You’re driving down the road, oblivious to any potential danger, and begin to change lanes. There’s nothing quite like the adrenaline rush and shock you feel when you nearly avoid a catastrophic crash with a vehicle lurking in your blind spot.
Several years ago, my wife and I experienced one of those moments with our family finances.
When it happened, we had been married more than 10 years. We had long ago settled into our financial routine and things were good – or so I thought. Unbeknownst to me, we had a cash-management conflict.
The blind spot: my wife was frustrated because she didn’t feel like she had money she could call her own. Both our paychecks went into a single joint account from which all our expenses were paid. I was happy and thought she was too, but I was wrong.
How do you and your spouse manage your money? Is it working? Are you sure, or could you be blissfully ignorant like
I was? As you take a second look at your cash-management options, weigh these four approaches:
Do everything together. It would seem that using joint accounts indicates a healthy relationship. With this approach, you have a single account that serves as the hub for all your month-to-month finances. Over my 20-plus years in financial planning, this is what I’ve seen most often. However, as my own experience showed, it’s not always the best approach. Your spouse may want the freedom to go on a shopping spree, buy gifts or just have some fun money that’s all their own.
Keep some and contribute. Sometimes dual-income couples set up a joint bill-paying account to which they will each contribute a specified amount. The household bills are paid from this account, but they keep the rest of their cash in an individual account. I’ve noticed this approach has worked well for a number of couples on their second marriage. While they are embarking on a new “merger,” this approach seems to appeal to couples giving marriage another go.
Divide and conquer. Here, you each manage your own accounts and agree on how you’ll split the bills. Essentially, each spouse controls his or her own cash, and a strategy is developed to meet joint obligations. This approach provides the maximum amount of individual autonomy, and I’ve seen it most often in couples that married late. Typically, they were well into their 30s with their own professional lives, financial habits and obligations they brought to the marriage.
The chief financial officer. In some cases, one member of the marital team holds sway over everything. That person’s name is on the accounts; he or she pays all the bills and manages the money. I’m not a big fan of this because, in my mind, money management is a team game. However, if this is your chosen approach, it’s important to ensure that the non-CFO is involved and understands what’s happening on the financial front.
As I’ve learned, there’s no right answer to how you manage your money. You’ve got to find your own sweet spot. Our story had a happy ending. My wife set up her own checking account, and each pay period we automatically transfer $125 from our joint account to her account. This small move paid big dividends. She’s content and feels like she has some of her own money. Hand in hand, we continue down the road to financial security.
J.J. Montanaro is a certified financial planner with USAA, The American Legion’s preferred provider of financial services. Submit questions for him online.