Every relationship is different, which means there’s no one-size-fits-all solution for how to handle money issues within a relationship.  Because money issues are the cause of nearly a quarter of all divorces, it’s critical that couples discuss money issues in advance and develop a plan that works for them.  One of the first financial issues to discuss is whether you want to have joint finances or separate finances.  There are arguments to be made on both sides.

AN Argument for Joint Finances

Many couples in their first marriages are drawn to the idea of joint finances.  After all, you’re joining every other part of your life together, so why not the bank accounts?  If you’re living in the same household, eating every dinner together, sharing all of your expenses, and planning on retiring together, it’s hard to foresee that separate finances could be a good thing.

Proponents of joint finances usually say that having a couple share an account is a great way to build teamwork and accountability.  It also promotes trust between the partners, because there are no secrets when all of the money goes into one place.

Anecdotally speaking, most of the proponents of joint accounts that I’ve seen are couples who are still married to their first spouse.  That generally makes sense.  Those couples haven’t been burned by divorce, and they are probably more likely to believe that they will remain married for the remainder of their lives, as opposed to people who have been through a divorce.

It may also be more common for joint accounts to be kept in couples where one person has financial smarts and one does not.  Those couples often delegate responsibility for managing the finances to the “better” half.  The person in charge of the finances dictates the budget, and can keep an eye on spending to make sure the couple sticks with it.  Having the more financially savvy person in charge of the finances can prevent the less savvy partner from overspending or making foolish money decisions.

An Argument for Separate Finances

While I haven’t been able to find any hard statistics on the point (if you know of any, contact me or leave me a link in the comments), I suspect that individuals who have been through a divorce feel more strongly about keeping their finances separate.  Speaking for myself, the feeling that “this is the person I will be married to forever” has been tempered somewhat by the knowledge that I felt that way about someone once, and it didn’t pan out as I expected it to.  Because I’ve felt firsthand what it feels like to have your carefully laid plans (financial and otherwise) go to waste, I am much more reluctant to join finances with a new partner.

At my age (36), I am financially independent and well on my way to accumulating assets and planning for my financial future.  I am only interested in dating (and probably eventually marrying) someone who is also self-sufficient and planning for his own future.  I don’t see a need (or a desire) to pool finances with someone else, since they should be providing for themselves by this age anyway.  I don’t want to be partnered with a stay-at-home husband, especially since I don’t have any kids and don’t have any plans for any kids at the moment.

Joint finances for me don’t make sense.  My partner will be at least financially competent, if not highly skilled, and will be making his own money.  We can agree on sharing expenses in proportion to our incomes, but there’s no need in my mind to give anyone unfettered access to my bank accounts, and I don’t want access to anyone else’s bank accounts, either.

My Struggle with a Joint Bank Account: Mismatched spending philosophies

When I first got engaged, and later married, I was very young.  I moved in with my then-boyfriend when I was 19.  Within the first couple of months, he had accidentally overdrawn his account at least twice.  He made the typical young adult mistake of going to the ATM, withdrawing cash, glancing at his account balance, and assuming that he had all that money available to spend.  He didn’t keep track of checks that he had written, or debit card purchases he had made that hadn’t yet cleared his account.  So he would spend the ATM balance down to near zero, and then a check would clear, and his account would be in the red.  Again.

After the second (or third) account overdraft, I proposed that my boyfriend put me in charge of the finances.  He would give me his paycheck to deposit, and I would pay the bills from the account and give him an allowance to spend on whatever he liked.  We were pretty broke, but we ate at home all the time and packed our lunches every day.  I was in school and working 20-30 hours a week in an office, and he was working full time as a mechanic.

During the course of our relationship, we bought a used motorcycle and paid it off as soon as possible on our meager budget.  At the time, we had only one semi-reliable car, so the motorcycle was my primary vehicle for about a year while I was working and going to school.  Later, when our semi-reliable car turned out to be a lemon, we bought another car and paid it off as fast as possible, too.

Despite these successes, we still struggled over money due to our differing spending philosophies.  Any time he made an extra $100, he wanted to spend it ten times over.  He would say “I’m going to spend my bonus money on video games” and I would have to remind him that he had already spent his bonus money getting a new stereo for his car, or getting new motorcycle boots, or some other thing.  It was difficult for me to always have to be the bad cop and tell him no.  And it usually led to me giving in and letting him get more “fun stuff” than I ever got, which led to some resentment on my part.  For example, in the 7 years that we were married, I was still using my first and only motorcycle helmet, while he was on helmet number 3 or 4 by then.  He always wanted to spend on newer, better stuff, while I was trying to make my current things last as long as possible.

When the marriage finally fell apart and we separated, his bad habits came back to him very quickly.  In about the first six months of after we separated, he had bought himself a brand new motorcycle (about $14,000), an ATV, a trailer, and I think another car as well.  He cashed out his Roth IRA to help pay for those toys, even though it meant he’d have to pay substantial penalties for doing so.  (He also didn’t tell me about cashing out his Roth, so when I prepared and filed our final joint tax return, I didn’t know to report it.  The IRS later sent me a tax deficiency notice and came trying to collect those penalties from me, because he was broke.  Fortunately, I was able to file an innocent spouse petition and the IRS let me off the hook.  But boy, was I angry.)

WARNING: Don’t Share a Bank Account Unless Your financial ideologies Match

In my former marriage, the only reason the joint accounts worked for us at all was because he knew he was bad with money, and so he was willing to defer to me.  But because we had such different spending philosophies, it still led to a number of struggles, and I felt like I was getting the short end of the stick quite often.  He was constantly asking for newer, better stuff, and my options were (1) say no, and feel like I’m being a bad wife/overbearing mother/bad cop, or (2) give in and say yes, knowing that I was going to need to work/save even more to compensate for his spending on something he didn’t need.

If your financial ideologies differ, a joint bank account can be a disaster.  The spender will overspend, the saver will resent it, and you’ll likely end up along with the other 22% of couples who divorce over money differences.

The same goes for differing work ethics.  If one spouse is working hard for 40 or more hours per week and bringing in most of the money, while the other is content to work less and earn less, the harder working spouse will likely grow to resent the other one for slacking off.  If the harder working spouse is also a saver and the not-so-hard-working spouse is a spender, multiply that resentment by a thousand.

Joint Finances or Separate: the decision

The decision of whether you and your partner should maintain joint finances or separate them is a deeply personal one.  Those in favor of separate finances might criticize joint account holders for being naive about the long-term probability of staying married, or for romanticizing the idea of being on the same financial team.  Those in favor of joint finances might criticize separate account holders for being overly pessimistic or selfish for refusing to be team players.

The fact of the matter is that it’s up to the couple, and no one else.  It’s possible that the couples who hold their finances jointly will be richer and happier in the long run, due to the benefit of truly being able to plan based on their joint financial situation.  It is equally possible that the separate account holders will do better, especially if the couple does end up splitting.

Do you and your partner keep joint finances or separate finances?  If you’re not currently coupled up, tell us what you would do if you were coupled up.  If you don’t mind sharing a little more detail, please comment below stating your current relationship status, whether you’ve ever been divorced, and the basic outline of how you and your partner handle your finances (totally separate, totally combined, or some combination of together and separate).  If you don’t feel comfortable leaving that information in the comments, I would love it if you would contact me and let me know, so I can keep an anonymous tally.  I promise I won’t disclose your information if you ask me to keep it confidential.