My wife and I are approaching nine years of marriage and I can’t remember ever having a big fight about money. Sure, we bicker about money on occasion. Who doesn’t?
In an era where financial issues are the second leading cause of divorce, I’m proud to say that this is one thing that has never been a significant issue. So what’s our secret?
The main reason is that we’ve never been in a dire financial situation on the verge of bankruptcy or anything even close. However, I believe a secondary reason is because we’ve ignored all of the advice about having a joint bank account.
Should Your Family Have Separate Bank Accounts?
We are big Dave Ramsey fans. I don’t think we’d be debt-free if not for his advice so I am grateful. One of the pillars of Dave’s advice is that a married couple should have a joint bank account. He says that a joint bank account forces you to make financial decisions together and it’s a danger sign to your relationship if you keep your accounts separate. According to Ramsey, “One checking account in your marriage forces you to cooperate, forces you to communicate, forces you to be of one mind, and creates a level of unity that is just plain weird.”
I’ll be honest, I’m not sure how much I love the word “forces”. I’ve always been someone who wants to fully understand the “why” in something, and the harder someone forces me to do something when I don’t understand the why, the less likely I am to do it. My wife is the exact same way.
Call me crazy, but I think being aligned with money is very possible with separate bank accounts. Ultimately, it comes down to what works best for you and your family.
Our Decision to Keep Separate Bank Accounts
Throughout our entire debt paydown journey, our premise has been to focus on the big things and let the small stuff slide. In many households, housing, transportation, and food account for about 70 percent of the budget. So our approach has always been that if we can keep these costs reasonable, we don’t have to be perfectly aligned on the small stuff.
Similarly, I don’t really see a need for my wife and I to communicate about every trip to Starbucks or decision to buy a beer or two at happy hour after work. My wife and I are both first-born fiercely independent millennials who like to have some financial space. I’d say that we’re both natural savers instead of spenders so we have never had issues making this work for us. This doesn’t mean that it will work for you and your family, but you also shouldn’t feel guilty for having separate bank accounts.
Bottom line, do what works best for your family. If there are trust issues, or if one partner is a big spender and needs some accountability, then by all means go for combined accounts. This is not a recommendation against a joint bank account; it’s simply an alternate to the status quo. I believe it’s possible for a couple to be united financially while having separate accounts.
Our Rules With Separate Bank Accounts
We have three simple rules that allow us to stay aligned with money.
1) We are not allowed to take on significant credit card debt. In addition to our own bank account, we also have our own credit cards. It’s not uncommon for either of us to carry a small balance that usually gets paid off within a month. We hold each other accountable by sharing when we are in a situation where we can’t pay down our balance in a reasonable amount of time, then try to help each other out.
2) Even though we have our own accounts, we still discuss major purchases. We do not have an exact threshold, but it usually ends up being anything about $200 or $300. As you’ll read below, many of the larger purchases come out of our savings or from my account given the way we’re set up.
3) We let each other know when money is tight. At least once a month one of us is asking the other how we’re doing with our money. We’ve grown to just kind of know when one is in better shape than the other. Our family sometimes teases us about deciding who is going to pay for dinner. Since this is a discretionary expense we just kind of figure it out. It’s never been that complicated.
How We’ve Managed Our Money With Separate Bank Accounts
My wife got her first teaching job in 2012 a few years after we were married. While she was in school I paid for most of the expenses and she worked a bit on the side for her own spending money. After getting a full-time job that paid decent, we sat down to sort out our expenses.
I don’t remember exactly what our take home pay was at the time, but my checks were about twice as much as hers. For simplicity let’s say that she made $1,500 and me $3,000.
Our goal in all of this was to agree on the amount we wanted to save or use to pay down debt and ensure we had roughly the same amount of spending money left over after bills were paid.
We’ve never kept a budget. However, we’ve used for years what has been coined as the anti-budget by Paula at Afford Anything.
A quick summary of the anti-budget is after getting paid you immediately save, give, and then pay all bills. Whatever is left is yours to spend on whatever you want. It’s basically budgeting in reverse, but at a higher level. Here was our process:
Step 1: Write Down All Regular Expenses
The first step in our process was to write down all of our regular expenses. This included mortgage, student loan payments, internet, groceries, gasoline, day and anything else that we paid for on a regular basis. We did not include costs related to entertainment, going out to eat, or other random expenses.
