One Important Factor to Keep in Mind When Keeping Separate Finances

by TTMK on April 7, 2014 · 14 comments

separate financesFor many couples, there is the age-old question: should we combine our finances or should we keep separate accounts?

Many people, myself included, tend to prefer the idea of combined accounts.  It seems less divisive, and more unified – acting as “one”, so to speak.  Is that the hopeless romantic side of me?  🙂  However, any others find that completely suffocating, and just need the feeling of freedom.  The desire to have some individual autonomy is often strong in many people, and that’s a part of their individuality.

However it’s done, I think that there is one important factor for people to keep in mind if taking on separate accounts.  It may not be something anyone really wants to think about, but perhaps it should at least be somewhere in the back of your mind.

What is it?  Well, it’s the reality that your separate accounts might really be marital property no matter how much you want to keep it for yourself.

I’m not a legal expert (see one in your location if you need specific advice), so don’t take it as such.  But my understanding is that marital income is general marital property.  At least in the sense of income from wages earned during the marriage.  If you earned it, the money belongs equally to your spouse.  And vice-versa.

For example:

Let’s say after marriage you arrange direct deposit of your paycheck into a bank account in your name only.  And your spouse does the same thing in his account.  Then, you divide up expenses based on your own method of doing so, and pay from your separate accounts.  Or, perhaps you each transfer funds into a joint account and pay joint bills from there.

Either way, you end up with residual funds that are in a bank account in your name only.  Again, presumably based on money that was directly earned by you, and direct deposited into the account.  Let’s say that the two of you agree that the leftover funds are for each of you alone, based on what is in the respective bank accounts.

Then, let’s say that the relationship meets an untimely demise.  As I said before, not something people want to keep in the forefront of their minds, but you never know – crazy, unplanned outcomes can happen to people.

In this case, you just might find out that money in each account is marital property.  So if one person had $50,000 saved and the other had $10,000 saved, it would mean $60,000 of marital property to be divided.  It very well might be that each person walks away with $30,000.

What if the “separate” accounts included funds that were already there, from before the couple got married.  In this case, these funds just might be considered commingled.  Thus, even if you think it’s separate, it might not be.  It could be joint property.

Yes, I know that these aren’t exactly exciting things to think about.

However, it’s good for people with separate finances to keep in mind.  For all the feeling of individual autonomy and control that separate accounts provide, it might all be more psychological than anything else.  Ultimately, a marriage is more than two independent people cohabitating.  It has some legal and highly non-romantic aspects to it that almost make it like a business in certain respects, and each person might want to consider acknowledging that facet of it.

I think that keeping this reality in mind can at least put things into perspective for a couple when deciding on what “his” money is and what “her” money is.  Because ultimately, it just might be both of yours anyway!  Which should provide some more motivation to accept the need to compromise on finances when in a relationship!

My Questions for You

Which do you prefer: separate accounts, or totally joint finances?

Do you ever think about the notion that regardless of the action of keeping separate accounts, much of it just might be joint anyway?

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{ 14 comments… read them below or add one }

Kathy April 7, 2014 at 10:23 am

Other than retirement accounts, which by law must be separate, everything hubby and I have is joint. We do each have a small account that is considered our separate “stash” but even those are jointly registered.

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TTMK April 8, 2014 at 11:52 am

That all makes sense!

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Renée (@nickelbynickel) April 15, 2014 at 3:01 pm

This is what i’d want too, everything joint and just one account with some blow money in it for myself for whatever, because otherwise it gets hard to buy presents without the other person knowing. If and when I do get married joint finances isn’t optional to me, it’s definitely a must!

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Emily @ evolvingPF April 7, 2014 at 5:52 pm

Very important point! We keep joint finances but I have thought about this before. It depends a bit on the laws of the state you live in, but in most anything acquired after marriage would be joint. Though I suppose separate finances would only get mixed back together in the case of divorce and that’s probably not the big reason why people manage their money that way (more for “this is my personal spending money and I get more than you because I earn more”).

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TTMK April 8, 2014 at 11:51 am

I think you’re probably right about that, when you mention the spending money aspect of things. At least, one would hope it’s for something like that, as opposed to really saying that separate income is for each person permanently (which seems to fly in the face of reality!).

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The First Million is the Hardest April 7, 2014 at 7:15 pm

I prefer combined finances, I think that letting go of what’s “mine” and “yours” leads to less fighting and less stress over money in the relationship.

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TTMK April 8, 2014 at 11:49 am

Totally agree!

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David April 8, 2014 at 8:25 pm

Separate finances makes it hard to keep track of what is whose, and that is precisely why I prefer combined finances.

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TTMK April 9, 2014 at 8:43 pm

It would be messy for some people to split bills, cash payments, etc. Not to mention it would be a lot of hassle over what might be joint property anyway!

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debt debs April 9, 2014 at 10:45 pm

I prefer joint finances just to ease the logistics of paying bills etc. The only thing that would be good is to have some separate fun money accounts to be used for discretionary spending and gifts, no questions asked! We don’t have that, because we are on a strict no-spend budget, trying to get out of debt. But ideally, if I had done then what I know now, yeah, that’s what I would want.

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Daisy April 10, 2014 at 11:32 pm

When I was sold on keeping separate accounts (at least partially), my reasoning wasn’t anything to do with marital property, it was about control. I didn’t want my fiancé to feel out of control of his finances and I didn’t want to feel that either. We haven’t completely combined yet since we are just getting married in a few months, but now we plan on combining our finances and I am sure it will work out just fine. It’s just that we’ve been doing the same thing for years and it will be hard to break the habit.

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The Thrifty Issue April 13, 2014 at 12:10 am

We have joint accounts and never really thought about it any other way. I have had friends divorce and the split actually ended up 70/30 her way, and he was the breadwinner.

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Poor Student April 13, 2014 at 4:55 pm

My parents have combined account their whole marriage. On the other hand, I know that some of my uncle and aunts have separate accounts (they don’t live in the US) and they’re doing just fine too. I personally would prefer a joint account where I put most of my income and my own account where I keep small portion of my income in case I have some impulse buying once in a while.

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Kay April 20, 2014 at 6:25 am

We combine all of our finances. It’s just easier that way since I take care of everything. Like you mention, if you are married everything is legally combined anyway.

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