Yours, Mine, and Ours: Keeping the household finances in order
Couple discussing finances (© Tony Anderson/Getty Images)
We all know the old saying, “When you marry someone, you marry the whole family.” Well I think it would be just as true to say, “When you marry someone, you marry their financial habits.”
Studies repeatedly point to financial issues as one of the most stressful aspects of marriage. But when both partners are working - whether they make comparable incomes or not - how should couples share the financial responsibilities?
Some couples celebrate their nuptials by opening their first joint account with the booty they scored at the wedding, making a ceremonious gesture of their financial union. They may also keep their individual accounts and simply transfer money for expenses to the joint account leaving a little money to play with in their own accounts.
According to a poll by Harris Interactive, half of married couples combine all expenses and only have a joint account while 18 percent take the opposite approach and having only separate accounts. The rest of the respondents likely have a combination of the two.
Evelyn Smith, 36, says the finances were always divided when she was a child. She said her parents had separate accounts and they would each handle different bills. This arrangement evolved as her mother realized that she was better suited to paying the multiple small bills, whereas her father could only be trusted to pay one large bill.
Having things divided may be logistically convenient, but according to Eduardo Ramos of Freedom Advisory - a financial advisory firm with offices in Chicago and Puerto Rico - keeping family income separate is not the way to go.
“Treat it like a whole pot. The most efficient way to grow your wealth is to comingle assets. Put the money together and you have more purchasing power and savings power,” says Ramos, financial planner and founder of Freedom Advisory.
The only caveat, he notes, is if the partner you have chosen has racked up a lot of consumer debt.
Smith and her husband have two accounts, but since he is the primary breadwinner, most of the bills are paid from the common account. She has yet to close her individual account, though.
Transparency should always be the goal when it comes to finances in relationships, but having personal money set aside can provide a feeling of empowerment. Anandi Vazquez, 35, believes that a woman should always keep a stash.
“My mother told me I should always keep a secret account,” says Vasquez.
The daughter of Indian immigrants, Vazquez and her husband - who is Dominican - have very disparate earning power.
“I have my Master’s Degree and five years in my chosen field while he just has a job that pays pretty well. But I am more employable,” says Vasquez.
Her paycheck covers the entirety of the family’s rent in a neighborhood in New York City that she selected because of the better public schools and safer streets.
“He’s very accustomed to living within his means, so I am the one pushing for us to upgrade and to buy better things.”
Vazquez and her husband currently have separate accounts and each pays for specific bills, but she is beginning to wonder if combining the family income into one account is a good idea.
Rosa Fonseca, 35, of Miami says that she and her husband have had only one account since they were married for all expenses, debts and savings. She tends to the bill payment and tracks the spending.
“It makes it hard to surprise my husband come birthdays and holidays, but I think of it all as our money, regardless of who earned it,” she says.
Regardless of who pays which bill and how the money is divided, Ramos stresses that one thing is vital in keeping a couple’s financial outlook bright: a realistic household budget with a line item for savings.
“Most of my clients are high net worth, but they didn’t start out that way. They got there by saving and investing,” he says.