spouse

Should Married Couples Keep Their Money in Separate Accounts?

It’s not uncommon for married couples to keep their money in separate accounts, specifically checking accounts. With retirement accounts, each spouse must have their money in a separate account, including IRA’s and 401k’s, but is it ideal for a married couple to have separate checking accounts vs. a joint account, and why is this important?

Exceptions

There are some situations where funds must be kept separate, such as the case of a spouse with some sort of addiction (spending, gambling, substance) or mental issue, but this must be done to protect the family. I’m not referring to this situation.

Business Analogy

Can you imagine starting a business with a partner and then telling them that there needs to be separate accounts for the business that they bring in vs. the business that you bring in? In some cases, you may be able to know this information, but it can start to get grey very quickly. If everything was separate, then how are you partners? Who pays which bills and when? Should each partner know what the other is doing financially? I have never heard of a business that has done this and if they have, then I would like to know how it worked out. On a practical level, it is no longer a partnership. If a husband and wife have separate accounts then how can they behave like partners, financially speaking?

Unity

Having a joint checking account forces both spouses to work together and communicate about finances. Finances permeate through all aspects of a family from simple matters to more complex matters. A joint checking account keeps both spouses on the same page, and helps to keep them accountable to each other. It also helps to minimize selfishness and sets a focus on the family. With separate accounts, you can easily spend money on your own needs instead of putting the needs of your spouse and family first.

Asset protection

Do you want to know how to protect your assets in a marriage? Protect the health of the marriage so you do not have to worry about divorce. Practically speaking, what are you really protecting if you have separate checking accounts? The point of a checking account is not to save money, but it is used to pay for the operating expenses of the family.

Interdependence vs. Independence

It’s great to be independent, but interdependence is a more mature, evolved, and higher level of thinking. Independence states that “I” am important while interdependence shows that “we” are important. Which would you rather be?

Give it a Test Drive

If you are currently keeping your checking accounts separate, then why not give a joint checking account a chance? Try it out for 3 – 6 months and see if it changes the nature of your relationship. If they get better then let me know, but if things get worse, then don’t tell your spouse that you got the idea from this article.

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What If Your Spouse Is Reckless with Money?

Did you take a financial compatibility test before you got married to your spouse? I am sure the answer is no and even if you did, people and circumstances can change over time. If one spouse is more cautious with spending and one is reckless, then this will not only cause tension, but the financially reckless spouse will most likely hurt or greatly strain your finances. It can also be a huge source of marital tensions. What should you do if you find yourself in this situation?

Here are some approaches, from rational, gentle approaches, to tougher, harder approaches, along with observations:

Communicate and work together: Hopefully, the remedy to your situation is as easy as communicating with each other to make sure that you are on the same page financially. If your finances are steadily strengthening, debts are decreasing or paid off, savings rates are sufficient, and charitable giving is charitable, then it doesn’t really matter if your spending seems reckless. However, when your income is growing and you are still struggling to pay for ordinary expenses, then it is time to have a talk. Both spouses should be aware of financial matters, savings goals, and limitations on spending. One can hope that this will solve the problem, but if not, then try again or move on to another approach.

Take charge and prioritize cash outflows: First, the more financially responsible spouse should be in charge of financial matters, including saving and paying bills. Next, the order of financial priorities needs to change, including saving first, preferably automatically, then paying bills and debts. This will cover your basic financial needs.

Cut off access: If the previous approaches still do not work, then you have to cut-off or greatly restrict access to funds and credit. I know, this sounds harsh and controlling, but it is not. If someone had a gambling addiction then you would do the same or you will find yourself homeless, which is not an exaggeration. Spending addictions are similar and you need to protect yourself and your family. If you are at this point then your spouse has issues with spending money.

Outside support: Financial decisions, views, and habits are very much driven by our emotions, our past experiences, and our attitudes about money. If you truly have a spending addiction, then seek the support and help of a professional that is experienced with these matters. I am not a psychologist or therapist, but anecdotally, it appears that reckless spending stems from several causes: seeking happiness by purchasing things (which is short-lived, possibly for mere minutes), the attitude that you deserve “things” (this is kind of related to the first cause), you do not care or think about finances (adults need to behave like adults), and lastly, you are just trying to sabotage your situation (it could be to get back at your spouse or because you do not feel you deserve financial security – again, seek therapy).

This can also happen with a business partner if you put them in place of the word spouse. It just won’t work.

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