At a recent gathering of horse enthusiasts (i.e. a large group of women), conversation turned to the expenses that come with this hobby. I was surprised at how many of the ladies mentioned that their husbands had no idea how much money they spent on their “horse habit”. As a financial professional I was intrigued, so I a steered the conversation towards exploring this finding further.
I knew that for a variety of reasons, a large percentage of the women keep their finances separate to some degree from that of their husbands. This is very common for women who are in their second marriages as well as couples who are self-employed. But what was surprising was that some of the ladies in the discussion kept everything separate right down to alternating who payed for groceries, and they had no knowledge of what the other spent, invested or earned.
Besides the arguments that may arise from your hubby eating those chocolate truffles you splurged on and were saving for the right moment, keeping everything separate and hidden makes good financial planning very difficult. How do you maintain an equitable split? How do you plan your household emergency fund? Your children’s education expenses? Your retirement? Tax planning and filing? These are very important financial considerations that need to be discussed and require some knowledge of the other’s finances.
The simplest solution is to maintain a joint account for the household to which you both contribute. The daily expenses for the household such as utilities, groceries, etc… would be paid for from this account. How much each of you contributes to the account on a monthly basis will be up to the two of you to decide. If you own your home jointly or if both of your names are on a lease, this joint account should be used to pay your housing expenses as well.
Other items such as family entertainment, clothes for the kids, etc.. could also be split between the two of you and paid out of this account. In many ways, setting up this household account will force you to budget and analyze your expenses better than couples that merge everything and don’t ever get around to budgeting. This same scenario could be applied to saving for college for the kids and setting up an emergency fund for the household.
Thanks to the miracles of technology, you could have your separate bank account transfer to the joint accounts automatically on a monthly basis so that you do not have to remember or worry about it.
Separate retirement accounts are always a good thing but you should spend some time discussing how you envision spending your retirement in order to help the planning process. You need to have some idea of what you expect your post-retirement lifestyle to be in order to have an appropriate plan.
Keeping all finances separate may allow you to avoid many of the day to day arguments that go along with pooling your money, at some point you need to get together to plan your finances now and into the future.
In a nutshell, while I am happy to see women taking control of their financial lives, collaboration and discussion is as important to your financial well being when you are married, as it is your relationship. There is a reason that so many “horsewomen” are divorced!