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Finances of Married People
Apr. 16th, 2006 10:08 pmToday I read the article "Marrying your money: Three questions to ask when deciding how joint your finances should be." Two of the questions set me on edge.
Financial standing
The first question isn't really a question. It just involves finding out about each other's financial pictures. Some people have trouble talking about finances, like it's taboo or something, but I'm lucky enough not to have that problem with either myself or people I share finances with.
Bank accounts
The second one is whether you want one, two, or three checking accounts. The article makes it sound like two accounts is the worst (except possibly if you're in your second marriage) and that three is the best. Here's what I think:
Three accounts: Each person has his or her own account for personal expenses, then they have a joint account for common expenses. Both contribute most of their income to the joint account. This sounds good, except for being a recipe for extra fees and bureaucracy.
Two accounts: This is what I'm doing now. I'm not married, so this makes sense. But I don't think it is necessarily a pathetic way for couples to handle their money. First of all, both accounts could be joint accounts, though each person would take primary responsibility for one. Second of all, people can still transfer money to each other. Yes, it's true. In my relationship, one of us pays all the joint bills as they are due, and the other person writes a single check for half each month. We also negotiate or take turns on other joint expenses like groceries.
One account: I can imagine this working, but not if someone equates the current balance with available spending money. I've heard of the strategy where one person just takes out a pre-designated amount each week or month for personal expenses and the other person is the financial officer of the family and pays all the bills, etc. out of the account. Any large purchase by either would be discussed. (Ideally before the purchase is made.)
Supposedly it's good for each person to have an account in their own name for credit purposes in case something happens to the other person although I'm not sure that applies in a community property state like mine. I can say, however, that if one bank is being a snot, it's nice to have access to a second account. And it's not like banks are the most user-friendly of businesses.
Who pays how much?
The article gives three possibilities.
First, each person pays for half of everything. This sounds fair at first and can work well when both people are earning comparable salaries. Except that it sounds more like roommates than like married people.
Second, each person can pay the same proportion of their income for things like rent, so whoever's making more pays more. This seems more fair, but again more like a roommate arrangement than a family arrangement.
Third, both people get the same allowance and put the rest of the money in the common pot. This one sounds the best to me, except that it turns out that I have strong opinions about earning money and sponging and job stress, etc.
Again, I'm coming at this from a nonmarried perspective, but I'm not sure that the addition of a lifelong commitment would change things dramatically for me.
I used to think that when people are in a family, there is one pot of money and it goes around in a fair way. For example, when I was growing up, if there was extra money, we got allowance. This was unrelated to chores, which had the same rule: if there are chores, we all get some.
But now I see that people have different tastes and needs and spending/saving styles, and so I am much more in favor of extremely detailed negotiations. I think we all have certain assumptions about what married people should be like, but there are a wide variety of these assumptions, so it's good at least to try to figure out what they are and see how well they match up with those of your partner.
I knew someone married to a military man and they were moving all the time so it was hard for her to get jobs. And his schedule was changing all the time and was totally crazy. I decided that if I were in her position, I would be the stay-at-home person, and I would do a lot more than half the work around the house in return for not having to go to work. I would iron his ridiculously difficult-to-iron uniforms, polish his shoes, do the shopping, and some of the cooking (he also liked cooking), plus all the laundry, vacuuming, mopping, dishes, etc. And I would try to keep my schedule in sync with his. I would still want him to put dirty clothes in the hamper, bring dirty dishes back to the sink, etc.
My real situation will probably be different though. I tend to be attracted to people who make more money than I do, spend more than I do, and work more hours than I do. I prefer to work fewer hours, at a low-stress job, and to be frugal to make up for that. But I like us each to have our own incomes so it's not so catastrophic if one of them disappears for a while. (This means I have no interest in control-freak sole-provider type men who would rather run away or kill themselves after a long period of unemployment than let his woman get a job. Fortunately, I mostly meet these men in my reading, though I think many men have a hint of this thinking in their blood.)
So, let's get very specific. I have a small, very affordable house. I can afford to make the whole payment each month if necessary. This means if my man is having financial difficulties, I can take care of things. I like that. I rarely have financial difficulties myself because I have a state job (lay-offs are almost nonexistent) and I have savings.
