How should your bank accounts work when you mix money and marriage?
TOLNA, N.D. – Michael and Jill Donahue of Tolna have separate checking, saving and investment accounts. They also split household expenses equally, paying for them out of an account to which each contributes the same amount.
They’ve been managing their money this way for 30 years.
“We would not do it any other way,” Michael said.
“(It’s the) only way to go,” Jill said.
When they married 30 years ago, each had been divorced and both were employed. Michael was paying child support; Jill was receiving it. They opened a separate checking account for her child.
Having separate accounts “leaves a clear audit trail,” Michael said. “We could track everything.”
They have a similar approach to handling money.
“We’re extremely value-oriented – which is a polite way of saying we’re cheap,” he said. “It’s been said that when Jill is done squeezing a nickel, the buffalo’s eyes are bulging.”
The couple set financial ground rules early on.
“It was all discussed before we ever got married,” Jill said. “(Having that discussion) made us more comfortable. We knew how we felt about money and how it should be handled – and saving, too.”
The Donahues’ decision-making system for purchases is clear.
“If it’s for the household or the farm, it’s definitely discussed,” Michael said. “If it’s an individual (purchase), we ask each other’s opinion.”
Jill said: “We feel we can do as we wish with our money – or not do.”
Each has individual mutual fund accounts and together they have a joint mutual fund account “that we use for ready cash, if we ever need it,” Michael said.
Their system does not resemble that of their parents, who had “one joint account, one checkbook,” he said. “I can’t fathom how you could operate that way anymore.”
Maintaining separate accounts “is fantastic for us,” he said. “I don’t understand why more people don’t do this.”
Among the biggest benefits is “no money arguments – ever,” he said.
Communication is key
Communication is critical if a couple wants to successfully manage their money, said Jenna Boerger, financial counselor at The Village Financial Resource Center in Fargo.
Boerger has helped numerous couples solve financial problems.
“Just being on the same page, as far as money goes, is so important,” she said.
She is used to dealing with couples who have different tendencies concerning money.
“For example, one is a saver; one is a spender,” she said. “They each have different habits or different philosophies about money.
“They may have been raised in homes with different approaches” to money management, which complicates matters because “we model our households after those we grew up in.
“Getting on the same page can be kind of tricky.”
Boerger assures couples that “there is no right or wrong way,” she said. “Some people like the ‘merged’ way; some love separate accounts. I don’t recommend one way over another.”
The system that your parents used or that your friends are using “may be good for getting ideas, but someone else’s system may not work for you.”
Each couple is unique, she said. “It’s really all about finding whatever works” for her clients.
“Our role is to set them up for success in whatever system they’ve chosen. We just put together a plan to execute it.”
Accounts: merged or separate?
She has noticed, though, that “more often than not, it seems easier for couples to merge” their accounts, for example, when one partner earns substantially more, she said.
“But ‘easier’ doesn’t always make it a better approach,” she cautioned.
The downside of merged accounts, she said, is it may be difficult if one person must ask the other for permission to splurge on an item.
“If they have separate accounts, they don’t feel they have to consult the other person about their financial choices.
“When accounts are merged, they have to account for their spending,” she said.
“(However) that doesn’t mean that person A doesn’t have a credit card that person B isn’t aware of.”
With merged accounts, “it’s easier for the secondary individual to stay very ‘hands off,’” she said. That person “may be unaware of credit card debt and may be shocked” when it’s discovered.
“The things that cause the greatest hardships for couples are credit card debt that the other person is unaware of and gambling,” she said.
“All of a sudden, you have a $20,000 or $30,000 debt that you were in the dark about.”
Boerger said that “you always need to be aware of debt” that both persons are accruing. It’s also important to share financial information to guard against unforeseen changes.
“If something should happen to the other person, do you know what bills are due when and which are auto-pay and which ones do you have to physically pay with a check?” she said.
Separate accounts may make it easier for couples to keep track of money, she said. “Each person knows what bills are coming in.”
But when “one person has a significant deficit each month and the other has a significant surplus,” it could lead to resentment, she said, especially if the one with a deficit is still expected to pay for certain things.
“The person may feel deprived,” she said. Or, in certain circumstances, “their credit could be hurt long-term. It can be very difficult for some people.”
If they decide that one pays, for example, the electric bill and the other pays the water bill, “the odds are that one person is paying more,” she said.
In such cases, Boerger may suggest that they split these bills equally by paying them out of an account to which each has deposited the same amount.
Certain considerations – like personal habits or tendencies regarding money – should be kept in mind when contemplating savings accounts.
“Some people are tempted by cash,” she said.
For them, it may be wise to keep the savings account under the control of the person who’s more careful with money, or keep the account at a bank other than the one where the checking account is housed.
Some couples have decided that one spouse will stay home with the children.
“That’s actually almost easier,” Boerger said. “Then there’s a straightforward budgeting situation.”
In counseling those couples, “you don’t see animosity,” she said. “They both view the other as contributing to the household.”
Boerger doesn’t see clear-cut evidence that one gender is better able to handle money.
But “it seems like females are doing a little more of the management part of it,” she said. “That seems to be shifting a little bit, but I don’t know if that’s industrywide or just my observation.”
What is certain, is that debt is “one of the most common” issues that causes couples to seek financial counseling, she said, but helping them achieve financial goals is not always easy.
“If they can’t agree on the same plan or the same goals, I will still run the numbers and talk about options, but until they agree on a plan, they’re going to have trouble getting on the same page.”
Money management is “a huge issue” for some couples, she said. “If they can’t get on the same page, we do refer for marriage counseling.”
The ability to manage household finances takes time and diligence, Boerger said.
“Nothing with finances happens overnight, whether it’s working off debt or planning for retirement or buying your first home.”