Disparity in debt/earnings and Relationships

Parent Cafe
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I have no idea what a, “mine, his and our type couple” is. Does that mean they have separate accounts, or co-mingle all money?

Though it’s probably best to stay out of it, it’s hard not to respond if asked for advice. I agree with Dave Ramsey’s perspective on this one. Finances stay separate until marriage (though I don’t think that means that people have to split everything equally, just not take on the other’s big loans). Then the day they’re married, everything is together. Her loan is his loan, their money is all theirs, not his and hers, same bank account, no matter who earns what. I know people that run things differently, and I don’t think that’s a good idea. If you aren’t willing to trust each other enough to co-mingle your money and debts, why even get married?

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Thanks for everyone’s input. I think everyone gave valid points. I’m not worried bout how they work their finances. They are both doing ok financially and I do have a feeling once they are married everything will be co-mingled. Just wish my husband would accept that it was a nice thing to do on her fiancée’s part.
BTW, my husband and I married when we were in our mid thirties, first time for both of us. At first, we kept our finances separate. I paid certain things and he paid certain things. Then, reality took hold. Infertility, adoption, refinancing the house etc, etc. within a year it was definitely an “ours” situation. So really it what works for you, but I have to say co-mingling finances makes you stronger in your relationship. Working and achieving the same financial and personal goals makes you appreciate each other so much more.

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I agree with @busdriver11 and Dave Ramsey. I would not have advised him to lend her money and would not have advised her to take it. I would have expected him to marry her and accept working with her to pay it off as their debt together. But as you said, they will work it out and I pray it doesn’t become a hurdle for them. Are they getting married soon?

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H and I are a mine, his, our and have been since we married in the late 80s. I have an account, H has an account and we have a joint account. We each kick in 50/50 into the joint account to cover monthly expenses and savings and what’s left over in our individual accounts is what we use for our personal vehicles and repair, clothing, “things” gifts, I pay for one vacation each year and H pays for one vacation each year…stuff. We have separate credit cards that are paid off our separate accounts. When the savings rises to a certain point we get together and decide whether to move it to our brokerage account or just what to do with it This obviously has not happened in ten years because we’ve been writing college checks for ten years LOL. We keep 6 months living expenses and college expenses in the joint bank account. Everything fluxes occasionally, for instance when we were both working at paycheck jobs, the cash flow and bill paying from our rentals went into a separate retirement account, but when H took an early retirement and effectively became a SAHD and took over the day to day management of the rentals, that became “his income” and his bills on his side of the equation which was part of the “deal” when he became a STAD. We were always so close to equal in salary, but now mine is higher than his, but it just means he has less fun money than I do.

Not everybody co-mingles and not every family has two incomes so then there is one that will be supporting the other financially and nothing on one side of the equation to “keep” separate. Although I suppose the working partner could pay the non-working partner a salary and then separate the money…but that just seems weird because if you’re not working the bill paying money is coming from the work for pay spouse. Although I have always secretly wondered where the non-working spouse got money…I can’t imagine in a million years asking my spouse for money just for myself or vice versa. The inclination would be for the person being asked to say “for what” and it would devolve from there LOL. If we had one account and my husband saw a debit for $100 he’s the type that would say “what’s that?” and it would get ugly… Keeping separate accounts definitely takes THAT off the table. Plus you can borrow money from each other if you have to, and we do every once in awhile, and we pay it back. I always laugh and say we’re separate but equal in the old days when close friends knew that was our we managed our money.

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Wow, I can’t imagine separate accounts. People earn different amounts of money, and sometimes none at all. That introduces a whole different dynamic to a relationship, if one person is doing well and spending lots of money, and the other person is struggling.

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We never have had to justify how or what we each spend money on to one another. We each get $150 or $200 per month as “petty cash” plus we both have unlimited access to our joint checking account and credit cards. We have always lived below our means and have never had a fight about spending or money, not in our entire 31 years of marriage nor in our years of dating.

When the CC statement comes in, we both look it over to be sure charges and amounts appear correctly and then pay the bills out of out joint checking account.

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I think that people who live in marital property states should have joint accounts for all marital property (work income, assets purchased during the marriage, debts incurred during the marriage) so that they get used to the fact that the law treats almost all their assets and liabilities as owned 50-50.

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“Marital property” is not the same as “community property” and not all states view it as a 50/50 split. In a divorce, some states will divide according to perceived needs.

Any couple with large amount of separate property assets that they want to protect should do a prenup or postnup to establish their intent.

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@busdriver11 – both I and my ex-husband were self-employed and neither of us wanted to be second guessing the other’s business decisions. But for a sole proprietor, the line between work-money and home money is very fuzzy - how much money needs to be kept in reserve to pay for work-related expenses? At what point is it appropriate to draw from the business (converting the work money to family money) ? If work income fluctuates, it’s important to keep a reserve in the work accounts to cover work expenses (like office rent, supplies, etc.) in the slower months. I didn’t want to see money drawn from our personal shared accounts to pay work expenses on either side – and as bad as things got between us and financially, I don’t think that ever happened because there was a pretty clear understanding that once the his or hers stuff got turned into ours, there was no going back – and home/family was not on the hook for work expenses.

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That would be complicated with two different businesses, that’s for sure.

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To the extent people are worried about legalities, in many cases there will be meaningful legal consequences to putting money or investments in a joint account. Whether a state is a “community property” state or a separate property state, in most states in the case of a divorce either spouse’s earnings from employment during the marriage (and savings from those earnings) will be treated as marital property subject to division in the divorce proceedings – either 50-50, or “equitable” – but other property (and earnings on it) may be treated as separately owned and not subject to division at all, but often only if it has been kept separate throughout the marriage, and not been used on a regular basis to maintain the household on a regular basis. That will usually include property and savings owned before the marriage, and inheritances and gifts received by a spouse separately. It’s that stuff you really have to be intentional about.

