I recently led a discussion about relationships and money: how to blend, and end, your finances with someone else. Questions were asked, and there were some interesting conversations going on in the room. Then, a few weeks ago, a long time reader of Quick Tips asked about shared bank accounts. I decided it was time to write about this subject again.
First of all, you may choose not to blend your finances at all. Many couples keep separate accounts and actually have happier and more successful partnerships because there are fewer arguments about who spent money on what and who overdrew the bank account. Others choose to handle their money and debts together, and they do just fine. The choice is yours.
Look at your habits and goals when you consider whether to combine your accounts or keep them separate:
- How does each of you handle savings and debt repayment? Do you have similar philosophies, or are your bank balances mirror opposites, with one carrying a large debt balance and the other carrying a large savings balance?
- Do you have the same financial goals? Or, is one of you saving mainly towards retirement, while the other wants to save for amazing vacations and a nice car.
- Does one, or both, of you have any issues that you would bring into a blended financial arrangement? For example, are there any debts that are currently in collections or that were charged off; bankruptcy; judgments; wage garnishments; or tax liens?
Some people find this subject to be a touchy one. I even received an angry comment on my blog by someone who insisted that married people should share everything equally. But, keeping separate accounts isn’t about holding out, or being less in love. Sometimes, it’s about protecting each other and making decisions that will carry you furthest towards your mutual goals.
If You Have Separate Accounts, How Do You Split Expenses?
Most people assume 50/50, but there are other options. You could choose different percentages based on incomes, family size, habits and hobbies. For example, if you have shared custody of your 3 kids with a former partner, then you might pay a higher percentage of the food bill. If your hobby raises the electric bill (gaming, woodworking, sewing), then you might pay a higher percentage of the utilities. You don’t have to use percentages – you can divide up the bills, where one of you pays for this expense and the other pays for that expense. The choices are as varied as the couples who make them.
The bottom line is that you need to make informed choices that are right for you individually and as a couple. Money is the biggest source of friction in relationships. Have the conversation before you get married or move in together, so you know what to expect ahead of time. If you’re already living together, it’s not too late to make changes.
Next issue, I’ll talk about separating your finances after the relationship ends.