Marriage: Combined Accounts or Separate? One is Definitely Better and Here’s Why.

I work with a lot of newlyweds and not-so-newlyweds to combine accounts as part of their overall financial planning. As a financial planner, I believe there is far more accountability and clarity with combined accounts, which leads to less cash seepage and waste.

I’m not saying you can’t have that pair of shoes, gadget, or whatever. I am saying you will spend less and save more if you have only one active account for the household. I’ve seen it a million times, and every time people with separate accounts:

  1. Did not know how much money they spent in total as a household each month (not just on household items);
  2. Did not know how much money they made in total each month; or
  3. Spent MORE as a result of their separate accounts.

From a financial planning perspective, there should not be any funds that one partner does not know about.

Here are the most common reasons I’ve heard and inferred from clients’ hesitation at giving up separate accounts:

  1. I need my own money where nobody asks me what I spend it on
  2. I don’t want to ask anyone else for money or permission when I want to buy something
  3. I want to know I have some money in case something happens

Number 3 is a reason to see a couples’ therapist. You’re in this together and if you’re legitimately worried about having funds for an ‘escape’, you and your partner should look into counseling. Let’s look at numbers 1 and 2. Essentially, they are saying the same things, which is I want my financial independence and I don’t want to answer to anyone about my purchases.

My perspective as a financial planner, is YES, everyone should have a pot of money they can do whatever they want with and will never be asked about it. In fact, calculating this “full discretionary” pot is part of my planning process for my clients.

The difference between separate accounts where whatever is left over is for you to spend and a combined account where both partners have a full discretionary pot each month is both partners have a view of the overall household finances and decisions are made as a household and not two separate people. Also, small point, but both partners are valued equally not based on the jobs they have… that’s a story for another post.

As long as each partner does not spend more than their full discretionary amount, purchases cannot be questioned. Then both partners can know their total monthly income, expenses, savings for goals or funds to pay down debt AND the amount they get for full discretionary. Full financial awareness for both partners!

I say this at every seminar or talk I give: the key to personal financial planning is KNOWING, so why would you want a system that generates an inherent LACK of knowledge. I’m no psychotherapist, but maybe your partner’s “lack of knowledge”, relieves some fear or provides some security or power . Ask yourself what you’re afraid of…