Tuesday, June 25, 2013

From "Me" to "We"

Marriage is the union of two lives… and two bank accounts?
I’ve talked with many different married couples and have heard varying opinions on having a joint account.  Most of the responses I’ve heard sound like the following:

 “We keep everything separate.  I have my own account and my wife has her own account.  As long as we split most of the bills 50/50, she can do whatever she wants with her money and I can do whatever I want with my money.”

“I don’t trust my husband with access to my bank account.  If he can’t control his own credit card spending, there is no way that I am going to let him touch my money.”

“I believe in having 3 main accounts: mine, yours, and ours.  This allows us to equally contribute to our shared living expenses such as rent, groceries, and bills.  We should take individual responsibility for our own money.”

What is your attitude towards having one joint account in a marriage? 

Couples nowadays are getting married later in life, which have allowed individuals to accumulate more money, more assets, and more debt.  It seems like generally most people are unwilling to pool all of their finances together completely.  Separate accounts can be thought of as a way to maintain personal independence.  Separate accounts can also allow one person to hide their full financial history.

While I can accept that there are certain situations (individuals paying alimony or child support) that warrant keeping money separate, I’ve become a firm believer that combining finances completely and honestly is the best way for a couple to financially succeed.  Before getting married, it was mostly about having an immature “me” attitude.  Six months into our marriage, it is now more and more about how “we” can mature together.     

Getting started
Before getting started with joining your accounts, make sure you have the financial talk with your spouse.  Having joint accounts requires that each member of the couple reveal all of their complete financial details including spending habits, assets, and outstanding debts.  This will force trust and set the financial expectations each partner will bring into the relationship.

Tracking finances together
I can’t emphasize how important I feel it is for individuals and couples to track where their money is going.  It can get very confusing tracking expenses from different individual accounts.  If you don’t track your finances, you won’t be able to notice (and control) any hidden excessive spending.  

Tracking spending habits helps you become more mindful of your spending.  I call it the “Oh Shit factor".  Oh shit, I spent THAT much on food this month?  I better do something about this.

If you don’t track your spending, you won’t be able to come up with ways to optimize cutting back on certain expenses.  You may also miss fraudulent charges on your credit card or your spouse’s credit card. 

The worst consequence of not tracking your finances is that you won’t be able to easily know your net worth or how much money you’ll need to reach financial freedom.  I’ve found that most people who don’t track their finances tend to be the ones that live paycheck to paycheck.  They have no idea when or how they will retire.  Is this you?  

By joining accounts, it will be much easier to keep track of your money.  Tracking your expenses doesn’t have to be difficult.  Mint.com can automatically track your finances with little to no effort on your part.  If you want to get more involved, you can use an online program like clearcheckbook or a smart phone app like Pocketmoney.

Teamwork and common goals
Marriage brings two people together as one team.  When two accounts are combined, the married couple can now combine their forces to pay off debt and start building wealth.  Teamwork is most effective when everyone works together as a team, and not as individual players.

Having shared accounts makes saving for future goals easier.  Two depositors into an account grow the balance better than one.  Seeing your account quickly grow with dual incomes can encourage and inspire each individual to work harder to earn, save, and invest. 

How can a couple hope to achieve financial freedom if each individual is only playing for himself or herself?  If you balance your bank account and your spouse doesn’t, the team is not going to fully succeed.  If you are a saver and your spouse is a spender, the team is not going to fully succeed.  If one account is focused on building wealth while the other account is focused on buying material things, the team is not going to fully succeed.

Separate accounts do nothing to help a couple become financially successful, and can easily lead to one person’s resentment of their spouse.  This is especially true if each one has a completely different outlook on money.

Who should control the account?
Ideally, both partners should be equally responsible and take equal ownership in the shared account.  However, one of you may be the more financially reliable partner; it will be that person’s responsibility to help the other one.  

If your spouse is overweight, does not exercise and chooses an unhealthy diet, do you just ignore them and leave them to fend for themselves?  If your spouse is an alcoholic, do you just abandon them because you don’t have that problem?  If your spouse has a problem controlling their finances, do you give up on them?

Both partners should be contributing to the marriage in all ways, not just with a paycheck.  For example, my wife is a much better cook than I am.  I trust her to prepare our delicious meals, and I happily wash the dishes.  I’m more financially savvy than my wife, so she trusts me to make sure we are saving and investing enough.

It’s about trust
The sooner you trust each other to share the burdens and joys of a shared account, the sooner you can efficiently work together to achieve common goals.  Marriage is about trust.  If partners have large disagreements about managing their finances, there may be a much deeper problem of mistrust in the marriage.  When one person insists that they want to “control their own money” without scrutiny, they could be keeping other secrets from their spouse.  If each partner in the marriage can monitor all of their finances together, there are no secrets to hide.    

I’m going to go extreme here and suggest that if a couple cannot be completely honest about their finances and share one bank account, perhaps a pre or a postnuptial agreement is in order.  But that’s just one man’s opinion. 

Every couple’s financial situation may be different, so there isn’t a one size fits all approach for everyone.  Let me share that joining our accounts was the best financial decision we made together as husband and wife; I highly recommend it.  

Regular communication and discussion on common goals continue to help us keep financially fit.  We still have a long way to go, but combining our forces will help us reach financial freedom much quicker.

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