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His And
Her Finances
by: Simon Harris
It’s difficult to learn how to manage finances together when
you’ve been managing your finances on you own, for better or worse,
up until now. But when you become part of a couple, many things
change, and your finances are no exception! Some couples take the
traditional path of blending all their finances together, however
more and more couples are deciding to keep their finances separate.
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What are the benefits of each option? The benefits of
consolidating funds into one checking account includes easier record
keeping, simplified money management (ideally), and less paperwork
when applying for a loan. In addition, the blending of finances can
create a “unified front” in that aspect of a relationship that
simply can’t be argued with. Obviously, the drawbacks are that both
people are actively using the account and that will make it harder
to track transactions and monitor your balance when you don’t know
what the other is doing.
On the other hand, maintaining separate accounts will allow each
person in the relationship more freedom, because they won’t have to
run purchases by the other person. In addition, doing so may create
fewer complications in the relationship, allow each person to build
their own good credit, and quite simply allow them to maintain a
sense of independence. The most obvious downfall to a his and her
finance arrangement is that it can be disproportionately unfair. If
one person makes $60,000 per year, and the other $30,000, the person
making the lower salary may not like the arrangement!
If you do decide to keep “his and her” checking or savings
accounts, then you’ll need to find a system for paying house bills
and handling other joint finances together. One option that has
worked great for many couples is to create a third joint checking
account and designate it as the “house” fund. You can set up your
separate, individual checking accounts to have money automatically
withdrawn from them each month at most financial institutions. You
will have to sit down together and decide what amount needs to be in
the joint account every month in order to cover the “combined”
expenses. In a situation like the above—where one person makes
significantly more than the other—it is usual for the higher wage
earner to pay a larger portion of the expenses.
Another aspect to consider with his and her finances is credit.
This can be considerably beneficial or problematic, depending on
your individual credit ratings. However, at some point you may want
to apply for joint credit with your spouse. You will most likely
want to make big purchases together throughout the marriage such as
a car, a house, or appliances, and it’s much easier to do that if
you have joint credit. With joint credit, you will both be 100%
responsible for the debt, even if you co-sign a loan with your
spouse or add your name to your spouse’s credit card account. On the
other hand, if you decide to maintain separate credit, the general
rule is that you are not responsible for each other’s debt. (The
exception to this is if the debt is considered a family expense.)
If one person had bad credit prior to getting married, then the
person with good credit may want to keep their credit separate. Why?
Because if you apply for credit together, the lower credit score
will bring down the higher one.
The best advice? Be upfront about your financial weaknesses, and
discuss a plan—before the big day—to handle them. Once you have
identified the potential pitfalls, it will only take a little
planning to overcome them.
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