Managing husband and wife finances correctly is a secret not only for your financial success but also for a happy marriage. You can join your accounts, keep them separate, or use a ‘hybrid’ option. No method is perfect and you should choose based on your situation and personal habits.
This article in The Guardian tells stories of ten different couples and their methods of money management (and some of those stories scream ‘divorce in the making’). As the article proves, any approach can work under certain circumstances. You just need to consider all pros and cons of each and discuss them at length to make the decision that will be best for your family in the long run.
Husband and Wife Finances: Joint or Separate or Hybrid?
Joint bank account for both spouses
Having a joint bank account means pooling all your money together and using it to pay all your bills and make personal purchases. The term ‘personal’ becomes blurred in this case as you are using shared money.
This method of money management for married couples has been traditional for a very long time. It’s also the best choice when the salary discrepancy between spouses is high. For example, the partner staying at home with kids and only working part-time or not at all won’t be able to contribute to the bank account equally with the main ‘breadwinner’ of the family.
It’s extremely important to understand that having a joint bank account, especially in a situation like one mentioned above, does not make spouses unequal. If it does, couple’s counseling might be the best solution for you as the relationship itself definitely needs some work.
This plan is merely the most efficient money management option for husband and wife finances if they want to share everything and literally ‘make their lives one’.
Joint bank account pros:
- Money management and budgeting become simple
- The less-earning partner gets more security
- You get more flexibility with large purchases and investments
- Joining accounts helps some couples solidify their trust in each other
Joint bank account cons:
- Debts become a shared issue as well
- Poorly negotiated shared accounts might breed arguments
- One or both of the spouses might feel constrained when making personal purchases
- The flow of money is harder to monitor
If you decide to choose this method of merging husband and wife finances, start with negotiation and analysis of your money management habits. If your approaches are completely different, a joint account is sure to become a source of arguments.
Separate bank accounts for husband and wife
If both you and your spouse have a separate bank account, you will. Have more independence in managing your own money. This would be a great method for people who have different strategies of saving and spending.
This method also minimizes the risk of one partner’s poor decision devastating the family financially. But bear in mind that in some states you’ll be held liable for your spouse’s debts regardless of whether your accounts are joined or not. It’s essential to research the legal procedures pertaining to the money of married couples in your state and county.
On the other hand, keeping husband and wife finances separate complicates the payment of bills for joint expenses (mortgage, utilities, groceries, childcare, etc.). You’ll need to determine exactly who pays for what and when.
Maintaining an individual account will also reduce your flexibility to take risks with work or investments as your funds will be more limited by default.
Separate bank account pros:
- Personal freedom and autonomy
- Reduced risk of debt and other problems
- Simplification of divorce proceedings (should you ever need it)
Separate bank account cons:
- Possible conflicts (who pays for what)
- Possible financial and legal problems if one of the spouses does not keep up with their payments and other monetary obligations)
- Smaller amount of capital to back up your business ventures
- This method might make one or both of the spouses to feel like they are valued only for the money they bring.
On the other side of the spectrum, it might make the spouse who makes less money feel worthless.
Hybrid husband and wife finances management plan
The hybrid method of money management for married couples is simple. You open a joint bank account and there you put money for fixed joint expenses. The remainder of your salary remains in your personal bank accounts.
This method ultimately gives you all the benefits of both, albeit on a smaller scale. This means that your joint money pool for prospective risky business ventures won’t be as big. However, you will also have fewer reasons to argue and both will have financial autonomy.
Hybrid money merging method pros:
- Independence for husband and wife finances
- Overall efficiency
- Equal distribution of responsibility
Hybrid money merging method cons:
- Managing finances in case of separation becomes harder
- Terms of contributions to the joint bank account might be difficult to negotiate
How to Join Husband and Wife Finances
- Discuss your money management strategies and goals as well as your current financial situation.
This discussion must be honest, open, and respectful. This step is necessary to ascertain that you should have husband and wife finances joint in one bank account. This conversation might also lay out some ground rules for your future money management strategies.
- Choose where the newly married couple should have their joint account.
You can choose either of your banks or open a brand new one elsewhere. Usually, it’s best to transfer one spouse’s money to their partner’s account and close down theirs.
- Reset all automatic payments and other things changed due to the change in account status.
- Nominate the primary account manager and outline the borders of what each of you will be able to do with the money.
For a happy marriage, both spouses should have equal levels of control over the account. However, in some cases, like having one person struggling with a gambling addiction, limiting a spouse’s access will be wiser.
If you choose to partially join your finances in marriage (hybrid method), you will need to add another layer of negotiations. You’ll have to decide how much money both of you will transfer to the joint account and how to manage it.
To keep this situation fair, spouses should contribute not the same amount of money, but the same percentage. For example, if one of the partners makes $27,000 and the other one $70,000, the terms will be very unequal if you decide that the contribution should be $20,000. To keep things fair, have every partner contribute 25% of their salary.
Note an interesting fact, according to Bloomberg research, couples who pool at least 80% of their money together feel generally happier.
Mistakes to Avoid When Managing Husband and Wife Finances
- Being secretive.
When you get married, you take on responsibility of sharing your important decisions with your partner. At the very least, you have to forewarn them. Regardless of whether you have a separate or joint bank account, you have to discuss all financial decisions. This also includes determining who pays for what (and why) if you have separate accounts.
- Guilt-tripping each other over your individual debts.
The right debt management strategy for newly married couples is ‘this is OUR debt, we should deal with it together’. No matter whose debt this was originally, you need to deal with it using a strategy you develop together as this method is both most efficient financially and best for your emotional connection.
- Not keeping your spending in check.
If one or both of you have a bad credit score and history of poor money choices, you’ll need to put more trust in the other partner. In case you are both prone to impulsive purchases and overspending, learn how to budget and save money.
Note that the same rule applies to investments.
- Not planning for emergencies.
Everyone needs an emergency fund that will not be touched unless your family is in a dire situation. Outline the definition of this situation so you know exactly when to tap into this stash. The spouses should contribute equally to this fund.
Married Couple Finances: Final Thoughts
When deciding which method of merging husband and wife finances is best for your family, you should consider your personal quirks and situations first. If you are unsure, start with separate accounts and steadily go from there.
Remember that money management doesn’t end with choosing to join your bank accounts or keep them separate. You’ll also need to plan how to use your money for your future together. Using the best family budget app you can find will definitely help with that. I also hope my posts will give you some helpful ideas on how to grow your family’s fortune.
What are your views on the best way to manage husband and wife finances?