This series was inspired by the recent marriage in the family. I organized some information with my brother in law and new sister in law in mind, though the information can apply to others looking at their finances. If you find these tips to be useful, please share them.
Seeing how finances can have an impact on marriage, here are tips and stories to help you avoid common financial pitfalls of married couples.
Having joint accounts, separate accounts, or a combination of the two is a very personal and emotional topic. Each couple has to decide for themselves what’s best for them. Find out how we and other handle our finances. i think this is a great opportunity to learn.
Our Joint and Individual Bank Accounts
Joint Checking
This is our main account and a big chunk of our paychecks is directed towards it. It’s an online bank account (we used to have a Bank of America account) that we use to pay our bills like rent, groceries, cable, light, Internet, doctor visits, and car insurance . My paychecks come in on a weekly basis and my husband deposits twice a month. The majority of our bills are scheduled and automated.
Joint Savings
We use this to keep our emergency fund and our house down payment. With interest rates going down, we’re not earning as much as we did before, but it’s still more than the local bank options right now.
Individual Accounts
We have our individual accounts at Wachovia. These individual accounts are for splurges such as lunches out, gifts, gadgets, and gasoline. We know the balance of each other’s account and we can access them in an emergency.
All of our bank accounts have no maintenance fees.
How We Budget Our Joint Accounts for Income:
I think the key for us is keeping it easy to use and easy to change. We use a Google Spreadsheet for our joint budgeting. It lists our deposits and expenses for the month. We also add a buffer in case we go over. Using Google for our spreadsheet is great as we share the spreadsheet and it notifies the other of changes.
We review this on an as needed basis, if someone gets a raise or works more hours, etc. To determine how much each deposits, we go by monthly income and come up with a percentage and then use that to calculate deposits.
How Others Handle Their Finances
Jim from Bargaineering and his wife have joint accounts.
Baker explains why they handle their finances with joint accounts:
Once we were married though it was our debt. Our income is our income. Our bills are our bills. Our financial goals are our financial goals. I love the fact that we have one shared plan and are constantly working together to implement it.
JD from Get Rich Slowly and his wife have separate accounts.
Your Take
How do you handle your joint finances?
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Great discussion topic! My wife and I have two accounts and share both of them. One account is for emergency savings as well as savings for taxes and home insurance. The other account is our checking account. We budget this account with Mvelopes Personal. It’s divided up into several electronic envelopes for the different spending categories. At any time we can look at the balance of each envelope to see how much is left for that category. For example, we each have an envelope for our personal spending money. This has worked quite well for us.
I’m glad your system works well. I have a question, do you have sub accounts with savings or do you divide that up electronically. My husband can separate the money in his head, while I prefer having sub-accounts.
Thanks for your question. Here’s what we do – we have one envelope for emergency savings. Once we have our emergency savings complete. We also have set up of envelopes we call freedom expenses . These include expenses that don’t occur each month, but we know they’ll occur sometime in the year. Christmas savings is a good exampe. So, when my pay check is deposited, I have automatic funding set up within envelopes to allocate the appropriate amount of money from my paycheck to each electronic envelope. I recently wrote an article about some of these features in envelopes. Let me know if you would like me to share.
My finances with my husband are all sorts of weird. There’s a lot of accounts he doesn’t have access to, because, quite frankly, he isn’t interested in how the finances work as long as they do. So there’s a joint checking, where his paycheck goes and where the bills get paid. There’s his own checking, for his personal spending, then my own checking accounts for my paychecks & spending. Then several savings accounts for various things…
Basically, my husband covers living expenses, and I fund the savings accounts. All in all, I hope we’ll always just live on what he makes, so whatever I make is just gravy.
It’s rather odd and complicated, but I make it work… People always think I’m insane when they find out how many accounts I have! (Checking, savings & investing.)
I guess the key is just finding whatever works for you and what’s fair. That’s been hardest for me — Finding what’s the fair split for spending money.
So fair, my fiancee and I had been doing a pretty equal split of the bills. Of course, as I’ve had to move to the other side of the state, that arrangement isn’t quite holding up, but when we start our life together on a more permanent basis, we’ll have to figure out a way to fairly divide up the bills.
Thanks for sharing your thoughts! I think a big issue you guys have all address is being fair on how you split the money. That can be a major headache if done wrong.
I think coming together with your new spouse and having this all important “finance chat” is a crucial step for every new couple.
I work with State Farm, and we often recommend that our customers add insurance considerations into their “things to think about” list of to-do’s when getting ready to or having already said “I do” – in addition to the 8,357 other things that need to be done.
As you can imagine, there are a lot of different insurance buckets to be evaluated and acted upon to make sure guys and gals get the right coverage together before they tie the knot (and in some cases, even save money by doing so). I think one of the best ways to get started with all this is to meet with an agent in-person to discuss both of the spouses current coverage, needs, etc and make a plan for what they’ll need in the future.
Another thing to think about, which may help new couples starting out in building a financial future together (and couples who’ve been together for a while that need some assurance), is to build an “emergency fund” – like some of you have already mentioned!
With the economy in its current state, it’s just good sense (as many finance experts will tell you) to have money set aside in the event the unexpected happens.
An easy way to get started with this is to use a financial calculator to chart out where your money goes each month and how that will impact your situation.
There are a lot of different calculators out there but one I’ve found helpful and comprehensive is available from Kiplinger: http://www.kiplinger.com/tools/budget.
As newlyweds think about how to establish their emergency fund, we at State Farm urge our customers to incorporate the cost of potential insurance deductibles – auto, home, health, and others – in the event of a claim – as you never know when an emergency will arise – and having some backup funds for those costs can make all the difference.
Hope this helps people and points those couples looking to combine their finances down the right path!
I am happy to know that there are people who really have so much of understanding even after marriage
and tend to have all their money matters in joint because I know at times couples are squabbing over money matters and their relationships affects a lot because of this. I too was one of the victim to this and I was adviced by one of my friend to get rid of this and I did.
A few months back when i and my partner had some issues on money matters and our relationship seemed like it is gonna sink and i went into depression and only on one day my friend made me realize how i could overcome my issue with this.
And it worked for me and now, we are a happily living couple.