Tuesday, 5 July 2016

Combining Finances

Combine finances or keep things separate?
Do you have a joint bank account with your spouse? Combining finances is one of those things that you'll have to make a decision on if you are married or in a long-term relationship. I'm in the 'no' camp...at least for now. I’ve been with the bf for over 10 years, but we’ve never taken the jump to going joint. Honestly, I don't really have a good reason why not. We bought a house together (6 years ago), have pets together, and while we may not yet be married, we are pretty darn committed. Our mortgage is in both our names, but other than that we split most of the bills and keep our bank accounts, investments and credit cards separate. I think for us it’s just been easier to keep things status quo. Setting up a new bank account and changing over all the automated payments is a pain, and that job would 100% fall to me, and I'm lazy. There's also a part of me that kind of likes being able to spend my money on what I want with no questions asked (the bf is pretty easy going but there may be a slight Sephora addiction I’d be answering for…)

Notice how I said my money there? I caught that too. Over the 10 years, we have been in all sorts of situations. I was in school and he was working, he was in school and I was working, we were both working, he lost a job, I changed jobs, and now we're both working again. Even though we've had each other's backs through all of that, there is still a part of me that is selfish (blame my only child upbringing or, you know, just being a human). If lump all of our money together into one account it will feel like 'ours', and it will be harder for me to justify the purchases I want to make. I'm not naming any names, but one of us has a salt-water fish tank hobby that the other one does not want to know the real cost of. That person doesn't want to know that a $70 fish just decided to commit suicide by jumping out of the tank and getting eaten by a cat. #relationshipgoals

As you can see, it's not always just as easy as flipping the magic switch and having effortless joint finances...it's a compromise folks! My issues aside, let's get into the nitty gritty of why you may (or may not) want to combine finances with your spouse...

The Good
  • Simplicity: This has got to be the biggie! One account where all your paycheques are deposited and all your bills are paid from; no transferring money back and forth between accounts to make sure everything is as even as possible. In our not so simple system, we are each responsible for a set of bills that total similar amounts but it's far from perfect and the simplicity of a shared account is tempting. 
  • Cheaper: If you’re not using no-fee bank accounts (you should be, I’ve talked more about that here) you could potentially cut your fees in half by having one shared account instead of two separate ones. If you are sending each other money via email transfers every month that will also be costing you each time, I know mine is $1.50 per transfer. There’s also chance that the bank will offer you a better interest rate if combining your accounts leads to carrying a larger balance. 
  • Communication: You will now both be able to see where, when, and how much the other is spending and that's likely to spur some conversation. I don't think this is a bad thing, but it's a good idea to have a detailed budget before you get started to avoid unwanted surprises. 

  • The Bad
  • If your incomes aren’t in the same range, the higher earner may feel like they are taking on more of the burden for paying bills and the lower earner might feel guilty spending money they didn’t bring in. I am certainly not above this, we’ve been back and forth enough that I think we’re on even terms but there for sure have been times I’ve been the money maker and have felt a little cranky when the bf buys something I don’t consider necessary. It’s really hard to set aside your feelings when it comes to money, hence why it’s one of the biggest stressors in relationships.
  • Balancing the chequebook and budgeting can be more of a challenge when you’re tracking two people’s spending
  • Less privacy: Sure, we should feel like we can be open with our partners but sometimes you don’t want them knowing where every penny goes and how are you supposed to surprise them on their birthday? Really though, if you're hiding what you spend money on then there's likely a bigger problem. To put a positive spin on it, the lack of privacy can be an extra level of self-control that might help save money over time. 
  • When finances are managed jointly, there’s usually one person who takes the lead, and if something happens to that person, the other half could be stuck trying to figure things out at an already tough time. If you do go joint, make sure you both stay in the loop and know what's up. Another thing is to ensure you are both listed on any bills (utilities, cable, etc.), the last thing you want is for a company to refuse you information if your spouse passes away unexpectedly. 
The Ugly
  • Credit impact: if one of the joint account holders gets into trouble with creditors then your shared assets could take a hit. Up to 50% of a joint account can be seized to cover unpaid debts. 
  • Both parties on a joint account can give instructions on the account, so if the relationship ends in a blaze of fury, one person could potentially clean out all the assets in the account. Yes, you could go back and sue them, but then you'd find yourself in a lengthy and expensive court battle. The hope is that you'll never find yourself in this type of situation, but if things start to go south then make sure you take precautions. 
One thing to know about setting up a joint account is that you have a couple of options available to you in regards to how the money will be treated if one of the holders passes away. The first option is ‘Joint Tenancy with Rights of Survivorship’. This basically means that if one of the account holders dies all assets in the account will be passed directly to the other holder. The benefit of that is that the funds don't have to go through the estate. The other option is ‘Tenancy in Common’. This means that each person owns a specific portion of the account, so if there is a death you would only get your portion and the deceased's portion would go through their estate. Either way works, but it is something to think about if you’re taking the plunge towards joint finances.

How do you guys feel about combining finances; do you prefer to keep things separate or like the simplicity of a joint account? 

3 comments:

  1. My husband and I are joint on everything except credit cards. The biggest challenge we have is surprising each other with gifts. It's hard when both your pay cheques go into the same account. It works for us because we are both finance people and are in the loop with our finances (more me than him though), but you make a good point, if your relationships is where one person manages the finances and the other one does not, things can go south when something happens to the 'nerd' in the relationship.
    It's been quite the journey for us in the area of joint accounts, been together 9years, married for 3 and during the 3 years that's when we joined accounts. Great post.

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    1. Sounds like it's working for you guys and that's what matters! I get you on the gifting, becomes hard enough to come up with surprises after being together for so long.

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