Money

Reader Question: Household Finances

Awhile ago, I received an email from a reader, Heather, about the division of finances in a relationship.

From Heather:

…I myself adore beautiful items and luxury goods but of course like many people, I will have to save up for any items I really want to own. I am a newlywed myself and my belief is to have a separate personal bank account aside from the joint account. Some would call this a “personal stash” and a betrayal to the marriage. However I think that this isn’t be a betrayal if my husband is aware of it and contributions to the joint account are made equally. 

Do you believe in spouses having separate bank accounts? If yes, does that mean all household expenses are to be split accordingly? Do you feel that having a personal bank account and a joint account is a matter of personal control over one’s finances and possibly security?

This is a question that I’ve received more than a few times from readers. It’s a topic that’s very personal and in the spirit of transparency, I’ve answered with my own personal experience, in an effort to be as open about the topic as possible. It’s a big topic with of course no “true” answer” so I accordingly, I have a long response – you’ve been warned!

On the topic of joint bank accounts and what I personally do…

In our household, my husband and I maintain separate bank accounts as well as several joint accounts. We each had our own savings before we got married, and built up our own equity. When we got married, we opened several joint accounts with the idea that we’d each deposit 80% of our take home pay (after 401k and the like) into our joint account, with the remaining 20% going to our individual accounts. The idea was that any crazy frivolous purchases and wants would come out of those accounts.

This worked for a while, and it was a nice transition for both of us. However, after a while it got to be kind of a pain calculating out that 20%, especially with job changes, raises, etc. And, we were basically paying everything out of our joint anyway. So early in 2012 we began combining all of our income into our joint accounts, while still maintaining our existing separate accounts. Basically 100% of our purchases are paid from our joint account, with a few rare exceptions.

This has worked out so far for us. Any big purchases we make sure to mention to each other beforehand, and my husband is very understanding about my shopping. On my end though, I make sure always to be responsible as possible, never go overboard, and we have fairly aggressive savings targets that we hit monthly, quarterly, yearly before spending anything else. If we can’t meet our savings targets, we don’t spend. I manage our joint finances (savings, investments, budget) and I care about our financial future much more than a new bag or coat!

And finally, my husband has full transparency and insight into my personal accounts, and vice versa. And to Heather’s question above, neither of us views these accounts as a betrayal!

Some beautiful luxuries

Some beautiful luxuries

And on that note, onto luxury purchases…

It is my opinion that each couple will find a system that works for them when it comes to luxury purchases. I know that’s kind of a cop out answer, but it’s true. We happen to pay for my luxury goods together, out of our joint funds, but  if I wanted something really crazy and out of the comfort zone of our joint finances (like that excellent stack of yummy Van Cleef bangles above), I wouldn’t feel good or responsible about using our household accounts to pay for it. In situations like that, I do appreciate having the freedom of my own money, to spend how I want.

And that leads me to my strongest held belief when it comes to couples and big purchases – no matter what a couple chooses to do, they should be on the same page, and completely open with each other.  No matter whose paying, I believe that both parties should know what’s going out, and what’s coming in. It’s simply a matter of financial transparency and knowledge. Even if your partner doesn’t necessarily want to pay for your “luxury” purchases, I still think that they should be comfortable with knowing how much you spend, and you should be comfortable with them knowing that too.

And finally, on personal accounts and security….

This is a difficult topic for me to write about, since it’s so personal. For me, having my own account was always the status quo. I grew up in a household where my mother always worked, and I’ve more or less had a job since high school. I enjoy the freedom of working and having an account that is just my own, and the security it brings as well. That feeling of course has nothing to do with my husband or our relationship, it’s something purely for, and about myself.

That being said, I don’t necessarily think that one needs to have their own personal account in a marriage. I have to repeat myself here that in my opinion, different systems work for different couples. You can have your own account, or just have a joint account, and manage the money, or not. For me, the most important components of a healthy relationship are a knowledge of the household’s finances, and complete transparency on both sides about spending, income, and savings. Hopefully all of thoes components are in good shape…with some room to spare for some little luxuries for each of you!

