How can you have a blog called Couple Money without discussing the topic of joint vs separate accounts?
Having either joint bank accounts, separate bank accounts, or a combination of the two is a very personal and emotional topic and tends to lead to some great debates.
I want to start off saying that what we do as a couple with our money has worked well for us. Is it a perfect system? No, but we’ve been productive with our finances and have a good communication system.
First, I need to give you some background and show you how we shifted with our finances.
Our Joint Financial Goals
It’s hard to map out something without some sort of destination. We were chatting about goals that we have that we’d like to achieve.
It had started simple when we were getting married. We wanted to pay off debt I had acquired, develop an emergency fund, and save money for a house.
Almost 3 years later, we are moving along with our goals and developed a new one.
- Have no debt except for our mortgage. Currently we don’t have credit card debt or car payments. The only debt left right now is student loans which has a low interest rate.
- Have a steady mobile income of $50,000/year or more. If we have no debts except a mortgage this would work well for us. This can from freelance work (which is my main source of income now), work from home, or passive income. We’re going to explore options as they become available. Our time frame is 5 years, so we have some work to do.
For ideas on how to execute this plan, I’ve been studying how others like Chris Guillebeau have done it.
We’re currently using proportional budgeting to determine how much each of us puts into the joint accounts.It’s been adjusted a bit as our finances have changed.
Originally the deposits were based on the ratio of our income to the family’s total income and were both deposited into joint checking.
Here’s how it worked :
- Person 1: $2100/month
- Person 2: $1400/month
- Total Income: $3500
- Bills: $2800/month
- Person 1 brings in 60% of the income.
- Person 2 brings in 40% of the income.
- So here are the deposits:
- Person 1 deposits $1680. That’s just multiplying the bills by 60%
- Person 2 deposits $1120. That’s just multiplying the bills by 40%
We feel like proportional deposits are a more fair way to handle the bills for us personally.
Now we take a slightly different path, but keep proportional deposits. We still put the majority of our money into the joint accounts, but the allocation has changed up a bit.
After reducing our household expenses and having one of us on mainly freelance income, my husband’s money,75% of his net pay, goes entirely to the joint checking account and my variable income gets sent to joint savings.
This has helped build our savings aggressively and kept a steady amount going to pay bills.
Automating Our Bill Payments
The key to keeping our goals is automating our bill payments and deposits. We use online bill pay and we only need around 20 minutes a month to take care of them. It’s extremely easy to maintain.
Setting it up was about a hour’s worth of time. I entered the bill names, addresses, due dates, account numbers, and bill amounts with our bank.
We set some of the bills up to be recurring, such as electric and cable. You can also set up your quarterly bills, like rental insurance. If the bill changes from month to month, I can just login and change the amount in a minute or two.
If there’s a mistake with a paycheck, such as the wrong amount was deposited, I could just sign into the bank’s site and fix it quickly.
Our Separate Bank Accounts
When you make your own choices instead of accepting the choices offered by gatekeepers or the status quo, you’ll naturally acquire both friends and enemies.
– Chris Guillebeau
It looks weird to see ‘Our Separate Accounts’, but that’s pretty much how we view them.
After having money sent to our joint accounts, the leftovers are in our individual accounts.
Some reasons for us having an individual checking account boils down:
- Trust: I trust my husband and vice versa. We could (in theory) keep each other’s balances a secret, but we don’t.
- Gifts: Yeah, I do like the element of surprise with gifts, so I’m happy that I have an individual checking account. they’re usually frugal gifts, so we’re not tucking away large amounts of money.
- Gas/Food: I enjoy eating out for lunch with friends occasionally. I can treat others and not worry about bouncing a the joint checking account.
Even though we have individual accounts, we know the balance in each other’s individual accounts and we can have access to them in an emergency.
We review our finances monthly to make sure everything is going smoothly.
Thoughts on Couples and Finances
Some people may feel that our individual accounts aren’t ‘separate enough’ while others may think we’re weird to be married and have separate accounts at all.
I see having both types of accounts as being a plus for our family and while I’m sure it’s not perfect, it’s doing well.
I’d love to hear how you keep your family’s budgeting system.