Couple’s Finances: Combine or Keep Separate?

by Rick Kahler

When it comes to your finances as a couple, should you combine finances or keep them separate? Here are the advantages and disadvantages of a few different approaches to consider.

Money is just one of many challenges to becoming part of a couple. Probably the most common question couples ask me concerns the best way to handle their cash management. Specifically, they wonder if they should combine all their cash flow into one joint checking account, keep everything separate, or have some combination of both.

My stock answer is “yes.” It seems that the older I become, the fewer right answers there are and the more often I say, “It depends.” This is one of those situations where there is no one best method.

Let’s consider the advantages and disadvantages of each approach.

1. Combine everything in one joint account.

The plus side of this scenario is that there is total financial transparency as to where the money comes from and goes to. Each party has full access to and the opportunity to be fully aware of the money flow. It’s easy to track. There are no secrets.

This brings us to the downside, namely, there are no secrets, no autonomy. Each party can see the other’s spending and spend the other’s money. This works well in some relationships where the shared belief is, “My money is your money and your money is my money.” It doesn’t work well absent that philosophy. I find this scenario is often problematic when one or both of the parties want autonomy over how they spend their money without the watchful (often critical) eye of the other. Often, this arrangement doesn’t work well in second marriages or where both parties have careers.

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2. Keep everything completely separate.

The positive of this scenario is that each party has complete autonomy and control over his or her money. This often works well for two-career couples or second marriages where both partners came into the union with significant pensions or assets. It may also be a good fit for unmarried couples. If one partner is a spendthrift, it can protect the other partner from unauthorized purchases.

The negatives are that it can be more difficult to manage joint expenses like housing costs and that neither party has any specifics about the spending of the other. If a partner has any type of addiction, separate accounts can serve to enable the addiction by hiding the extent of the problem from the other partner.

3. Have a combination of joint and separate accounts.

The advantage of this scenario is that it provides more autonomy than putting everything into a joint account, yet it offers an easier way to manage joint expenses. It can often result in a clear agreement on what is mine, yours, and ours. Some couples have a system where each one’s earnings are their own, and they each contribute fixed amounts into a joint account. Another method is to deposit all the income into the joint account and give each partner a periodic allowance.

The disadvantages to this are the need to manage three accounts and to decide who writes the checks from the joint account.

Personally, my wife and I use the third option. As the major breadwinner, I deposit most of my income into the joint account, from which she pays all the family bills. A smaller amount of my income goes into my separate account that I use to pay for private schooling, funding 529 plans, and personal care like massages and haircuts.

Problems often arise when partners assume the money should be managed (or is being managed) in a certain way. No matter which approach couples use, the most important factor is to discuss it and agree, as equal partners, to a system that works for them.

About the Author

Rick Kahler, MSFP, ChFC, CFP, is a fee-only financial planner and author. Find more information at KahlerFinancial.com. Contact him at Rick@KahlerFinancial.com or 343-1400, ext. 111.