 

Wow, that was long, and there was so much that I didn’t even cover! I would love to hear all of your opinions on Heather’s question – and if you’d like, to hear what you do in your households and how you split your finances. Thank you for reading and for your input!

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  • Tabitha
    February 11, 2013 at 7:56 am

    K -Can you come and manage us please? We are so haphazard but I’m now taking on the role of ‘manager’ but I failed maths and arithmetic at school…so it’s a real struggle for me, but my husband is even worse!

  • Mel
    February 11, 2013 at 7:59 am

    Interesting topic! We keep separate accounts, but it is becoming a bit of a pain and I’d like to be more involved (albeit, reluctantly…finances *yawn*) with our money/savings. I’ve been talking with a lot of friends and most seem to have their own savings account, plus a joint account.

    Thanks for sharing, Katherine!

  • Christie
    February 11, 2013 at 8:41 am

    These are such lovely advices! Thank you for sharing your personal advices on finances.

    xx

  • Marlene @ chocolatecookiesandcandies
    February 11, 2013 at 9:36 am

    I love your posts about finances. You’re absolutely brilliant and bang on about saving and investing for the future. Do continue posting these. I’m in your camp where I just feel better having my own separate account. We also have several joint accounts as well. I know some friends who are adamant about having one account but as you’ve said, whatever works.

    • Katherine
      February 11, 2013 at 9:56 am

      Thank you Marlene!

  • Michelle
    February 11, 2013 at 10:07 am

    Thank you katherine for sharing your advice and thoughts on what is sometimes a very sensitive topic. Your answers are very insightful and bang on! I need you to be my financial controller! Michelle

  • aliami
    February 11, 2013 at 10:34 am

    Hi Katherine!

    This a a great post and I think you offered very sound advice.

    I agree that transparency is extremely vital to any relationship because without it separate accounts could used as way to conceal spending habits from each other. Of course, this is just my observation from looking at my aunts/uncles that constantly try to maintain the image of being ‘non-spenders.’

  • Beth Maiorana
    February 11, 2013 at 10:41 am

    What a good question: my marriage occurred in 1978. Neither of us was “rich”. We both had reasonably modest-paying jobs. I adored fashion and beauty and would be inclined to spend extravagantly for something, but, because I could not bring myself to do that kind of luxury shopping damage to our jointly held marital assets/household money, I had my own account. Our marriage didn’t last. We fought a lot- but it was never ever about finances. Everything but. I think it’s a good idea, and would do it again that way.

    • Katherine
      February 11, 2013 at 11:27 am

      Thank you for sharing your story Beth, and how enlightening that you never did fight about finances – it seems like your system worked for you in that respect!

  • Cee
    February 11, 2013 at 10:44 am

    Very well said, Katherine!

    I completely agree on doing whatever is most comfortable for each couple. DH and I maintain our own separate accounts and also share a joint account. Our salaries are pretty much equal, so instead of using %, we came up with a hard number to deposit each month that would cover all the bills. We’re both not big spenders, so it was easier to keep the bulk of our own money in separate accounts that were already generating decent interest. The rate on our joint checking is pretty much 0%. We’ve talked about possibly opening up more joint accounts with better rates, but that’d be more accounts to keep track of. So, laziness plus what we have works for us for now is keeping us from making more changes.

    Personally, I don’t plan to stop working, mainly for security reasons but also because I’d be bored out of my mind if I do. I’ve been keeping track of my finances for what feels like forever, so I do like that I still have control. Any big purchases, whether from our joint or separate accounts, will get talked about. Like you, I wholly believe in transparency. Even if I want to hide any purchases from my husband, I’m not sure I can. We share a closet with limited amounts of storage, haha.

