Tuesday, January 17, 2012

Joint Account Chaos

With the new year in full force, it seems as if many people are focused on their finances and financial goals for 2012. I would be lying if I didn't say that Steven and I have goals of our own. Through emails and private conversations with many blog readers, I have noticed that many couples may struggle with managing a joint account together.

I thought I would share a financial tool that has saved Steven and I a great deal of heartache over the past few years.

In preparation for our marriage, Steven and I opened a joint account and began depositing all income into that account. We established a budget and intended to have only one checking account that all bills and personal spending would flow through.

After about two months, it became very clear that method was not going to work. You see, I'm an accountant. I like to know where every single penny goes. I check my bank balance every morning and I know exactly how much should be there. So if Steven stopped at the gas station on the way home and spent $5 from the joint account, I became annoyed. If that happened numerous times over the course of the month, I became a little more than irritated. It was too easy to overspend on eating out and entertainment because we didn't have a clear way to track our spending.

It felt like joint account chaos.

In my opinion, it's very hard to create and stick to a budget when both people have full access of the joint account and have the ability to overspend without consequence.

So we discussed our options.

I wasn't comfortable with each person having their own checking account and us "splitting" the bills. To me, that felt more like roommates than partners.

I suggested we each get a weekly cash allowance for personal shopping. I could hand Steven cash and if he wanted to grab something from the gas station or lunch with a buddy, he could use his allowance. That would make budgeting for entertainment and personal spending much easier because I knew that each Monday a certain amount would be withdrawn from the account.

Steven was weary of receiving cash because it's too easy to spend. I also realized that this "cash method" would require me to go the bank once a week to withdraw funds. So we quickly decided against it.

Thankfully, we came up with a solution that works perfectly for us.

We maintain our joint account to which all earnings are deposited and from which all bills/living expenses are paid. But we each have an individual account that is tied to the joint account. At the beginning of each week I transfer our weekly allowance into our personal accounts and we are free to spend that money as we please. If we don't spend all of our weekly allowance one week, it stays in our personal accounts as extra to be used later.

I truly believe this has saved numerous arguments over finances. If one of us needs a little extra cash for whatever reason, we just discuss it. Or if we mutually decide to spend additional funds from the joint account for something that we both want or for something for our home, we discuss it.

This method has not only saved my sanity, but more importantly has allowed us to stick to our budget by forcing us to keep our personal spending within the amount we have agreed upon. It holds us both accountable to treat funds in the joint account as "family" money that we cannot just spend without discussing it with the other person.

I would highly suggest this method for any couple who struggles with overspending or tracking your expenses when both spouses have access to the joint account and spend at will.

What about you - any budgeting or money managing tips that have proven to be very successful for you over the years?


Jessica said...

I think this is a great idea! I'll have to mention it to my sister. Her and her husband are discussing doing a joint account, but her husband is hesitant.

My husband and I have a joint account and it works great for us. I hand him the receipts, he writes them down and cautions me if we need to back off spending. It's not perfect but it works for us.

Katie said...

LOVED reading this! My husband and I do something really similar with our finances, we have a joint account and personal accounts. We kept the accounts that we had prior to getting married, but added an additional acct. - the joint. Now our paychecks go to two separate accounts - so much goes into personal, so much into the joint. I know exactly how much I can spend each month, and it allows me to spend cash on whatever I want - without approval! Shoes? Yes please!

It has worked so well for us, and it keeps us from getting into fights about how much he spends on lunches at work and how much I spend on clothes.. ha!

asj said...

two of my best friends [who are married] do this too and they love it. I just am super anal about balancing our checkbook [old school style] and I take out $20 cash for each of us for our "coffee/lunch/random" allowance... I'm with you though, I can't imagine not having a joint account and just "splitting the bills" - just not for us.

Rebekah said...

Having a joint account works for us mainly because we're on a strict budget. If Dylan needs to spend $ during the week for any reason he uses his credit card and then pays it off each month. We had separate accounts when we first married and it didn't work for us. This does!

Crystal said...

Thank you sooo much for this post! I am getting married in August and have racked my brain trying to figure out a way to handle our finances. I am way better with budgeting & taking care of the finances, so ultimately I knew I would be responsible for whatever we decided. I came up with something similar to this too, because like you, I dont want to see every $5 & $10 purchases he spends at gas stations etc. So glad to hear that it works, and I know it will be the right decision for us! Thanks.

d.a.r. said...

