The Case for Combining Finances When You’re Married

Maybe my head has been in the sand, but over the last year or so, I’ve noticed more and more people saying they have separate finances from their spouse.

According to a recent Bank of America survey, I’m not imagining it. The survey states that 28% of Millennials are opting to keep their finances separate and forego the traditional joint bank account once married. That is more than double the amount of the preceding generations (Gen X 11%, Baby Boomers 13%).

What’s even more surprising is that nearly one in five Millennials don’t know how much their spouse or partner makes.  

Call me a little old fashioned, but in a time when we crave transparency from the media, the government, and even our advisors, many are neglecting transparency where you should desire it the most, in your marriage. 

But I trust my spouse

Now, you could certainly make the argument that you trust your spouse and don’t need to know. With the other groups mentioned above, there isn’t a whole lot of trust going around. 

In a recent Gallup Poll, it reported that out of 60% surveyed, 27% don’t have much trust and 33% have no trust at all in the mass media. 

Over the last three presidencies, trust in the government has hovered around or below 30% according to a Pew Research Poll, and I don’t see that getting better anytime soon. 

For the financial services industry, things don’t look all that great either. According to Northwestern Mutual’s Planning & Progress Study, 28% of respondents said the person they most trusted for financial advice was themselves, versus 24% who said they trusted a financial advisor. 

Additionally, an American Association of Individual Investors (AAII) poll found that almost two-thirds of clients don’t trust their advisor to act in their best interest. “Perhaps not surprisingly, the vast majority–nearly 83%–feel that their interests are secondary to corporate profits and advisor/broker compensation,” the AAII wrote.

Apparently, we need to introduce these folks to what Fee-Only compensation models for advisors are. I did a podcast on that.

All this to say, we trust our spouse (I mean we did marry them after all), but we don’t trust them enough to combine finances?

I don’t think trust is the number one issue, but more the rise of the dual income household, the shame of financial baggage, and the lasting impression of negative financial experiences they’ve experienced growing up… and then maybe sprinkle in a little of the doubt society casts on wedlock by claiming that half of marriages end in divorce. 

If this whole marriage thing is a coin flip, then maybe we should proceed cautiously and hold off on joining financial forces so soon?

Fortunately, half of all marriages don’t end in divorce. Not even close. That myth was busted by Shaunti Feldhahn, but I’ll let her do the explaining in her research article.

So what’s the deal? Why are more married Millennial couples keeping their finances separate?

The rise of the independent woman

With the rise of the dual income household, we’ve seen more women enter the workforce over the last half century, meaning they’re making their own money.

To put it another way, wives used to have the underappreciated and underpaid job of caring for the kids and maintaining the household.

I say underpaid because while raising the kids is one of the most important jobs you’ll ever have, the pay is pretty lousy. It’s a labor of love, and you can’t cash love at the bank. So they were left dependent on their spouses to provide financially for their household. They didn’t have a separate pot of money to rely on.

Financial baggage doesn’t fly free

It’s no secret that the Millennial generation has been plagued with all sorts of debt including credit card debt, car loans, and most notably, student loan debt.

Compared to prior generations, financial considerations tend to be more top of mind for Millennials when considering starting a family, and bringing debt into the equation is often viewed as financial baggage.

In a recent Yahoo! Money article, half of Millennials and 62 % of Gen Z’ers said they would think twice about starting a relationship if the other person has debt or other financial baggage.

Additionally, almost two-thirds of Millennials and more than three-quarters of Gen Z said that financial stability was a must for a new partner.

You can see why someone might want to keep their financial skeletons in the closet and their finances separate.

Remember others’ (financial) scars

Rachel Cruz is known for saying, “more is caught, than taught,” with kids. 

For many, we’ve seen family members that have fallen on hard times. Maybe they lost a ton of money when the Dot Com Bubble burst in the early 2000s, or they lost their job during the Financial Crisis of 2008. They may have even had their house foreclosed on and/or filed for bankruptcy. 

As kids, growing up, we noticed these things, and for many it left a lasting impact, financial scars from other peoples’ past. We drew a line in the sand and said I’m going to make sure that never happens to me. 

When we do this, it often leads us to shutting others out, including our spouses, because we feel we’re the only one that can handle the situation. We feel if we let others in, it exposes us to the risk of mistakes we’re trying to avoid.

