There is no once-size-fits-all answer but I will make the case for separate AND joint accounts. Let me explain.
When I first began cohabiting with my husband, I tried to keep completely separate accounts but that did not work. I got prideful about paying for half of everything and even paying for all of some things that we should have split (like the huge hospital bill when our son was born!). Then I resented him when I didn’t ask for fair splitting. I was like that lunatic guy in The Joy Luck Club. That wasn’t fair to my husband, who is more than generous but didn’t know that I was being a martyr. Oh money. It makes people act like such dipshits.
Then I found Suze Orman’s advice about personal vs joint bank accounts. The woman is genius! Her formula goes like this: You each keep your own separate checking and savings accounts. Then you add up your household expenses and you each contribute an EQUAL PERCENTAGE of your income to the joint accounts to pay for joint expenses. What is left over, you keep to yourselves.
For example, you make $4,000 per month (that’s take-home, not gross pay) and your spouse makes $4,500 per month. Your monthly expenses add up to about $6,000 per month but you’d like to keep a little padding in the joint account for date nights and emergency plumbers. So you aim to keep $6,500 per month in your joint checking account. How?
Spreadsheet time! (I need a jingle for every situation that calls for a spreadsheet.)
I have a spreadsheet that I will send you by clicking below. You input your expenses into the cells in green and my formulas will help you calculate your joint contributions. You know you want it! Clickety click!
Here is how the spreadsheet works: In the example above, your total contributions have to add up to $6,500. If you put 80% of your monthly income, you’ll be contributing $3,200 and you’re spouse will be contributing $3,600. That adds up to $6,800 in the joint account which is more than enough. You can actually dial back a few percentage points to 77% and still hit your goal.
Now do the same for savings. What is your joint savings goal? What is the percentage of contribution you need to get there? Most likely an extra 10% from each of you will be awesome and help you reach your goals.
So you take your paycheck (net, not gross), subtract your living expense percentage (77%), then subtract your savings expenses (10%), and what you’re left with is yours to spend on yourself. In this case, 13% is yours to do with as you please. Shoes! Shoes! Shoes! Massages! Rent The Runway Unlimited Membership. The ole’ Ball and Chain cannot have an opinion on those purchases since they are made with your own money!
I’ve always followed this rule religiously but it only works for dual income families with regular paychecks. And now that no longer applies to us so we’ve had to change the rules.
In the beginning of our relationship I was full-time at CNET. When our children were born we decided that I would freelance so that I can be home for our family as much as possible. That means that my paychecks come in fits and spurts and some months not at all. I’m not complaining. I still have respectable earning power but freelancing means that we cannot count on my regular 77% to pay our bills.
As I’ve addressed previously, this was hard for me. I had to make an emotional adjustment to paying our bills with my husband bringing home the bacon. Even typing that out, I hate myself a little. I don’t want to talk about how my contributions to the home are just as valuable. That’s a subject for another post. The point is, not contributing your percentage can feel crappy if you’re used to doing it. But it got to the point where it no longer made sense for me to maintain my own checking account and try to pull my percentage contributions from my savings. I was doing it for the wrong reasons: pride, not practicality.
I closed my checking account last year but my husband maintains his still. He contributes 100% of the percentage to get us to our living expenses and savings goals but gets to keep what is left over in his account to buy apps on iTunes, URLs from Hover, and lenses for his cameras. The man is random.
On months when I do have income, I split it between our joint account and my own personal no-fee savings account. Sometimes I use it to pay larger bills like insurance or taxes so that we don’t have to move money around for those doozies.
If one spouse does not have income, I still recommend keeping both separate and joint accounts. The earning spouse will contribute 100% of the joint budget to the joint account and still keep what is left over in his/her own account like my husband does. It can prevent the earner from resenting the non-earner, and vice versa. The non-earning spouse can keep a no-fee account for if and when earning situations arise.
Maybe this is a temporary solution and maybe it isn’t. Maybe I’ll go back to my own checking account and our percentages or maybe I should just get over my pride about it. My husband says I’m looking at it wrong. It isn’t a failure of my ability to bring in a regular paycheck. Instead, he says it’s proof of faith in our family decisions. Maybe. I do miss my personal account to use for expensive night cream. Those purchases carry more guilt when they come from a joint account.
I didn’t intend to get self-reflective tonight but personal finance is oh so personal.
I still 110% believe in Suze Orman and all of her formulations for my family. She gets me. But every family is different. I’d love to know how other couples work this out! Do share!
And one more time, about that percentage worksheet, click below to get it!