For years, the standard financial advice for couples was to combine their finances. All income, debts and expenditures belong to both parties, so why not put them together?
Combining finances makes sense for many reasons, but not everyone wants to take this direction. If you're preparing to tie the knot, you might wonder which option is best for you. We've collected the pros and cons of combining your finances and keeping them separate so you can decide which method will work for you.
The Pros of Combining Your Finances
Combining your finances can be tricky, especially if both parties have their own debts, accounts and assets coming into the marriage. But it might be worth it for the following reasons:
Women May Have Greater Security
Other research shows that women have greater security when they combine finances with their spouses. That might seem counterintuitive, but remember, women are typically more prone to income interruptions, as they may take time off to start families.
It Keeps Things Simple
Splitting finances may work for some couples, but it can also lead to complicated conversations. Who pays which bills? Should you split evenly when there's income disparity? Who should pick up the check on date night? If all the money is going into and coming out of the same pot, it may help simplify things.
It Allows for More Flexibility
When you can rely on your spouse to foot the bill while you take parental leave, go back to school or start a new business, you may be more likely to take certain career risks. And in the long run, those risks can be good for the couple if they pan out. If, on the other hand, you have to keep paying your share of the bills, you might be less likely to take the leap.
It Creates Shared Goals
When all the money comes from the same place, the couple needs to communicate. That can be a good thing, as couples can thrive on having common financial goals to work toward.
The Cons of Combining Your Finances
Combining finances may not be the solution for everyone. This strategy also has some potential downsides:
Making Debt a Bigger Issue
If one partner comes into the marriage with big financial problems — including hefty debt or terrible credit — that can turn the relationship sour. In these instances, it can sometimes be better to separate accounts while the indebted spouse works on their finances. (You can keep tabs on your finances by viewing two of your credit scores for free on Credit.com.)
You Can Feel Constrained
As an adult, it's natural to want to spend your money however you see fit. After all, you earned it. When all the money is combined, you may not get to spend on those personal things you have in mind, especially if your spouse has a say in your spending.
It Can Cause Arguments
What if each spouse has a different idea of what financial responsibility looks like? Maybe one spouse prefers to pay down the mortgage, while the other thinks it's wise to invest. Or maybe one spouse is frugal, while the other's a spendthrift. In this case, combining finances requires take serious communication and the ability to compromise.
The Pros of Keeping Things Separate
There are plenty of ways to keep your finances separate. Some partners split expenses down the middle while others split them according to who earns more money. Some partners maintain a joint account for overarching expenses like housing but hold separate accounts for everything else. Regardless of how you do it, keeping separate finances can be good for a few reasons:
Keeping Spouses From One Another's Messes
If you're going into marriage with a lot of student loan debt or an otherwise complex financial situation, you may want to keep your money — and money problems — to yourself. This can make your spouse more comfortable and shield them from disaster in an emergency.
Giving Both Spouses More Autonomy
Perhaps the main reason couples decide not to combine finances is because they like having autonomy. Having control over your own money may cut down on fights and allow each spouse to meet their own financial goals.
The Cons of Keeping Things Separate
Here are a few reasons to avoid this option:
It Can Devalue a Spouse
Splitting household expenses by income may seem like a good idea, but it can make each spouse feel their value in the marriage is tied to their salary. However, splitting things 50-50 can make things stressful for the spouse who earns less.
It May Diminish Risk-Taking Ability
As we noted above, one of the advantages of a joint financial approach is that it allows for risk taking. When you have your spouse's income to fall back on, you can go start a business or have a baby. The opposite may be true of couples who split their finances, unless the couple works out a system to allow for such ventures.
For many couples, the best approach to will be somewhere in between. My husband and I, for instance, combine most of our finances. But we each maintain a separate checking account for "fun money." We can transfer a predetermined amount of money out of the joint checking account each month and spend that money however we wish. This helps us have a bit more autonomy, but ensures we're still on the same page about our finances.
Whichever approach you choose, keep evaluating what works and what doesn't. And don't be afraid to discuss your feelings and change your approach if things aren't working.