Now let's say my man has a high-paying job and wants a bigger house. Do we both pay half? It's not fair for me to have to pay more if I am happy with the smaller house. I really don't want to be pressured to have a high-stress multi-hour high-paying job. But it's also not fair for me to pay the same if I am also enjoying additional benefits. So, we'd negotiate a deal. We'd both decide how much more it was worth to each of us to have the bigger place. Let's say it's worth 10% more to me and 50% more to him--that gives us a good starting point for negotiations. If he wants it more than I do and is willing to back up that want by working more, than we might move up.
But it's not always the case that the richer person pays more. If I want to do something that he would normally never pay for, but would like his company, I pay for both of us, because it's worth paying double the money to have him along.
What if one person has a multi-hour high-stress job that doesn't pay much in money (like social work) but that does pay in karma or helping the world or however you want to say it? Or if there's some kind of debilitating ailment that greatly limits employment opportunities? Now the salary isn't linked to how hard the person is willing to work, so you would need a whole different kind of plan.
And what if one person is a full-time homemaker and the other works outside the house. How do you match this up with who has the more expensive tastes? Let's say that whoever prefers each role can get it because the one working outside the home can bring in a decent income. Shouldn't that be all that matters? But we have this creepy vibe that who ever brings home the most money should have more power. So if it's the other person with the expensive tastes, should that person have to make all the financial sacrifices? Ew.
There are lots of other factors, too.
Here's a real situation I know of. One person is only happy working for himself, which means the income is almost completely unpredictable. The other person gets ulcers over financial stresses. The wife has gotten a job so she can have the income to pay all of her expenses plus all the bills except the biggest one (rent). Then, if the husband forgets to pay a bill or doesn't have the money one month or whatever, she can still always count on there being water, electricity, etc. They might occasionally get evicted, but everything else is taken care of.
The allowance system seems pretty flexible. I've seen it work well where one person typically spends all than they have (at least), no matter how much it is. And I've seen ti work well where the people deliberately take turns working at paying jobs vs. taking extended leave from work to do things like earn a degree or write a book.
But then does one person get a higher allowance if they have more expensive needs? Say they have differing requirements to stay properly connected to one's career (clothes, make-up, golf fees, whatever)? Well, all medical bills should come out of the common fund, right? What about addictions? What about if the addictions cause the medical bills? What if they only might have caused them?
So, anyway, my answer to this question is that it all has to be negotiated and that no matter what, it seems like it could get very tricky. And I don't think I could settle for just one of these answers; I might need a different answer for each kind of expenditure, and the answer might change each time someone's job situation changed.
Financial standing
The first question isn't really a question. It just involves finding out about each other's financial pictures. Some people have trouble talking about finances, like it's taboo or something, but I'm lucky enough not to have that problem with either myself or people I share finances with.
Bank accounts
The second one is whether you want one, two, or three checking accounts. The article makes it sound like two accounts is the worst (except possibly if you're in your second marriage) and that three is the best. Here's what I think:
Three accounts: Each person has his or her own account for personal expenses, then they have a joint account for common expenses. Both contribute most of their income to the joint account. This sounds good, except for being a recipe for extra fees and bureaucracy.
Two accounts: This is what I'm doing now. I'm not married, so this makes sense. But I don't think it is necessarily a pathetic way for couples to handle their money. First of all, both accounts could be joint accounts, though each person would take primary responsibility for one. Second of all, people can still transfer money to each other. Yes, it's true. In my relationship, one of us pays all the joint bills as they are due, and the other person writes a single check for half each month. We also negotiate or take turns on other joint expenses like groceries.
One account: I can imagine this working, but not if someone equates the current balance with available spending money. I've heard of the strategy where one person just takes out a pre-designated amount each week or month for personal expenses and the other person is the financial officer of the family and pays all the bills, etc. out of the account. Any large purchase by either would be discussed. (Ideally before the purchase is made.)
Supposedly it's good for each person to have an account in their own name for credit purposes in case something happens to the other person although I'm not sure that applies in a community property state like mine. I can say, however, that if one bank is being a snot, it's nice to have access to a second account. And it's not like banks are the most user-friendly of businesses.
Who pays how much?
The article gives three possibilities.
First, each person pays for half of everything. This sounds fair at first and can work well when both people are earning comparable salaries. Except that it sounds more like roommates than like married people.
Second, each person can pay the same proportion of their income for things like rent, so whoever's making more pays more. This seems more fair, but again more like a roommate arrangement than a family arrangement.
Third, both people get the same allowance and put the rest of the money in the common pot. This one sounds the best to me, except that it turns out that I have strong opinions about earning money and sponging and job stress, etc.
