20 Oct Married couples and separate accounts

Q. My husband thinks we shouldn’t have separate checking accounts. I think we should so we don’t fight about money. How can we compromise?
— Wife

A. Fighting about money issues is more common than fighting about sex, studies say.

You’re right that a compromise is in order.

“The last thing any couple wants to do is argue over money, but if one party feels like the other is more knowledgeable about the household finances, it could cause a greater issue,” said Vicky Tomaro, an Investment Advisor Representative with Tomaro Financial Group in Wall.

She feels very strongly that there should be a joint checking account for couples to use for household expenses.

The benefit is that both spouses are cognizant of how much money is needed in the budget, Tomaro said.

She recommends joint savings and investment deposits should also run through this account, but spouses can still maintain individual checking accounts for personal expenditures.

Debra Morrison, a certified financial planner with Empowered Retirement in Lincoln Park, said your question “addresses some of the more gnarly aspects of personal finance.”

There is no “right” way to do it, she said, but rather, couples need to talk about what is working and what’s not working. This will arm you with knowledge about what needs to change, she said.

She said a good compromise would be to have a joint account to pay all of your fixed expenses, which may include, rent or the mortgage, utilities, groceries, commuting expenses and other costs.

Then, she said, you could each maintain an individual account for your personal savings and spending on items such as entertainment, alcohol and vehicle expenses.

If you try this, be warned, Morrison said.

“Typically the partner earning more income tends to wield more influence in labeling what expenses are deemed fixed and ‘extraneous,’ so if you are through that hurdle, congratulations,” she said. “Seek to strike a balance and/or compromise so both of you feel empowered to both pay your bills responsibly, save in pretax retirement accounts and then have money left over to spend.”

Morrison offered this example:

Start by totaling your net-after-401(k) investment-incomes and total your fixed expenses.

Mathematically, she said, if you’re making $60,000 and your husband is making $50,000, you would each automatically contribute (at least) 5 percent into your respective pre-tax retirement plans at work. Your net income is thus $57,000 and his net income is $47,500. You would deposit 54.55 percent — $57,000 divided by $104,500 — and your husband would deposit 45.45 percent of the total expenses.

Continuing then, if your total fixed expenses are $3,000 per month, you would deposit $1,636.36 [.5455 x 3,000][/.5455] and your husband would deposit $1,364.

Finally, she recommends you have each of those fixed expense bills paid automatically so you’ll never be late and you can maintain your good FICO score.

If only one of you has the opportunity to save in a pre-tax retirement account at work, the math is altered to factor in only the net-after retirement plan investment to arrive at that partner’s share to be deposited into the joint account.

So, in the above example, Morrison said, if you don’t have a pre-tax retirement plan at work but your husband does, you would funnel at least 5 percent of your combined incomes, which is $5,500 into his 401(k) plan. Then his net income, for purposes of the joint acct contributions is $44,500, and he contributes 42.58 percent — 44,500 divided by $104,500 — and you contribute 57.42 percent — 60,000 divided by $104,500.

Again, given $3,000 per month total fixed expenses, you deposit $1,722.60 [.5742 x $3,000} and he deposits $1,277.40 [.4258 x $3,000][/.5742], she said.

“Once the fixed expenses are tallied and paid, each of you should save in an outside investment brokerage or local bank or credit union savings account or merely stash money into your spending account,” she said.

While you’re at it, consider whether you’re better off filing taxes as a couple or separately.

Developing a new pattern is always going to be fraught with difficulties initially, but you can get there with a little work and a little will. Good luck!

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This post was first published in October 2016.