Joint finances: Are they right for you and your spouse?

Sponsored by PenFed Credit Union, federally insured by NCUA.

You’ve walked down the aisle, said “I do,” cut the cake and officially tied the knot. While marital bliss is surely underway (or imminent) – it may be time to talk about if combining finances is the right choice for you and your spouse.

Joint finances can mean different things to different couples. Some couples keep their money mostly separate, except for perhaps one shared account. Other couples may choose to combine everything – from their banking accounts and investments to their credit cards and expenses. It’s really all about finding the best solution for you and your spouse and making that decision together, notes Money Management International, a non-profit that provides credit counseling and education.

There can be pros and cons to combining finances with your spouse.

On the plus side for joint finances – your money is equally available to both of you as needed, the experts at PenFed Credit Union found. That’s compared to those who don’t combine finances and instead move money around and divide who’s responsible for what expenses.

Combining finances can also help couples consolidate points and credit card rewards, NerdWallet explained. For couples who make different amounts, it can also simplify the process of figuring out how much each one owes for different expenses.

One downside of combining finances with your spouse means giving your partner a firsthand look into your spending habits – for better, or worse. A 2020 NerdWallet survey found that among those who don’t combine finances with their significant other, about 1 in 5 (21%) say they don’t want to explain or justify their expenses. The survey also found almost a quarter — 23% — chose not to merge their finances at all.

Also, combining finances can sometimes become a source of conflict in a marriage – especially if one person enters the union with little to no money or investments, while the other person has more money and a better portfolio overall, CNBC reported.

“Still, [joint accounts are] not the best approach for everyone, especially for couples who can’t quite agree what to do with their money,” PenFed Credit Union’s experts said. “If how to spend keeps turning into a fight, keeping things separate — where each spouse is responsible for their own money — may be the best way to go.”

Some couples may function best with a hybrid approach, of sorts. It can be something where each person has their own accounts with their own spending money, but there is a joint account to handle mutual expenses, PenFed Credit Union noted.

There are several things to discuss with your spouse if you decide combining finances is right for you.

First, couples should set some financial ground rules and get on the same page about spending and saving.

“If one spouse likes to save every penny for a rainy day and the other treats every dime in their paycheck as money to be spent, financial strife is right around the corner,” PenFed Credit Union’s experts said. “You shouldn’t expect to completely change your spouse’s financial mindset, but you should be ready to settle on some ground rules.”

The ground rules can be as simple as determining a percentage of income that will go to savings, go toward paying off debt, and be spent on things like travel and entertainment, PenFed Credit Union added.

Couples should also determine a household budget. The budget should tell you how much money you anticipate coming in and where you think it will go, Money Management International said. When another person is added to a single person’s budget, it can certainly change expenses and expectations.

A spending plan can also shed insight into how you’ll address your expenses and how you’ll work toward your goals, Money Management International said.

“While budgeting sounds boring, this is a good time to talk about your long-term goals together. Do you want to take a European vacation? Get a new car? Buy your dream house? Talk about it and make a plan to save up for it,” PenFed Credit Union’s experts said.

Determining who is responsible for which financial duties is another key to successfully combining finances. One person may pay the cellphone, water and electric bills, the other person may handle the rent; one person may prefer to do the taxes, the other person may enjoy researching investment opportunities.

“It’s important to make sure you both know who’s responsible for what so no financial obligations fall through the cracks,” PenFed Credit Union said.

Read more about combining finances on PenFed Credit Union’s website. PenFed Credit Union is federally insured by NCUA.

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