    • Katherine
      February 11, 2013 at 11:28 am

      Hi Cee, I 100% agree with you on the limited storage! I’m not sure how I would hide purchases either, my husband has a fairly sharp eye as well, LOL. I plan on working after children as well – the boredom is definitely a factor and it’s why my own mother said she went back to work. Thank you for sharing!

  • kiwifashionblog
    February 11, 2013 at 10:50 am

    Great write up! I enjoy very much reading everything! I am glad you have your spouse have such transparency and trust built to each other. My is also very similar. Great communication definitely helps and trust is essentially the most important component in any relationship or marriage 🙂

  • Amy
    February 11, 2013 at 9:27 pm

    Thanks for sharing this with us, Katherine! Finances have always been a very private topic for me, that sometimes I wonder how I’ll be able to talk about it later on. Both my parents have always worked, and taught my sister and I about being fiscally responsible, and not depending on anyone else. Because of that – I think, I’ve never thought about including anyone in that conversation.

  • Heather
    February 11, 2013 at 10:45 pm

    Hello Katherine! This is “Heather” =) Thank you so much for sharing and writing this topic! I was taught and raised to be independent. Therefore this topic and how I felt about it after I got married became some sort of a sensitive spot for both my husband and I. I think we still have tons to learn from each other – honesty, transparency, adapting, and communicating.

    • Katherine
      February 12, 2013 at 3:03 pm

      Hi Heather! Thanks so much for emailing me and I hope this was helpful along with all the great comments 🙂

  • Sophie
    February 11, 2013 at 11:01 pm

    This is a great post! I always wonder about how couples manage their finances… Although, I am not married yet it gives me some insights of what to do later on. 🙂

  • Hera
    February 12, 2013 at 3:34 am

    You got great points there, as long as the SO is aware of the finance of each other, I think separate accounts are fine.

    My DH and I don’t have a joint account and that thought never came to our mind actually. But we both each other’s fiance very well, and we have an investment pool just for investment and we both contribute to it according to our ability (like an honor system, but so far it is working great), especially since I don’t work these days.

    Who is paying for what is also a big thing and we discussed it in great length before we got married, at the early dating stage in the relationship. I think as long as the couple are open to each other and discuss it seriously before marriage, it would be a joy to find out how finance can hold a couple together too and it helps the couple to decide if they are a good fit for each other.

    Good luck to you all!

    • Katherine
      February 12, 2013 at 1:34 pm

      You too my friend – I hope all is well and your little one is doing well too 🙂

      A joint investment pool is a great idea – who makes the investment decisions?

  • this gorgeous life
    February 12, 2013 at 6:16 am

    Such a great post Katherine! My husband and I both keep separate accounts and a joint account as well and I completely agree on both parties being aware of all accounts. Transparency and communication are really important in a marriage and while finances can be complicated talking about it together,setting goals/making financial plans and being 100% honest makes it less so.

  • Chic 'n Cheap Living
    February 12, 2013 at 7:11 am

    We actually do something similar to you and your husband. We each have our own accounts and intended to pay all household bills from our new joint accounts. But we didn’t have an 80/20 split. We know each other’s information anyway since we have it in a separate, secure database. So yes, we just pay everything jointly – necessary expenses and frills.

    What has worked for us is having a monthly “no questions asked” allowance. If the amount is higher than that we, talk about it with the other party. I haven’t splurged on a luxury in a while (ok save the lizard KD I got myself as an anniversary gift), but allotting a handful of luxuries a year and keeping to the budget really works for us!

    xoxo,
    Chic ‘n Cheap Living

  • phiphi's blog
    February 12, 2013 at 8:41 pm

    i love this post – we have a combination of joint and separate accounts too, having essentially a long financial past before we got married (student loans and investments and the like). we’ve somehow cobbled along for the past 10 years managing this, and not viewing a separate account as a betrayal either.

    all of our big purchases (even the shoes!) are done after discussing it as a couple, but i do enjoy the freedom of my separate account for the little things. i’d love to be more organized with the budget though. it’s worked but you have a better system managing the finances. you’re inspiring me to be more detail oriented!