Again, I'm coming at this from a nonmarried perspective, but I'm not sure that the addition of a lifelong commitment would change things dramatically for me.
I used to think that when people are in a family, there is one pot of money and it goes around in a fair way. For example, when I was growing up, if there was extra money, we got allowance. This was unrelated to chores, which had the same rule: if there are chores, we all get some.
But now I see that people have different tastes and needs and spending/saving styles, and so I am much more in favor of extremely detailed negotiations. I think we all have certain assumptions about what married people should be like, but there are a wide variety of these assumptions, so it's good at least to try to figure out what they are and see how well they match up with those of your partner.
I knew someone married to a military man and they were moving all the time so it was hard for her to get jobs. And his schedule was changing all the time and was totally crazy. I decided that if I were in her position, I would be the stay-at-home person, and I would do a lot more than half the work around the house in return for not having to go to work. I would iron his ridiculously difficult-to-iron uniforms, polish his shoes, do the shopping, and some of the cooking (he also liked cooking), plus all the laundry, vacuuming, mopping, dishes, etc. And I would try to keep my schedule in sync with his. I would still want him to put dirty clothes in the hamper, bring dirty dishes back to the sink, etc.
My real situation will probably be different though. I tend to be attracted to people who make more money than I do, spend more than I do, and work more hours than I do. I prefer to work fewer hours, at a low-stress job, and to be frugal to make up for that. But I like us each to have our own incomes so it's not so catastrophic if one of them disappears for a while. (This means I have no interest in control-freak sole-provider type men who would rather run away or kill themselves after a long period of unemployment than let his woman get a job. Fortunately, I mostly meet these men in my reading, though I think many men have a hint of this thinking in their blood.)
So, let's get very specific. I have a small, very affordable house. I can afford to make the whole payment each month if necessary. This means if my man is having financial difficulties, I can take care of things. I like that. I rarely have financial difficulties myself because I have a state job (lay-offs are almost nonexistent) and I have savings.
Now let's say my man has a high-paying job and wants a bigger house. Do we both pay half? It's not fair for me to have to pay more if I am happy with the smaller house. I really don't want to be pressured to have a high-stress multi-hour high-paying job. But it's also not fair for me to pay the same if I am also enjoying additional benefits. So, we'd negotiate a deal. We'd both decide how much more it was worth to each of us to have the bigger place. Let's say it's worth 10% more to me and 50% more to him--that gives us a good starting point for negotiations. If he wants it more than I do and is willing to back up that want by working more, than we might move up.
But it's not always the case that the richer person pays more. If I want to do something that he would normally never pay for, but would like his company, I pay for both of us, because it's worth paying double the money to have him along.
What if one person has a multi-hour high-stress job that doesn't pay much in money (like social work) but that does pay in karma or helping the world or however you want to say it? Or if there's some kind of debilitating ailment that greatly limits employment opportunities? Now the salary isn't linked to how hard the person is willing to work, so you would need a whole different kind of plan.
And what if one person is a full-time homemaker and the other works outside the house. How do you match this up with who has the more expensive tastes? Let's say that whoever prefers each role can get it because the one working outside the home can bring in a decent income. Shouldn't that be all that matters? But we have this creepy vibe that who ever brings home the most money should have more power. So if it's the other person with the expensive tastes, should that person have to make all the financial sacrifices? Ew.
There are lots of other factors, too.
Here's a real situation I know of. One person is only happy working for himself, which means the income is almost completely unpredictable. The other person gets ulcers over financial stresses. The wife has gotten a job so she can have the income to pay all of her expenses plus all the bills except the biggest one (rent). Then, if the husband forgets to pay a bill or doesn't have the money one month or whatever, she can still always count on there being water, electricity, etc. They might occasionally get evicted, but everything else is taken care of.
The allowance system seems pretty flexible. I've seen it work well where one person typically spends all than they have (at least), no matter how much it is. And I've seen ti work well where the people deliberately take turns working at paying jobs vs. taking extended leave from work to do things like earn a degree or write a book.
But then does one person get a higher allowance if they have more expensive needs? Say they have differing requirements to stay properly connected to one's career (clothes, make-up, golf fees, whatever)? Well, all medical bills should come out of the common fund, right? What about addictions? What about if the addictions cause the medical bills? What if they only might have caused them?
So, anyway, my answer to this question is that it all has to be negotiated and that no matter what, it seems like it could get very tricky. And I don't think I could settle for just one of these answers; I might need a different answer for each kind of expenditure, and the answer might change each time someone's job situation changed.