Why, When and How to Separate Finances in Marriage

by Neal Frankle, CFP ®

If you and your spouse argue about money, consider having separate finances. It might be the best way to keep your relationship intact.

Normally, I recommend that couples keep their finances together. It’s easier to track spending and savings. It’s also easier to plot a course for the future. But sometimes this is terrible advice. My experience tells me that one in 10 couples should keep their finances separate.

separate finances

You’ll know if you are that one in 10 if you and your spouse fight about money and/or just don’t seem to make any headway toward your ultimate financial goals. Believe it or not, keeping the money separate can sometimes do wonders to help you increase savings, maintain a high credit score, track your budget and advance toward your financial dreams. It can also significantly reduce the conflict at home.

The trick to separating finances is to set up strict monthly goals without micromanaging your partner’s spending. The reason I focus on spending is because it’s typically budgeting and spending tracking that causes couples to fight. They argue over what’s necessary and what isn’t.

By separating your money, you don’t have to worry about that anymore. Even if you make most of the money and your husband does most of the spending, you can still find a way to split the finances rather than the marriage.

1. Allowances

Each of you gets an allowance. But you also get an area of responsibility. Let’s say you bring home $7,000 a month and your husband brings home $2,000. That’s a total of $9,000. Let’s say he’s responsible to pay the mortgage and to buy food. You are responsible (in this example) for everything else – including saving for the future.

Let’s assume that it will cost $3,000 a month to cover his responsibilities and it will cost you $3,000 to cover yours. (You know this because you’ve been tracking your expenses using a software program like “You Need A Budget”). You have $3,000 extra.

You might decide, as a couple, to bump up the savings another $2,000 each month and split the spare $1,000. So each of you would get an additional $500 a month for extras. You each make your own decisions about that money. You can either save it for unexpected emergencies or future goodies. On the other hand, you can spend that money too. It’s up to each of you. The rule is nobody is allowed to scrutinize what the other decides to do with that extra $500 a month.

(On the other hand, if one spouse wants more money than is budgeted, he can always look for a second job.)

2. Accountability

This works great if everyone sticks to the agreement. But how do you make sure your husband is actually paying the bills? This may seem like a dumb question but I ran into a case last year where a couple encountered this exact issue. He was in charge of paying the bills but didn’t do it.

He thought it would be better to play the ponies instead. By the time my friend found out about her husband’s irresponsibility, they were facing bankruptcy and foreclosure. She was angry and started talking about divorce, and I couldn’t really blame her. But thankfully, this couple worked it out by separating their finances, making allowances and (most important) having accountability.

In their case, the wife took over paying the bills, and she showed her husband the receipts each month.

In my opinion, if you’re going to separate your finances and assign different areas of responsibility, it makes sense that each partner show the other that they have fulfilled their responsibilities each month. Set up a time and stick to it. Have your monthly meeting and be accountable to each other.

3. Be Flexible

Over time, your needs, goals and financial resources will change. You have to make allowances for these changes too. The problem of course is that some people use this as an excuse. They point to some “special circumstance” and try to leverage that into the reason they spent too much or otherwise didn’t live up to their responsibilities. In my opinion, the only way around this issue is to have a third-party accountability judge. This person is going to have the hard job of deciding just how “special” the “special circumstance” is. Does the situation require or justify a new spending pattern, or not?

If you are a couple which has decided to split the finances, chances are high that you won’t be able to make this determination yourselves. If you can’t find a friend who is willing to be your accountability judge, hire a financial advisor for an hour and get his opinion as these items come up. You likely won’t have to see the advisor more than once or twice a year and, believe me, it’s going to be a lot cheaper than a divorce.

Related Posts:

Cold hard facts about money and marriage.

How to stop arguing about money.

Outside Resources:

US News Accountability: His and Hers



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