Written by Divorce Professional Pamela George
Do you have negative connotations associated with the idea of keeping separate accounts to manage your money in a relationship?
Society promotes a lot of misconceptions regarding how you should manage your finances when in a relationship. Unfortunately, that means many people feel pressured to conform to certain “rules” that promise to lead to a “happier relationship.”
Let me know if any of these sound familiar:
- If you don’t combine all of your finances as one, you don’t love your partner.
- If you don’t share a bank account, you don’t trust your partner.
- Separate accounts mean that one person does all the work or is held less accountable than another.
- If you keep separate accounts, you’re more like roommates than partners.
These viewpoints simply aren’t true! Keeping a separate bank account or having your finances separate from your partner’s finances can be a great way to maintain control and autonomy over your finances. This helps to avoid what I see as a big problem with the couples who come to me – they don’t lose themselves and their dreams. Keeping finances separate or having just one account that is yours alone keeps my clients feeling like they still have some autonomy and independence in their life.
I have seen too many instances where people have given up control over their finances when they get into a relationship and have been taken advantage of because of it.
If you read my recent post, Financial Mistakes You Might Be Making And What To Do Instead, you would have read about multiple instances of this, including the story of my mother. She gave up her financial control when she sold her assets (including property) and moved in with a man, only for him to throw her (and me and my sister) out with nothing.
We need to empower ourselves when it comes to our money. We can stand in our power, have money security and control, and still love our partner.
How to manage separate accounts
Here are three ways you can organize your finances if you are in a common-law relationship or a marriage:
1) Have a joint account where both salaries go in. Then all combined expenses (including debt repayments) and combined savings are paid from this account. What is left is then transferred to each partner’s separate account for them to use for their personal savings and expenses. This way (as an example), they can purchase a gift for their partner without it coming out from a joint account (which in some cases, means the gift may be paid for with your partner’s money).
2) Each partners’ salary goes to their individual bank accounts, and then they transfer an amount to a joint account in both their names. E.g. if joint combined expenses total $5,000, they each transfer $2,500. And keep the rest in their individual account for their personal debts, savings and expenses.
3) Each partner keeps their separate accounts and pays expenses from there. If this is the way you prefer to go, you should agree in advance who is responsible for each bill. E.g. who will pay the electricity bill and who will pay for groceries. If both of you will be doing the groceries, who keeps track of how much is being spent.
The bottom line
Whichever way you and your partner decide to manage your finances, here are some key points to remember:
1) Have a money date at least once a month to over your finances. Make sure all bills are paid on time; make sure debt is going down and NOT going up; ensure savings are going up and you are on track with your financial goals.
2) When deciding how much to contribute to joint/combined expenses, it is a good idea to explore proportional income splitting. E.g. If Partner A works for $3,000 and Partner B works for $5,000, and you have combined expenses of $4,000. Most people think that the best way is to have each contribute $2,000 to combined expenses.
This will mean that Partner A will have $1,000 left after contributing to the combined expenses, while Partner B will have $3,000 left. Of note, it is not uncommon for me to see a client who spends all of their income on combined household expenses with nothing left for themselves. At the same time, the other spouse pays the same amount towards combined expenses but has lots of money extra for other things.
This example done using proportional income splitting would look like this:
Partner A contributes $1,500 to combined expenses leaving them with $1,500.
Partner B contributes $2,500 to combined expenses leaving them with $2,500.
This way, each of them contributes fifty percent of their income towards joint/combined expenses.
Regardless of how you decide to split up your finances, please ensure there is open communication and regular conversations regarding your financial status, philosophies, and dreams! These conversations are so important to ensure you’re on the same page.
Are you looking to expand the financial conversations you have in your relationship? Here are 22 other topics you can discuss with your partner.
As always, if you’d like help managing your money in the context of your relationship, please reach out! I honestly believe all couples should participate in some form of financial counselling and am here for you if this is something you feel you need.