The Joy of Split Accounts
As an advisor, I sometimes need to play marriage counselor. Money differences are one of the biggest sources of marital discord. Recently, I resolved a key disagreement that divided a couple. The answer: Let each spouse have his and her own bank account.
The couple – let’s call them John and Jane Bickerson – is nearing retirement, and sat down with me to look at their cash flow needs, possible dates to quit working and the ever-present question, “Do we have enough?”
Frequently, I work with couples who have a hard time agreeing on how much they can spend in retirement, how much the can afford to save, and where to prioritize and allocate the money (to retirement, a wedding, college, etc.).
This couple, however, was different.
The Bickersons had a comfortable net worth, with little, if any, need to worry about funding retirement. But the tension between John and Jane was enormous, and tough to listen to. Jane snipped at John, and John interrupted when Jane talked. These were small jabs, really, and nothing to get too excited about – on the surface. But such disagreements can lead to trouble when people no longer have jobs to fill up their days.
Did they argue about needing more, where to save, who will work longer before retiring? Not at all. They argued about spending on the little things. John was upset because Jane spent money on a local community newspaper subscription. Jane disliked John’s buying rare stamps for his collection.
After about 20 minutes of quasi-hostile bantering back and forth, they asked my opinion. I started with a one-word answer: “Autonomy.”
I proposed that they each allocate a portion of their earnings each month to separate personal checking accounts. I also suggested that the couple limit their dealings with the other’s account to the amount going into it each month. They needn’t discuss the purchases they make – it is their money to do with what they want, from newspaper subscriptions to stamp purchases.
Did this work? John and Jane seemed to relax in their chairs. This couple is brilliant on the big things, but let the little things hamper their progress toward their financial planning goals – and bring acrimony to their marriage. They left the office saying they would give it a try.
For couples I recommend this approach to, the results are extremely favorable. Many couples report a sense of freedom. Some even say they use the money to buy gifts for their spouse, bringing back some of the magic of their dating days. Such gifts are surprises, because the other spouse cannot see the purchases in their mutual account.
Autonomy can be a great tool in financial planning for couples. And sometimes being allowed to have independent control on the little things, makes working together on the big things tolerable, if not enjoyable.
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Sterling Raskie, MSFS, CFP, is an independent, fee-only financial planner at Blankenship Financial Planning in New Berlin, IL. He is an adjunct professor teaching courses in math, finance, insurance and investments. His blog is Getting Your Financial Ducks in a Row, where he writes regularly about investments, retirement savings and financial planning.
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