The Joint Checking Dilemma

Money

{Background}

There is a scene in my favorite movie, Sweet Home Alabama, where Jake (Josh Lucas) comes home to find that his recently returned wife, Melanie (Reese Witherspoon), has redecorated his house and replaced all of his furniture, food, and décor.

The scene includes a married couple, but it gives some idea of what happens when a relationship is failing and money is involved.

Jake: Whatever blows your dress up darlin’. You go right ahead and spend your money.

Melanie: Oh but darlin’, I thought you said we should think of it as our money? Just a guess, but I’m thinking the words “joint checking” are flashing into your head right now?

Situation and film exaggeration aside, whether or not to use a joint checking account is a decision faced by couples. It may seem like a good idea, but as Reese Witherspoon demonstrates, that’s not always the case.

{Cohabitation}

So, you’ve decided to live together. You’re splitting bills, sharing food, and investing in furniture. While it’s an exciting time in your relationship it is important to remember not to rush into any financial decisions.

You might be tempted to combine your money into a single account. After all, you’re splitting all of your bills equally, right? Wrong. Unmarried couples have a variety of expenses that do not affect their partners.

  • Student Loans
  • Car Payment
  • Credit Card Debt
  • Insurance
  • Clothing
  • Recreation
  • And so much more…

Personally, I don’t know anyone who is willing to freely contribute to paying off a partner’s previously incurred debt.

Additionally, 40% of cohabitating couples break up within the first five years. When there’s no legally binding agreement to stay together, couples are far less likely to work out problems and stay together. It’s much easier to move out than to get a divorce. Separating finances in this event can get messy. Should you split everything evenly? Base it on the percentage contributed? My tip: skip the drama and keep your money separate.

While couples who live together are likely to have similar incomes, both partners will not be making equal contributions or have equal outside expenses. Save yourself the fight.

{Compromise}

Is it going to be difficult to use joint accounts while cohabitating? Yes. Can you make it work? Yes.

Create a “Bills Account”: This is an account specifically designated for paying bills including rent/mortgage, utilities, insurance, neighborhood fees, etc. When the bills roll in each month, each partner deposits half (or whatever amount you agree on) into the account. This account is not used for other purposes, and it is up to each partner to budget and insure that they have enough to contribute each month.

Take it one step further: If you’re both responsible enough (and you should be if you’re living together) you can also use the joint account for specific joint purchases. This is food, household items, furniture, etc. Make sure that each person is contributing equally, and that your purchases from this account fall within the guidelines you create together.

Whatever you choose, make sure that you keep the majority of your finances separate. Build a savings account and keep a checking account for personal purchases and emergencies.

Personal Note: Having guidelines and saving recipts may seem like you’re expecting the relationship to fail. Understand that you’re really only protecting yourself if things happen to not work out. It’s a little like signing a prenuptial agreement.

NC and I have an agreement about our finances. We share a phone plan (which he pays for) and divide expenses for food, household items, and pet care. When a bigger item comes into play we save receipts. Our arrangement outlines who gets what should we break up. It also includes how our phone bill would be paid, etc.

I do not expect that we will break up, but we’re young and there are no guarantees. I’m happy to know that we’re each protected, just in case.

{My Advice}

Whether or not to use joint accounts is a decision not to be taken lightly. Talk to your partner and establish guidelines and expectations. Be open and honest. You don’t have to hand over your paycheck, but your significant other should have an idea of what you can expect to contribute. You can’t live a six figure life on a $12, 000 budget. If you’re not comfortable talking about money, you probably have no business living together in the first place.

In the end, no one can tell you what will work for your circumstances and relationship. Be realistic and understand that you should hope for the best but be prepared for the worst where money is concerned.

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