Money is an emotional subject, even for me. Before I launch into a conversation with my husband about anything financial, I take my own temperature to figure out if I’m running hotter than normal and, if so, why—because I know that at some point every couple fights about money. Still, if you set up your household finances according to a system that works for both of you, it is possible to reduce the stress that this subject puts on marriage. Talking about finances can even become an intimate way to plan your future together. First, of course, you have to figure out how to handle your accounts. Here’s how I do it, plus some things to keep in mind.
SEPARATE, JOINT OR BOTH?
Some couples—such as my parents, who shared everything during their four-decade marriage—can’t even imagine splitting up their cash. But increasingly, couples are choosing to put their money into multiple pots. In 2001, just 38 percent of married couples had more than one checking account; today it is 49 percent, according to Raddon Financial Group, an Illinois consulting firm. Many of the couples I know who take this route are in second marriages. “Usually when money is kept separately, there is some reason: ‘I’ve been burned before,’ or ‘My mother was left high and dry,’ ” says New York psychiatrist Gail Saltz, MD. “It doesn’t mean these people have no trust in their partner but that their trust has been injured overall. When you buckle your seat belt, are you saying, ‘I’m going to be in a car accident’? No, you’re saying, ‘I’m taking precautions.’ ”
I guess that makes me a seat belt buckler. My new husband and I use what I call the yours, mine and ours approach: I have a personal account, he has a personal account, and there’s a joint one for the household. I believe you should figure out how much it takes to pay the bills each month and save for your family’s goals, and then you should each kick in an equal percentage of your individual wages until you cover that household nut. (Having partners contribute a percentage of take-home pay rather than the same set amount can be fairer, because one spouse usually makes more than the other.) Whatever’s left over is yours to spend, save, invest or use as you like.
YOUR MONEY IS JOINED EVEN IF YOU THINK IT ISN’T
Almost all the assets you acquire during marriage are legally considered marital property, no matter whose name is on the accounts. This means that even if you’ve socked away $50,000 from your salary in your own account, it is still considered joint property if you accumulated it after your wedding.
There are a few exceptions. Inheritances are usually separate property, as are distributions from certain trusts and damages you receive from personal injury claims. You can also protect assets by not touching them. It works like this: If you come into a marriage with a brokerage account and don’t spend it, trade it or use it for family purposes, that money will in most cases remain yours alone. But if you even discuss with your spouse whether to sell some shares, it can be argued that part of the account has become marital property because a decision was jointly made about the money.
How the money will be divided if you divorce depends on where you live. In 41 states, called equitable distribution states, if the couple can’t agree, the courts (or a mediator) will decide how to divide the assets. In the nine other states, known as community property states (Arizona, California, New Mexico, Nevada, Iowa, Washington, Texas, Wisconsin and Louisiana), all property and debts are divided equally, 50/50. The issue is more complicated than this sounds, however;topics.law.cornell.edu/wex/table_divorce is a useful place to start your research.
The best way around this is with a prenuptial agreement. If you have assets or earnings you want to keep to yourself, you need to sign this legal document. It specifies not only what you’re bringing into a marriage but also what each of you will likely exit with. A prenup is a good idea if either party is coming to the marriage with significant assets, real estate, children or a family business. (Long before we tied the knot, my new husband and I agreed we’d need one for the protection of both sets of children.) If you’re already married, you can get a postnup, which is very much the same thing and becoming more popular every year (though they are not recognized in every state). Find downloadable pre- and postnuptial forms at uslegalforms.com.
A SEPARATE ACCOUNT CAN GIVE YOU AUTONOMY
To me, having a personal account isn’t about secrecy or about building an escape hatch from the marriage but about day-to-day freedom. After I meet my financial obligations, there should be money I can use without having to ask permission before or justify myself after. So what if I want to buy another pair of shoes? My spouse should have the same privilege.
I also believe a woman should have her own account because managing money is the best way for her to secure her future. It’s obviously no longer the case that men earn all the income or have the right to make all the investments. In fact, quite the opposite, notes Michael J. Silverstein, coauthor of Women Want More. Today, 28 percent of women in dual-earner households (including me) make more than their spouses. By 2028, the average woman will outearn the average man. As midlife women, we will most likely outlive the men in our lives, and we need to know how to make financial decisions.
If you are part of a one-income family, financial autonomy is still possible. Direct deposit the paycheck into one account, then automatically transfer equal sums into his and hers accounts. Just be sure, as in the two-earner example, that you leave enough in the “ours” account to cover household needs.
THE BEST OF BOTH WORLDS
The beauty of the “yours, mine and ours” approach is that it allows you to have it both ways. Some people say that relationships where money is joined are tighter than ones where it is kept separate. “The difference lies in the perception of yourself as a couple,” Saltz says. “It’s a question of how merged, how blended are you?” That’s one reason I recommend also using a joint account to save for goals you agree on as a family, such as buying a second house or a new car.
The goal-setting process at the heart of financial planning sounds tedious until you understand that it’s about your dreams: What do you want to accomplish together? When do you want to achieve it? What will it cost? This is why the notion of completely separate funds is to me unromantic. Part of the fun of saving for that boat or that party is watching the money add up together. Of course, in the end, it’s about figuring out what works for you. “A successful marriage is one that lasts and where both people are content,” Saltz says. “If two people are really happy and have separate money and are present for each other and their children, who’s to say what’s wrong?”
Reprinted from More Magazine (www.more.com)