Step 2: Determine Giving, Savings, or Additional Debt Payments
After writing down our regular expenses, this gave us an idea of how much we could dedicate to either giving, saving, or additional debt payments. When we first started out, my wife was still in school pursuing her teaching certificate. We weren’t able to put much of anything towards any of these categories.
When my wife got her first teaching job, instead of increasing lifestyle inflation, we lived on the same budget and put almost all of her salary towards paying down the $50,000 in student loans that we had accrued. As our salaries increased over the years, we steadily threw more money at our debt and built an emergency fund. More recently, we have been trying to give more of our money away as well.
If you are using the anti-budget method, the most important part is that these payments come out of your account as soon as you get paid. If you wait to see what’s left over at the end of the month to make debt payments, I promise there will be nothing left unless you are on a strict budget.
Step 3: Determine Slush Money
What is slush money? This would include anything that isn’t a regular monthly expense identified in steps 1 or 2. This may include going out to eat, tickets to a sporting event, grabbing a latte from the local coffee shop, buying a wedding present, or any other random or infrequent expense.
The most important thing here was to ensure that our slush money was the same. Even though my income has always been higher than my wife’s, we’ve always had similar slush money in our separate bank accounts after all monthly payments are made.
Below is a snapshot of what our income and expenses looked like back in 2012 as a duel income married couple. Keep in mind this is before we had kids or gave regularly to charity. For a more recent snapshot of our expenses after becoming debt-free you can check out this blog post.
Step 4: Determine Who Pays What
After writing down all regular expenses, extra payments, and slush money it’s time to determine who pays what expense. After determining the amount of slush money and additional debt paydown, we could then go back into who paid what regular expense. Usually, I paid the larger expenses such as the mortgage and debt payments. She would pay the smaller regular bills. Below is how we separated our bills back in 2012.
Additional Advice For Couples With Separate Bank Accounts
Have a Small Emergency Fund
The first question you may have is what happens if an unexpected expense comes up? This is where a small emergency fund comes into play. Since 2011, we have followed Dave Ramsey’s baby steps to paying down debt. The first step is to save at least $1,000 into an emergency fund. This will allow you to pay for the majority of unexpected expenses.
If you are going to use the anti-budget approach, I’d recommend a larger emergency fund before starting to tackle debt. In 2012, we had about $5,000 in savings despite all of our debt. Thankfully we did because we had to replace our HVAC system around this time, which would have been crippling and would have resulted in more debt if we didn’t have this cushion. Because this is more of a laid back budgeting approach, having more of a cushion will allow you to respond to larger unexpected expenses.
Re-adjust at Least Once Per Year
While we do not budget on a monthly basis, it has always been important for us to review our expenses, additional payments, and slush money at the beginning of every year. We’ve had several life changes during this period including two children, day care expenses, increased income through promotions, and many other events.
Re-adjusting once per year allowed us to determine how much we wanted to throw towards debt and not giving or saving. It also allowed us to ensure that we had similar slush money for all of the fun things we wanted to do with our own pool of money.
Considerations on a Single Income
After six years of teaching, my wife decided to take a few years off to stay at home with our young children. They are 4-years-old and almost 11 months as of the writing of this post. This decision would not have been possible if we didn’t start to get our financial lives in order back in 2011. What seemed like a painstakingly long journey to become debt-free, came to fruition at the absolute perfect time.
We paid off our mortgage in early August 2018, which was the exact month that my wife received her last paycheck. Even though she has stopped working, we decided not to move to a joint bank account. Instead, I’ve set up my direct deposit at work to where she receives basically the same amount of money per month as when she was teaching. The money that we were paying towards our mortgage, plus some of the additional payments we were making, now goes directly into her bank account.
Should Your Family Have Separate Bank Accounts?
There are benefits to married couples having a joint bank account. However, I believe there are also benefits to having a separate bank account. In too many families only one person handles the majority of the money. Having both involved with money allows for shared responsibility.
This approach may not work well if one of you is a natural spender who needs some assistance managing money. It also may not work if there is a lack of communication or trust issues.
What I don’t believe is that married couples should be shunned for keeping separate bank accounts. Every relationship is different and couples should do what is best for their situation.