Hey everyone! Today, I have a great guest post from Stephanie Schill. Stephanie is the creator of the personal finance blog WynningInLife.com. A lifetime saver and self-proclaimed shameless couponer, she is passionate about spending consciously and saving intentionally. When not writing she enjoys spending time outdoors with her husband Nick and their daughter Wynn. Below is her story of how her and her husband keep separate finances.
My husband, Nick, and I have been married for 7 years. We are successful in managing our finances happily and relatively stress-free by keeping them separate. In talking with our circle of friends and reading financial advice from experts, I get the feeling this may not be the norm.
But it works for us.
I want to share with you our experience of managing money independently, as a couple. You may be inspired to separate your finances if they are currently joined.
Or it may give you a perspective on how you can be in a relationship but keep your financials separate.
Other content you may be interested in:
- How We Paid off $266,329.01 in 33 Months
- Money And Relationships: Are You On The Verge Of Calling It Quits?
- How My 401k Loan Cost Me $1 Million Dollars
Our earnings & accounts
Nick and I both work corporate jobs, with an approximately 62%/38% split in our earnings. My husband earns a higher salary.
Our daughter is 3 years old and we have a second child on the way. We have one combined savings account that we can both access through Chase. All other accounts: checking, savings, investments, etc. are all managed independently.
Growing up my parents kept independent finances, so that was normal to me. My mom and dad have been married for 41 years and counting, and it has worked for them. They are a huge influence on how I manage my finances today.
While as a married couple I think it's important to consider all money as “our” money and align on financial goals, managing money independently works really well for us.
Reasons why managing money independently works for us:
- We don't argue about money! For example, arguing about how much he spent on this or how much I spent on that.
- Zero bounced checks or overdrafts because we weren't aware of what the other is spending.
- Birthday, Christmas and other gifts given throughout the year are true surprises.
- We both have financial independence and are able to spend, save, or invest freely as we want.
Separate finances from the beginning
Our independent financial model happened pretty organically. When my husband and I were dating, and through our engagement, we had separate finances.
When we got married and purchased a house in 2011, we had various financial conversations about how to manage our money. It just felt right to continue to manage our own finances individually, but take some action to bring our finances together.
We landed on having one combined savings account and managing all other finances separately. Our preference was to make large financial decisions together but to leave the smaller day-to-day financial choices to each of us independently.
Recurring household bills
All of the household bills are in Nick's name and he pays all of them every month. That includes things like the mortgage, gas, electric, cell phone bill, etc.
Once per month, I will wire him money that covers my “portion” of the bills, based on my earnings. He earns a higher salary and thus he pays a higher percentage of the bills each month.
For example, let's say our mortgage, gas, electric, and cell phone bills are $2000 net per month. I will wire him $760 to cover the 38% that I am responsible for. In turn, he covers his 62% which equals $1240, for a total of $2,000.
We both bank through Chase. So I use Chase's Zelle to effortlessly send him money each month.
Finances beyond recurring household bills
Outside of regular household bills, we each have other regular expenses we pay for individually. I pay for groceries, daycare, and anything that my daughter needs: diapers (thankfully potty trained now), clothing, etc.
Nick will routinely pay for anything around the house. Examples would be all trips to hardware stores when we do projects (he's a project guy so there's always something that needs fixing or improving). Typically, anytime we eat out he pays, any taxes we owe annually, any household expense like a broken water heater, or furnace checkup, etc. is usually all him.
Any expenses regarding our vehicles: gas, maintenance, payments, etc. are taken care of by each of us individually.
Our Savings/ Investments
We have one shared savings account that we both access. We both put money into the account, but it is a joint decision if we are to ever take money out of the account. The initial goal of the account was to build an emergency fund. For example, if either of us loses our job or if there is an unexpected medical household emergency.
Over time the account has grown so now our conversations have changed toward investments and identifying ways we can have the money accessible if needed, but have it earn more interest. We all know the fraction of a percentage point any traditional bank will give you on a savings account is nothing relative to what a high-yield savings account or the stock market could yield. The question comes down to how much risk we are willing to bear.
Beyond our one joint savings account, we both manage our own savings and investment accounts. We each have our own personal savings accounts.
While not completely defined, they would be for things like a down payment or cash payment on a car, a future vacation, or a larger ticket item either of us wants to purchase.
I consider it the bridge between our salary and the emergency fund, and money we'll likely spend but not yet sure on what.
We both have our own individual 401K retirement accounts.
