one for the house. And the house gets taken care of first.”
To which expert number one responded, “Oh my gosh, without a question you should have separate bank accounts. I mean you should be able to do with your money whatever you want to do with your money.”
The host concluded the segment by saying, “Good advice.”
I concluded watching the segment by saying, “huh?”
Separate Accounts, Separate Lives
Divorce attorneys have told me that when money is the issue that brings a couple in to see them, as is it often is, the specific issue is usually that the husband and wife were living separate financial lives. Over time, one spouse trashed their finances, usually by racking up a lot of debt. By the time the other found out, it was too late. Not only were their finances a mess, but now all respect and trust had been lost as well.
Let’s face it, there are plenty of factors that tend to make money a tough topic for married couples. There are deep-seated family of origin habits and points of view about money that impact each spouse in ways they may not even realize. There are temperament differences that are very often really the cause of many financial disagreements that seem to be about something else. And there are often a whole host of unspoken money-related hopes, dreams, and fears.
With all of that working against us, we don’t need to introduce systems that foster separateness. We need systems and structures that create teamwork, openness, and honesty.
In part, that means combining financial accounts. Of course, some can’t be combined. An Individual Retirement Account is, after all, individual. But those accounts that can be combined should be, including checking and savings accounts.
It also means both spouses should have easy access to the household’s complete financial picture. How much income is coming in? How much is going out and where is it going? How much is being invested and where? How much is being given away?
In our household, Mint provides much of this information, automatically tracking and updating our financial picture. All either of us needs is Internet access and we can see the current state of our finances.
Freedom Doesn’t Require Separate Accounts
One point made by expert number two that I agree with to a degree, was this: “Let’s acknowledge that we’re each going to have this pool of money that we can do with what we want and we don’t have to talk about it.”
Jude and I each have individual clothing budgets. Each amount is a line item on our household budget. We each have the freedom to spend that money as we want, but we’re accountable to manage to the number. And we usually do talk about what we buy. Other couples use such budgeted amounts for lunches with friends, hobbies, etc.
You don’t need to live separate financial lives to have some semblance of freedom in marriage. You each just need a budgeted amount you can manage.
What’s your point of view on this? When a couple gets married, should they combine their finances or keep them separate?
By Matt Bell
Matt Bell is Sound Mind Investing’s Associate Editor. He is the author of three personal finance books published by NavPress, leads workshops at churches and universities throughout the country, and has been quoted in USA TODAY, U.S. News & World Report, and many other media outlets.