The experiment has been a success. It's time for an update after four and a half years of marriage.
Reasons to Keep it Split
- More personal freedom. Save or spend what you want, when you want, and how you want from your own accounts.
- Less worry. I know exactly how much is in each of my accounts, as does my husband for his, which allows me to plan my spending accordingly.
- Less friction. You don't have to debate every purchase or check in to make sure the money isn't planned for spending elsewhere, which is especially critical if one partner is more of a saver and the other is more of a spender.
- Gifts remain separate. When you receive a gift or inheritance, it's up to you to decide how/if you want to spend it.
- Assets remain separate. When you enter marriage with assets (which is becoming more common as the marriage age increases), keeping them separate allows you to keep them in your control. Romantic? No. Practical? Yes.
I’ve personally known women trapped in poor quality marriages due to not having separate bank accounts. One of them had a husband who spent all his money and then hers as well, all the while racking up credit card debt. Since she divorced him last year, she is now debt free other than her house and built up savings and an emergency fund. He has squandered away his $40k payout from their house and is racking up debt again. Yes, there are other problems in these relationships, but not ones that they had their eyes open to before marriage. Yes, it’s a kind of safety net, but I’d rather have a safety net than only be with my partner because I can’t figure out how to not be. It's fine to merge finances, and many prefer it, but please consider a separate bank account with some money tucked into it to ensure your own personal safety.
Split Decision
There are multiple options for splitting expenses. It's extremely situational, and it's critical to have open and honest communication. Otherwise, hurt feelings or resentment may fester.
- 50/50: Cut everything in half. This works well for two individuals with similar incomes and similar backgrounds. However, this can breed resentment if there is income disparity.
- Income-Based Split: Each covers a percentage based on income. If the first partner makes $60k and the second partner makes $40k, it's a 60/40 split. This is what we do. We simply use the before-tax base salary from our day jobs to figure out our ratio.
- Any other split that you and your partner feel is fair and agree on after open and honest communication.
Our Own Split
Big Picture
- We agreed on our financial priorities and long-term goals before getting married. Separate finances won't solve foundational differences.
- We have all our accounts linked a single Personal Capital account to get a full overview of our household, which is critical for understanding your money.
- We check in regularly (at least once a month) to make sure we are both on the same page.
Long Term Goals
- Both of us max out our separate pre-tax 401ks ($20,500 each), pre-tax HSAs ($3,650 each) and I also max out my Roth IRA ($6,000). This is our "enough" for retirement and puts us in the best tax situation possible, per our fabulous CPA's advice.
- Long-time followers know I own the house in my own name and hacked money from it with AirBNB in the early days before "retiring" when we got married. We like where we live and intend to stay here. I refinanced my mortgage to a 15-year at 2.25% in 2020. 2 years down, 13 to go (unless I decide to retire before then, in which case I'd pay it off first to limit sequence of returns risk).
Accounts
- His, mine, and ours for checking and savings accounts
- His and mine for credit cards (no joint)
- All retirement accounts are separate (it's required by law anyway)
- Our investment accounts are separate. His are mostly bonds, while mine are 100% stocks.
Health and Taxes
- We each have individual insurance through our work. We pay for our own health expenses. Thankfully there aren't many. I've filled my Limited FSA to help cover his dental work, and he covered a portion of my glasses when he had money left over one year. This helped us as a couple to save money on taxes. We didn't worry about "making it up."
- We each pay our portion of income tax. When we owe money, we calculate share based on the proportional income split. If we get a refund, it goes to the joint account and usually covers a trip or something fun.
Housing Expenses
- I keep track of the total annual house costs and pay all the bills. This includes our cleaner, lawn service, and pool service. I'm sure you're so surprised, considering I write a blog about money...
- We take the monthly average and do a 58/42 income-based split. He puts $1,800 monthly into the joint account automatically via his payroll's direct deposit. This allows him to comfortably plan his saving and spending for the year based on what is left, and I just take care of the variances. Note: He doesn't spend from the joint account unless he checks in with me first.
- If there is a substantial change (like the $1,200 insurance increase last year...), we adjust the dollar amount. Otherwise, we just make slight adjustments at year end which cover inflation and salary change.
- I usually cover random miscellaneous things, like when the pool pump bit the dust.
Other Expenses
- Groceries are covered separately, but we share food and do pick up whatever the other needs while out. Interestingly enough, it ends up at about 60/40, which would be our income-based split anyway. During Covid (when only I was shopping), he did manually transfer additional dollars to the joint to help cover as needed.
- I almost always buy the Random House Needs (toilet paper, tissues, etc). This is my Mental Load. It evens out since he pays for all the groceries when we shop together.
- Vehicles/insurance/gas is covered from our own accounts, although sometimes he borrows my truck.
- Cell phones are covered from our own accounts. If we did a family plan, we'd use the joint account to cover, but I like my iPhone and he likes his Google phone.
- I cover all my gym fees, monthly massage, and monthly pedicure. He uses the home gym in the garage for free.
- When we go out for dinner, he pays. When we take trips or do resorts or parks or things, I plan and pay.
In general...
- He wants/uses, he pays from his account. I want/use, I pay from my account. Example: he pays all video subscriptions and I pay the yacht club membership fees solo.
- We don't nickel and dime each other. It's a marriage, it's a partnership, and we look out for each other. When he's low or things come up, I try to help, and vice versa.
- It isn't complicated and it works for us because we were already doing it before we got married. If something changes, we adapt.
Pets and Children
- I pay for all care and expenses for my dog, though my husband loves her just as much. She was mine before marriage and she'd remain mine if divorced, which we discussed before tying the knot.
- If we had children, we'd aim to fill their Roth IRA together and treat their recurring expenses with an income-based split and we'd pay for extras based on which one of us wanted/allowed the extras. We discussed this prior to marriage, too.
Making it work for you...
Every situation is different, and that's why personal finance is personal. Evaluate where you are and what your own needs are.
The most important thing is just being on the same page as your partner. That's the piece that truly matters.