They are through our current employers, and we both contribute to them each paycheck. Recently we both began maxing them out which was a goal of ours for years. We know how important saving for the future is.
Due to changing of jobs over the years, we have both made decisions in the past to roll 401Ks from old employers plans into traditional IRAs.
Beyond traditional 401ks we both have additional investment accounts.
We both use TD Ameritrade to purchase stocks. In my curiosity with personal finance, I've also dabbled using Stockpile to purchase fractional shares of stock (or gift stock) and Robinhood to purchase stock. We discuss investments but we don't get permission from each other before we buy or sell a stock, we just do what feels right.
Separate finances are not perfect
While this independent financial model works really well for us, it's not without its challenges. As the person earning less money in the relationship, even though I pay a portion of the monthly bills, our take-home pay varies significantly. Meaning, each month Nick still has significantly more money in his account that isn't allocated toward bills.
I don't know exactly what he makes or the exact net amount of any bonuses he receives and vice-versa. If I ask him about his balances, he will tell me and vice-versa, but it's not something I have visibility to on demand.
I know he's saving money above and beyond our joint savings that I have visibility to. However, I don't know exactly what is in his personal savings account, or retirement accounts, or investment accounts.
We each have the freedom to make our own financial choices, sometimes when the other may not fully agree. For example, purchasing a specific stock or investment, liquidating a specific stock or investment or spending money on a hobby or entertainment item.
Regular check-ins to stay on the same page
Regularly we check in on our finances with each other. We don't have a specific time, but at least once per year. Sometimes the catalyst for such a conversation will be a life event: a change in earnings from a new job, unemployment, a large purchase we want to make, or the birth of a child.
We regularly review how we are trending toward our goal of paying off our mortgage early. We'll share how much we have in our personal savings, retirement, and investment accounts, etc. so we can make larger joint decisions together.
Examples of money decisions we make together:
- Should we move some money from our joint savings account to an investment account that would give a higher return?
- Should we be putting more in our daughter's college fund?
- Can we put more money toward the mortgage to aid in paying it off faster?
- Is there a vacation we want to take that we should start budgeting for now?
- Are we serious about buying that boat or gutting our master bathroom? If yes, how are we going to pay for it?
Regularly checking in our finances helps to align our finances as a couple, even if we keep them in separate accounts.
Separate finances pros
- The feeling of financial independence. You get to decide where and how to spend or invest your own money.
- Less arguing or heated conversations regarding who spent what on what.
- Ease of budgeting when you know your income, and know your exact financial responsibilities each month.
Separate finances cons
- Less visibility into the day-to-day finances. If you're a number cruncher or always like to have a pulse on exactly how much is in savings, calculating your net worth, exactly how much is left on the mortgage, or how your significant other is tracking toward their student debt, this may be invisible.
- You may not account for every single expense that arises, so when something unexpected comes up, you may each think it's the others' responsibility.
- If you are not the breadwinner, you may have feelings of envy of the extra money your significant other has, even if bills have been calculated relative to income.
- If your partner is a spender, they may spend on things you don't agree with or nickel and dime their money away each paycheck so they don't have money to pay a portion of the agreed upon monthly bills.
Is managing money separately as a couple for you?
There are some things you should consider with your partner if you are thinking of going the independent finances route:
- Is your significant other responsible enough for this arrangement? Maybe you're not good with money or they aren't good with money.
- How are you going to divvy up the regular, recurring bills?
- Whose responsibility is it for non-recurring or unexpected household bills?
- Whip out your current budget if you have one, or create one. (If you don't, I recommend a zero-based budget). Identify whose responsibility it will be for every line item in that budget. Being very deliberate and transparent up front will negate heated conversations down the road. Include everything: gifts, holidays, pet food, vet visits, diapers, eating out, groceries, misc. household expenses, takeout, annual lawn maintenance, snow removal, garbage removal, donations, kid's expenses for school or activities, etc. The list goes on…
- How will you manage savings, retirement or other investments?
- Define how often you will check in with each other regarding the finances, and get household meetings on the calendar.
Separate finances just happened for us. My husband and I had maintained separate finances when we first got together and it became the norm as we got married. I'm used to it; we have our rhythm.
While sometimes there are heated conversations about money, they are few and far between.
I feel in control of my money which gives me a feeling of independence. But I also feel like his money and my money is “our” money regardless of whose bank account it's in or whose name it's under. We still make large financial decisions together and align on future goals for our money. So it's a system that has simply worked for us.
Do you prefer joint or separate finances? What do you think of separate finances?
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