Going at it alone

When you manage your finances separately, it adds complexity to your relationship. Rather than a commingled pot of money that you manage together, you have to decide how to split the bills or which bills each person pays.

Maybe you have a joint account that you pay bills out of, but you each fund it from your separate accounts. How much do each of you pay into it? Is it an equal amount? Is it proportional to each of your incomes? What is fair, and how do you keep the one that is paying in more to the pot from becoming resentful?  

When you manage your finances separately, it can also create trust issues. When you can’t see where your spouse is spending his/her money, how do you know what they’re doing? 

I’ve seen several cases of married couples managing their finances separately, and oftentimes with differing progress.

On one side, a spouse is out of debt (or has a plan to be), saving for retirement and doing a budget for “their” money, and on the other side their spouse is digging a hole of debt, and their spouse doesn’t even know it. It’s like rowing a boat in opposite directions.

They don’t make any progress because they’re not working together.

Now, while I highly recommend you combine finances once you are married, I discourage couples from combining finances prior to getting married.

There is too much that can go wrong, and I’ve seen it happen. No one expects their relationship to fall apart, but it can.

If you break up and you share accounts, it can be a mad dash to the bank or ATM to see who can empty the account first. If you bought a house, the last thing you want to do is have to sell a house with your ex.

Not to be taken lightly

Let me first say, combining finances is a big step, and shouldn’t be taken lightly. It should be an intentional, and ongoing conversation prior to marriage.

You need to make sure you’re on the same page, and put all your cards on the table so to speak. I know, it puts you in a vulnerable position, but we’re talking about the person you’re planning to spend the rest of your life with. Remember, for richer, or for poorer.

Yes, someone may be bringing financial baggage to the relationship, but if you’re on the same page about what your plan is to move forward, to put yourselves in a better financial situation, then you can get past that.

Working as a team is only going to accelerate your progress.

Communication is key 

When you combine finances, you go from being the sole individual that has the determining say over your money, to sharing it with someone else. Someone now has a say in what you do with your money.

If you want your marriage to last, you have to communicate and make compromises with your spouse on how you spend your money as a couple.

But remember this, you’re on the same team. When you got married, and said “I do,” you became one with your spouse. You both contribute different things to the relationship, but the things you do are to benefit each other.

The best way to communicate with your spouse about money is to do a monthly budget together. I know that sounds tedious and restrictive, but it’s not. It’s giving you the authority to tell your money what it’s going to do this month.

That includes giving each other permission in the budget to do things you want to do. Maybe she wants to get her nails done and a new pair of Beats wireless headphones for all those Zoom calls, or maybe he wants a new pair of running shoes and a set of weights to start burning off the Covid-19 weight.

Whatever it is, you guys get to decide together. 

Having this level of communication about your money is going to reduce money fights, because you both agreed on how you were going to spend your money. It was in the budget.

While you may still have disagreements from time to time about money, this will certainly reduce the frequency and magnitude of those disagreements.

Additionally, this level of transparency is going to only improve your trust in your spouse. When you combine finances you’re not going to wonder where they’re spending their money, because you see it. It goes from being “theirs” and “mine” to “ours.”

Lastly, when you and your spouse go from “mine” to “ours” with your money, and you’re communicating about how you’re going to spend your money - being intentional - you’re more likely to improve your financial situation, and faster, than going at it alone. You know what they say, “two heads are better than one.”

Conclusion

Combining finances with your spouse is a big decision, but a necessary one.

It takes your commitment to one another to a deeper level. It’s going to foster more communication between the two of you, and gentlemen, your lady wants more communication, not less. It’s going to bring a new level of transparency to your relationship, and a natural byproduct is going to be a deeper trust between the two of you.

Overall, you’re going to experience a better, happier marriage. 

To close it out, I wanted to share this quote with you. 

“You must be interested in finding the best way, not in having your own way.”

John Wooden, Wooden: A Lifetime of Observations and Reflections On and Off the Court

John Wooden is a legendary coach. He coached the UCLA Men’s basketball team to 10 NCAA championships in 12 years. Some call him (myself included) the greatest coach that has ever lived. He published many books and was highly sought out for his teachings on leadership.

While this quote is in his book Wooden: A Lifetime of Observations and Reflections On and Off the Court, it’s actually in a section of the book on how he made his marriage of over 50 years work well.