Joint Accounts: One for you, One for me, One for us
A couple months ago, I talked about how sharing money works for our marriage, and one comment really stood out. I want to reprint the comment in its entirety here. I won’t share any of my own ideas about the method that Tim and his wife use in their marriage because I want your feedback! (I’ll just add some formatting for readability)
Tim writes:
My wife and I have three joint accounts.
- One account gets all our paychecks and income direct deposited. That account has sub-accounts in it, so it makes it very easy for us to budget because it automatically moves $X to subaccount 1, $X to subaccount 2, etc., and we then have subaccounts for groceries, gas, bills, mortgage, insurance, etc. each with their own amount in them. At the end of each month, we can see how much over/under we are in each account as we go through the credit card (we charge everything to get cash back) and move money from each appropriate subaccount into our credit card payment subaccount. Anytime we realize we’re consistently over or under in a particular subaccount, we adjust both our budget and the auto-transfer amount to compensate if we think it’s necessary. (comment from Mike: Is this the “envelopes” method?)
- The other two accounts are joint only so that if something happens to one of us, the money is still under the control of the other person. However, those are only used individually. We each get $25 a week auto-moved from our main account into each of our “individual” accounts. This is our spending money, or allowance, and we’re not responsible to the other person for how we spend it, its our individual money. I happen to spend mine on going to the bar with my buddies, or buying comic books or games; she spends hers on movies and eating out with her friends, and sometimes buying stuff for her garden or clothes. At the moment, I’ve got maybe $150 saved in my account, because I want to buy a nice new video card for my computer.
This works for us; we share all our finances, but we each get an allowance basically that is in its own account with its own debit card, that we can spend on whatever we want without needing to ask the other person, because that allowance for each of us is built into the budget and automatically transferred every Friday. The rest of our money is 100% each of ours, and we decide together what to do with it, how to budget it, when to spend it and what to spend it on, how to do savings, what to invest in, etc.
We’ve only been married a year (yesterday was our first anniversary actually), but we discussed how we were going to do things before we got married, and implemented all the changes to our finances within the first month of being married. Incidentally, my wife is a loan officer at a credit union, so she knows a lot about credit and loans and interest and making money, and she’s a real whiz at it, and I’m not, so I let her do most of the work because she enjoys it and looks at all of our accounts probably once a day on average, so I’m very blessed to be in that kind of situation.
(Comment from Mike: This last paragraph is a different topic, but a very good tidbit of information that I didn’t know!)
Here’s something I learned from her last week that I had never heard before: your credit score drops if you have more than 50% of your available credit taken out. So, you have a card with a $10,000 available balance, and you’re carrying $4999 on it, your credit is fine. Charge a $2 coffee, and your credit score drops. This apparently happens on whatever day your credit card reports to the credit bureaus the owed/available ratio; since they don’t advertise that to people, apparently it’s best for your credit to keep your balance enough under 50% that you can still charge if you need to but not get hit with a credit drop.
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So readers, what do you think of this method?
We do ours sort of around the other way. My pay goes into my account, his into his. We have a joint credit card that we use for groceries / household expenses, etc. that we pay of in full (half each) on the date we get paid. Anything outside that amount, we’re not responsible to the other person for.
Suits me just fine, but then we have absolutely no assets together either! 🙂
My boyfriend and I have been talking about marriage and the good stuff that comes with it recently (like money). A close family friend does this kind of method and works very well for them, and we have discussed doing this as well.
I think its a great idea – especially with incomes changing a lot over the years. We both dont want to feel like the other person is “allowed” to spend more just because they make more!
I like it. I don’t think I’d use it myself, probably preferring the other way round that Ms Broke explained, but I like it.
I bet having the two separate (technically joint) accounts as well as the main one makes doing joint budgeting easier. I think it would be particularly good if one person was earning nothing or a very small amount.
cleverdude: I get the impression somehow that you don’t approve of this method. You should give us your feedback too at some point.
Plonkee, I was waiting for others to comment, but yes, I do have my own opinion. But, it’s not what you think.
I definitely approve of this method, and have considered doing this in our own finances. However, I hate clutter, and consider additional accounts as such. I could instead do this management on paper if needed. But, just doing it all on paper leaves room for changing the numbers at-will.
We just have a single joint account, and decide on extra expenditures together. But then again, we just don’t buy much stuff.
This is how we are going to be managing finances soon. I’ve been wanting to do it for a while, but we haven’t really had the room in our budget to have “personal money” until my wife was able to work.
Now that she is getting an income, our accounts will look something like this: (Clever Dude may want to look away, this will probably look a bit like clutter)
Normal bank: Checking account, mostly unused except for making deposits to be moved to the main checking account which doesn’t have a branch since it is an online banking account.
