I thought I would do a follow up post to my previous post ‘How to Deal with Money Personality Differences in Relationships’ as a lot of people seem to like the post and could relate to some of the issues that I addressed. I want to point out that I am not a psychologist or marriage counselor (not even close), but I am sure we have all wrestled with different money issues with our spouses and I am using this opportunity to share my experience.
There are many ways couples can decide to manage their finances. In my mind I categories these into 3 simple categories: fully separate, partially joint and fully joint accounts. Mr. MMC and I subscribed to the fully joint account approach because that is the approach that works for us. I don’t think there is a wrong or right approach, the options available are as unique and different as the people in the relationships.
This post is not to convince you to fully join accounts, but rather to address some ways of knowing whether or not joining accounts is right for you. These pointers are based on my own experience of having separate accounts before marriage, and then joining accounts after marriage.
If you find yourself in any of these 7 situations, I think that working through these concerns is the way to go before fully joining accounts.
- You can’t come to an agreement on spending & on a joint budget
Before you can come to an agreement about going fully joint on accounts, you need to agree on a joint budget (if you are not budgeting yet…get on it). Having a joint budget won’t mean that you will not face money issues, but it’s the foundation needed to have a fighting chance of making the joint thing work in the first place. Mr. MMC and I have been budgeting together before we were married, when our accounts were fully separate. We did this for about 3 years before we got married (before that we never budgeted….fail on our part). The experience of budgeting together before joining accounts was so important to me because it allowed us to work out many disagreements around the subject of money before taking ‘the plunge’ to going fully joint. In the 9 years we have been together, only 3 of those years we have had our accounts joint, but we have been budgeting together for 6 (for the other 3 years, money just flew through our hands like water). So what worked for me was that we tested out the waters by budgeting together while having separate accounts. Once we had a good rhythm going, the idea of fully joint accounts did not scare me.
- Have conflicting money values
If you perceive your partner’s spending habits as foolish, or if one party chastises the other for their spending habits, more work would need to be done on the discussing money issues before fully joint accounts will work for the relationship. Having very different money values can be a challenge if compromise does not play a big part in the relationship. Having common financial goals can help to minimize the tension around different money values. My money values strongly align with Mr. MMC’s even though he is the spender and I am more of the saver. I think this is because even though he is more inclined to spend more here and there, we both subscribe to a relatively frugal lifestyle which we agree with in keeping our lives ‘decluttered’ from too much stuff. I am not sure if in a situation where one person is frugal and the other is focused on material things whether a joint account situation would work. If you have experienced a situation like this, let me know in the comments below. Either way, having different money values without including compromise in the equation will create a lot of money tension whether your account is joint or not. I think having a serious discussion with your partner on addressing these issues is needed before anything else can occur.
- If you have a spending addiction
Okay, I think this is pretty straight forward, but if you gamble, have a shopping addiction or feel the need to ‘keep up with the joneses’, it might be best to put a pause on the joint accounts and work through those issues first. Now don’t get me wrong, we all have our occasional shopping splurges here and there, I have been guilty of that. But if you subscribe to a life style of spending money until there is nothing left, and then leveraging that again with more debt, this behaviour will not only destroy your relationship, but it’s probably an indication that joint accounts are not the best idea.
- When you don’t have an equal vote on the finances and you don’t feel heard
The best financial situation that a relationship can have is when both parties have an equal 50/50 vote on different financial decisions irrespective of income. This is not to say that one will get their way in all financial decision making, but rather that every option is taken into consideration where both parties really take the time to put themselves in the other person’s shoes and try to gain their perspective. I think knowing that your financial concerns have been heard, seriously taken into consideration and there was a compelling reason to go for or against that decision is more important than one partner getting their way without discussion.
In terms of savings rate, Mr. MMC and I had to come to a compromise where I had to be okay with not saving as much as I would have wanted each pay cheque, and he had to accept the fact that he could not spend as much as he would have liked. We reached a happy median of 30%-35% savings rate (although I would have liked 50%), which we are both happy with. In terms of discussions around investing, Mr. MMC tends to have the bigger ‘pull’ because he has more knowledge on this subject. However, I still feel like I have an equal vote in determining where and how we will invest our monies in the long-term. Many times, by just reading up on his investment strategies and learning more, I come to realize that I agree with his approach.
Based only from my own personal experience, I think in order to have fully joint accounts, there needs to be a feeling from both parties that their vote matters and their concerns are genuinely being heard, analyzed and discussed before being discarded or implemented. Not having this in place will only make one party feel resentful, angry and detached from the process leading to other problems down the line.
- If you divide household expenses & savings by income
The happy middle ground for not going fully joint on accounts is to go partially joint where you both have your own separate accounts and one joint account where you transfer monies for shared household expenses. Many times the monies transferred are in proportion to income so if one person makes 60% of the income in the household, then they would cover 60% of the expenses. Another approach is to transfer monies based on usage so if for example, the hubby gets the full satellite television package, and you don’t watch much television, he might be 100% responsible for the television bill with all other expenses being split 50/50.
For obvious reasons, fully joining accounts makes any combination of the above approaches difficult to do and not worth the time and effort. If your accounts are fully joint then for record keeping purposes it is as if one person is making the income and incurring all the expenses. Creating a spreadsheet where you can capture your joint incomes coming into the one account, but then separate expenses according to usage or proportion of income or 50/50 split is doable, but would be a nightmare to manage and might just put you off of budgeting all together.
If you divide household expenses & savings based on any system, I think it’s better to do fully separate accounts or partially joint accounts where the joint account is monies for household expenses based on a system that you can both agree with.
- If you are waiting for something bad to happen
This is a sensitive topic so I will try and tread lightly. In speaking to some women about fully joint accounts, the major concern for most is that they don’t want to put all of their financial eggs in one basked in case the relationship does not work out. I totally get that and I am not going to argue for or against this notion. Every relationship is different and people come with their own experiences when entering a relationship. So, if the idea of fully joining accounts is keeping you up at night, then maybe taking small baby steps towards this may be the best approach. If you are waiting for something bad to happen, then every money fight or disagreement will only confirm your fears and I think it will be difficult to get to the other side of the conversation where you can reach an agreement.
- Prefer to have full control of your money
In my experience, fully joining accounts requires a lot of compromise from both parties in order to make it work. If you prefer to have full control of your money and not have to discuss any major changes you would like to make with your spending, then a fully joint account is not the answer.
I do want to point out however that Mr. MMC and I don’t consult each other on everything we buy. Rather we each have our own ‘fun money’ that we take out as cash and can use as we wish, no questions asked. These monies are already agreed upon from our joint budget so no one feels any which way about spending this money. If however we need to spend over and above that, then we have a discussion because this would mean affecting other budget line items. If the idea of this makes you cringe, then fully joint accounts may not be for you.
I want to conclude by saying that this post was only to share my experience with money and relationships. I don’t claim to be an expert in this matter, and I don’t think one approach to managing finances as a couple is better than the other. It’s really what works for the two of you, because ultimately, it’s your relationship.
What method works best for you in managing your family household expenses?
Categories: Money & Relationships
Tags: are joint accounts right for you, combining finances, dealing with money differences, dealing with money issues, financial planning as a family, joint accounts, joint budget, money and relationships, money values, seperate accounts