We do this too!! It has saved our budget and makes our marriage better :). There is no running to each other to ask for permission to buy something that is $20. Our transfers roll in on the first of the month every month--and we put our Christmas money, etc. in there, too. Z just saved up to buy some exercise gear and I bought a new kindle :). Everything else is joint.

It does draw some giggles though, when we mention that we used our "allowance" to buy something! :)

Newlyweds on a Budget said...

I'm glad you both found something that works for you. Eric and I have tried every method but he is just horrible with managing money. It has gotten to the point where I have seriously considered separate accounts--it's more of a wake up call for him though, because he would have to eat rice and beans all month if it weren't for me. Right now, he gets a cash allowance, but he always ends up with no money after 2 days...so he's broke for another 5 until his next allowance. he has to learn SOME time how to manage money...haha. I love him though...he's got the sweetest heart, he just sucks with money

Jessica @ Acting Adult said...

That's a really good idea! I think I may try to use that formula when my husband comes back from Paris. I like the accountability and flexibility of this.

Mateya said...

Oh my this might have just saved my marriage haha!

How did you guys decide what the proper "allowance" amount was to be??

tiffersnc said...

This is EXACTLY what Shel and I do. It's so nice because then when I buy him dinner for a promotion or buy his anniversary gift, I'm really using my money. Plus he doesn't know. :) And it's helpful for him because he, like you Amber, likes to know where our money is going. LOVE this idea.

Lauren Stewart said...

I'm not quite here yet but this is great advice to keep in mind! Thanks :)


Sarah said...

THANK YOU for posting this!!! Joe and I are trying to be better about how we spend our money. We tried the cash thing - and it does work pretty well - but going to the bank all the time is a problem for us since we're military and use a bank that's pretty much online only. It's easier for us to use our debit cards. Plus, I purchase a lot of things online...which makes the whole cash thing a problem. Anyway, thanks for the tip!! =)

Lil' Woman said...

It's like you read my mind. I will be discussing this with the hubs

The Granberrys said...

LOVE this idea!

Jill said...

This is EXACTLY what we do as well! Started doing it less than a year into our marriage. Works much better than getting into an argument about "what'd you buy at target?" or what have you (not that I was ever asked THAT question....ha) Great minds, huh? ;)

Whitney @ Everything Happens For a Reason said...

My hubby and I have our own separate accounts. This really has worked for us. We plan on getting a joint account, but haven't gotten around to it. When I was working, we would split the bills. He would pay the rent, electric, water, tv, internet, and stuff like that. I would pay for the phones and my credit card bills. We didn't really have a budget at all. We just spent it on whatever. Since I started working, we still have the separate accounts, but we no longer eat out and buy stuff that we don't need. This has been a lot better and we are saving more money, due to not throwing it away. Towards the end of the year, we plan on getting a joint account, but still plan on keeping our separate accounts.

Anonymous said...

I'm a single gal but if I were to marry, just the THOUGHT of a joint account would make me cringe. I'm the same way with my own money...I HAVE to check everyday.

What's REALLY helped me personally is my own "electronic checkbook". Banks can take awhile for pending purchases to go through so what I started doing was typing down every purchase I made onto my blackberry and added it to my current total. I definitely check into the blackberry before making purchases so I can figure out my budget.

Chelsie said...

I love this idea. now, all I need is a hubby :)

rkjalernpan said...

Amber! I love this. Bran and I have hummed and hawed over exactly what we will do and this sounds like a good solution. I already knew we would end up doing a his, hers and ours but this sounds very sensible. About to send a private message cause I'm so curious...

love you.

Melissa said...

Thank you for posting this! I love seeing how other couples manage their money! I'm a newlywed (of two months), and we're still trying to navigate through what works best for us. This may just be our answer! :)

The Presutti's said...

Wow :) Thanks so much for sharing. This sounds like such a good solution and a great way to keep up with our bank account :) Thank you :)

Young, Fabulous, Newlywed

Button Love

My Blogger BFF

Designed By:

Munchkin Land Designs
Elements by Karen Funk