Online Checking account: Gets Direct Deposit from our paychecks for all of our month-to-month expenses. The average balance of this account is as much, or more, than our monthly expenses… So I can pay for any budgeted item without worry if there is enough in the account. Bill comes in, payment is scheduled, no need to worry about it further.
High-interest general savings: Gets direct deposit from our paychecks for money we’ve designated for our savings goals (First house, replacement car for when my truck finally keels over, etc)
High-interest emergency savings: Emergency fund – not actively funded, but as we dip into it then we replace what was taken till it is back to the correct balance.
Our own personal accounts: Gets our “allowance” direct deposited from our paychecks. These are joint accounts, but like Tim’s arrangement, we can do whatever we want with the money inside. Whether we want to waste it all on $5.00 coffees at Starbucks or methodically save it for larger purchases – that’s our prerogative, and we don’t have to worry about the other person judging us on it. One place where this really helps out is when trying to purchase a gift for each other – since we don’t check up on what is going on in the other person’s account, we don’t have to worry about them noticing what we’ve been buying as birthdays or anniversaries approach 🙂
So that is 6 accounts at a minimum, but they all serve distinct purposes: Regular Expenses, Savings, Unexpected expenses, 2x Personal expenses. I like the separation of concerns, it makes it easy to see where we stand at a glance.
How do you get sub-accounts? Do only certain banks do this?
This method sounds very complicated. Why not just have one account and take out a cash allowance each week? You can still save up in a jar or something. $25 a week that isn’t collecting interest isn’t going to hurt anything.
Yeah, I agree that it sounds complicated. my wife and i have a joint checking and a joint savings. we each have individual checking and AMA accounts in order to fund IRA’s. We have these AMA accounts at the same bank, so despite not being a joint account, the bank does count or cumulative deposits to qualify for better rates on trades, etc.
i, for one, cannot itemize debits in sub accounts like the one mentioned above. we allocate a total amount for all expenses into our joint account and go from there. the rest is diverted to various investments and savings.
This is the Tim that wrote the original post…
Anca said: “How do you get sub-accounts?”
Our credit union offers an unlimited number of these for free, we can set them up whenever we feel like online. So today, if I wanted to add an account, I can just log in and add one. It gets its own number, so I can set up auto-transfers into and out of it as I like. Not all banks do this. The bank I used before I was married did not do this, I just had a checking account there and that was it.
Family Savings said: “Why not just have one account and take out a cash allowance each week? You can still save up in a jar or something. $25 a week that isn’t collecting interest isn’t going to hurt anything.”
As stated above, we get as many sub-accounts as we want for free and can set them up ourselves. It just makes it easier for budgeting, to see how much money we have set aside for each budgeted item before we pay the bills, as well as having the payment history that is kept by the credit union on how much money goes in/out of each account. So, I don’t have to keep paper records, I can go see a transaction history for my “car” account to track exactly how much came out of that account each month for the last year. That helps us budget for the future, as well as change our budget when we see that we are consistently short or long on anything. This works for us, it won’t work for everybody.
Also, my wife doesn’t like cash, and in fact hasn’t used it since she started working at the credit union. She never carries cash and uses a debit or credit card for everything (we get cashback bonus from our Discover – we actually use it each year in December to get Christmas presents/gift cards for family, helping to keep our holiday budget stable).
Beck said: “I think its a great idea – especially with incomes changing a lot over the years. We both dont want to feel like the other person is “allowed” to spend more just because they make more!”
When we get overtime, we put the first $200 of overtime from any paycheck into our house sub-account (used for fixing up the house, gardening, household tools/appliances, etc.) and anything over that goes into the person’s personal account, as their own spending money. Because we do make different amounts of money, we also didn’t want one person to feel poor because of inequity in spending money, which is why each get $25 a week for personal money, but we also think that if someone works lots of overtime, they can get some benefit from that as well. This works for us because we get paid overtime first of all, but also because the overtime is not so abundant that it would cause one person to get $1000 in a month while someone else got $100. If the overtime differences were that large, we would probably do a percentage of it, rather than a fixed number.
One other note:
Our credit union pays interest on all the money in our account, regardless of what sub-account it is in. So, we have no need of a separate “savings” account, as one of our sub-accounts is labeled “savings” and we put money in it every paycheck. We do receive different % based on how much is in a sub-account, so we keep our savings sub-account above $2000 and our insurance/taxes sub-account above $2000 all the time. Everything else only has a few hundred dollars in it at any given time, so it makes a smaller %, but interest nonetheless. The credit union also mails checks for us, so we have no extra checking account either, and no checkbook to keep track of.