    thanks for this – it was a very interesting read for me.

    xox P

    phiphi’s blog

  • Anonymous
    February 12, 2013 at 9:57 pm

    My husband and I have been together for six years and have a toddler and a baby. Up until our kids came into the picture, we continued functioning on our separate accounts as we’ve had them before even getting together. We have since been living comfortably on an exact $1K budget each month. The budget entails fixed amounts for each category (e.g., groceries, restaurant, household items, children’s, gas, etc). This sort of budget ensures that we don’t out eat too much and eat enough hearty home-cooked food along with preventing overall overspending each month. Leftover money from any months goes into savings.

    • Katherine
      February 12, 2013 at 10:35 pm

      That is a great way to save and I admire your monthly budget. Love the yummy home cooked food ideas and adding the extras into savings 🙂

  • Lindsay @ A Walk in the Closet
    February 13, 2013 at 8:24 am

    I wrote a post about joint finances and my husband and I’s arrangement last summer – what worked, what didn’t. – http://awalkinthecloset.blogspot.ca/2012/06/moneytalks-joint-finances.html

    Short version is, we went from separate accounts to the 80/20 split but with separate credit cards. Since then we’ve started making all joint purchases on a joint card (which is great because our cash backs are coming back fast!) but things like lunches out with our own friends, individual wants (toys, clothes, etc.) on our separate cards. It’s been working out GREAT!

    We have other friends that have 100% joint income and it works for them. Another that has completely separate accounts and it works for them. But I do have to say, in MY circle, there is a lower level of success with couples who have completely separate accounts due to the work involved with keeping track AND the trust or lack of that seems to eventually creep in.

  • Belen
    February 13, 2013 at 6:23 pm

    Even if you don’t combine your bank accounts, legally all money earned after marriage is joint property isn’t it?

    I our case, we have everything combined. One joint account where we deposit our checks, and we have a household budget that determines where the money goes. This household budget includes a monthly “allowance” for each of us (same amount for each), which we can use anyway we want without question.

    • Katherine
      February 14, 2013 at 10:08 am

      Hi – yes at least in California that is so – however all accounts previous to marriage I believe are your own.

  • Janelle
    February 15, 2013 at 11:15 am

    We have kept separate accounts for 35 years. When we first got together we had joint, however after being asked to account for every $20 I drew from the ATM I had enough of that BS. Not to mention every time we got in a argument he would threaten to throw me out. I knew then I needed to establish my own account with money to have should that ever happen. So I soon wised up even though I was only 18 and and he was 35- I got a separate account. We split the bills…he pays more of them because he makes more. I pay the mortgage (650) plus phone bills, life insurance and my own minor bills…we trade off on buying groceries. It is the only thing that has marginally kept the peace. I would NEVER go back to joint accounts.

  • Grace
    February 15, 2013 at 1:54 pm

    What a fantastic post Katherine! Thank you so much for shedding some light on this subject. I’ve always admired your effort in revealing as much about your household finances and these topics that I can’t even talk to my own friends haha. Absolutely agree with you in regards to 80/20 portion, then having the joint account, and hitting saving targets before spending and tell each other BEFORE making any big purchase. I think in my own marriage it works the same although he’s the one managing since I don’t currently work right now and he’s supporting me with my living abroad. I get treats every now and then but I don’t abuse it 🙂

  • Allison
    April 3, 2013 at 12:14 pm

    Hi Katherine,

    I loved this post; it’s so helpful to hear how other people personally manage their finances, because it’s not something you get insight into very often.

    I do have one question I would love for you to answer if it’s not too personal–could you share your general savings targets? I’m just starting out career/savings-wise and would love to hear what your goals are.

    Thanks so much!

    Allison

    • Katherine
      April 3, 2013 at 1:52 pm

      Hi Allison – since you are just starting your career you probably have different targets – when I was starting out I saved about 25% of my income spread through 401Ks, etc. Now we save over 50% of our net income…hope that helps!