Uncommon Cents

Turning the tables on this blogger, a reader asks:

I’d love to get your take on combined vs. separate finances in marriage. [My spouse] and I have always had joint accounts, but I know several married couples who keep their finances separate.

Wow. Being a lifelong bachelor, my personal experience with this topic is very limited. So, a bit of research and a bit of thought on the issue:

In the United States, marriage is an interesting mix of the religious and the legal. While marriage has tended to be most often performed by some form of clergy, it also has legal implications including financial ones. Social Security benefits and health insurance benefits are two examples of the financial implications of marriage. Marriages in America fail at an alarming rate, with estimates usually at about 50%, and very often, finances are cited as a reason for the failure. It’s idealistic to think in a relationship that it’s just about love and not about money, but in the end, it’s naive to think that money is not important.

Marriage can unite those with very different financial situations, which has led to interest in prenuptial agreements–agreements that often include predefined ways to divide the property of the married couple if and when that couple divorces. In the U.S., prenuptial agreements are recognized by courts but not always enforced. Basically, this is an attempt by those who have more money when entering the relationship to preserve that money for themselves if the marriage ceases to exist. Combine this with the fact that women often do worse financially after a divorce than they did entering the marriage and you see that the picture is cloudy.

Some thoughts on this: first and foremost, a marriage is supposed to be a partnership, so as separate as a couple may try to keep their finances, there are ways in which they will be lumped together by law if nothing else–think eligibility for health insurance or Social Security survivor benefits or Medicaid or Medicare. You’re in it together.

Second, finances need to be a part of the discussion leading up to marriage and to continue to be a part of the discussion all the way through. Couples talk about where they want to live, what they want to achieve, their religious beliefs, their desire or lack thereof for children, their sexual history, and dozens of other topics. It’s hard to believe that finances are off topic, but they apparently often are, given how many stories there are about spouses hiding debt from each other. Talk about it. Discuss it. Decide what’s priority and what’s not, and what you can afford and what you can’t. While it doesn’t seem a big deal that I would spend $50 a month on Diet Pepsi while SF spends the same amount on coffee, it could be a symptom of a bigger issue somewhere down the road–I may want to spend a given amount of money on a new MacBook Pro while she would rather spend it on a 40 inch HDTV. There needs to be open communication and negotiation on these issues.

Third, while many couples combine their finances and have one person as the CFO of the marriage, it’s important both parties have some idea of their finances and how to manage them. This is important not just in the event of a divorce, but also in the event of death or disability. Can you imagine not being able to balance a checkbook or know which bank your savings account is in? Being organized and having a list of accounts can be helpful no matter what. It’s also possible to keep some of each spouse’s finances separate; it’s not an all or nothing deal. This would require more bookkeeping, but might be a happy medium. For instance, bills for the family (rent, for example) may be paid out of a joint account, but bills for one spouse (my cellular phone bill or the veterinary bill for her rabbit) may be handled by the appropriate spouse.

One thing I would be vary wary of is buying something together that involves a substantial financial commitment (say, a house or a car) when you’re not married. While it certainly can be a sticky widget even if you’re married, it can be even worse if you’re not.

My feeling is that as much as couples may try to keep their finances separate, there are situations where it’s not really possible to do so. Like many other issues in marriage, communication, prioritizing, cooperation, and negotiation will be key to keeping the finances from becoming an issue. Finances can be an emotionally charged issue, so proceed with caution; it’s difficult to say if keeping your finances separate or not is a wise decision, so each couple must make a joint decision. For myself, at this point, I’m not sure what I would do; a lot would depend on what I know about the financial health of my betrothed.

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