Of course, the point of most financial arrangements we are discussion is to avoid divorce, not to plan for it! In that sense, for many couples maintaining separate finances can make a lot of sense, even if the separation may not be respected fully in the event of a divorce. In that case, however, it may be wise for people to have two separate accounts for each spouse – one for truly separate, non-marital property, and the other for the portion of your paycheck over which you have sole dominion.

If any outsider looked at my family’s bank accounts, we would look like a “your, mine, and ours” family. In fact, however, we commingle everything, including money inherited from my parents. Historically, I have earned 70%-80% of our income, although there were a few years (bad for me, good for her) when it was close to 50-50. Our separate accounts are really an artifact of my wife managing the finances, and my not necessarily going to the bank with her. I have one moribund separate account that we should terminate; she has a separate account through which most of our bills get paid. That’s not how I would tell a client to do things!

My parents paid for my college and law school, so I was debt-free. My wife’s parents paid for her college, and their divorce agreement specified that her father would pay for her law school. But neither parent bothered to tell her that, and we didn’t find out about it until after they both died 35 years later. (Her mother assumed her father was paying; her father was being a jerk. She didn’t discuss her finances with either of them.) She paid for her first two years of law school out of savings, loans, and summer job earnings; we got married before the third year and we paid for that, and repaid the loans, mostly out of my earnings. Thanks to the high inflation at the time, and my earning capacity, it wasn’t that much of a burden.

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Good points, JHS. I live in a marital property state, and while the classification of assets does not control at divorce, it does control what each spouse is considered to own during the marriage and thus can bequeath at death. And at divorce, the presumption is that assets will be divided 50-50, although this presumption can be overcome if one or more statutory factors apply. My point about getting using joint accounts to get used to marital property treatment is that, for example, if I earned $100,000 per year and put it into an individual account and my spouse earned $10,000 per year and put it into an individual account, each of us, at any moment in time after the marriage occurred, would own half of whatever was in those accounts. Gifts and inheritances are not considered marital property unless they are commingled, which is why it’s important to have separate accounts for those if the recipient doesn’t want them treated as marital property.

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DH and I have separate checking accounts and credit cards. As a banker, I refuse to share an account with another busy debit card user- - career suicide, since we can not have overdrafts, etc. DH has traditionally made more or had more income flexibility and I like to use online banking. I am apparently more detailed when it comes to big plan stuff.

We discuss the household budget, upcoming expenses and decide on what he needs to give me. He gives me a check monthly and I make the allocations and make the magic happen by paying recurring household bills, finding good buys, setting aside college money, buying most of the groceries and children’s daily needs. I tend to eat lunch at work, DH skips lunch and buys golf gadgets with his unassigned money. If I’m going to be tight, I just ask him to pay whatever and I sometimes use one of his cards to pay for pre-discussed things. (Cheer uniforms, travel cost, etc.) He buys gifts, pays for insurance, takes the children to the mall and gives them allowances, pays for everything when we are out unless it is his special occasion.

We both buy what we want, within reason, and there is no arguing over money. As a matter of fact, it think the last unhappy money conversation was more than 30 years ago when he had the money but kept forgetting to pay the light bill. Wifey is not going to work every day to sit in the dark!

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We have a joint accounts, personal, business, etc. Whomever is in charge of being the main user on that account is the only one who can use the debit card & neither of us ever uses the account the other one is in charge of, for the same reason as above, two busy debit cards on one account leads to errors. Also, we each have a joint CC, but I use mine and he uses his so we can each ensure all the charges are correct, I think my bank recently made a change so it gives each user a different number and it displays the charges by person, so we might change in the future to use fewer CCs, but it’s important to know who charged what if you are checking the bill for accuracy.

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Mr R and I have separate checking accounts that our paychecks go into. We also have a joint Ally savings account that I’m sure he’s never cared to look at.

I guess we have a yours, mine, and ours marriage but only because that’s what we did for years before we signed the marriage papers. It’s not a conscious decision. I pay the bills out of both accounts but I ask Mr R how much I can take out of his account since frankly I’m too lazy to go look myself.

Our credit cards are joint.

Our parents don’t know how we split finances because it’s not their business.

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We live in a community property state. If I want to make a $2000 gift to a relative of mine out of my paycheck, formally, I have to get approval for $1000 from Mr. If the money is kept in a joint account, the presumption is that both know how the money is spent.

Community property is not automatically split 50/50 in divorce, but it is treated 50/50 for estate taxation (50% of Mr.'s separate account will be in my estate if he funded it with money earned during our marriage). Our state estate tax exemption is quite low… A house in the city and a couple of well-funded retirement accounts will put a person over the threshold.

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We split everything 50/50 except that a significant amount of money is in retirement plans for me. My wife is either first beneficiary or a trust in which she is a primary beneficiary is the beneficiary. My income is many, many times hers. But, we have been and are partners in life. Hard to see doing it differently.

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Things aren’t always going to be completely equal in a marriage – sometimes one or both partners have pre-existing obligations that need to be taken into account. For example, what about blended families, where there are kids from a previous marriage? It may make a lot of sense for the parent to maintain a separate educational savings plan for their kids, more so if a kid has special needs. Sometimes it’s not just the kids – a partner coming into a marriage may be partially supporting a disabled parent or sibling – again – do they pool all their money and the one partner simply rely on the good faith of the other when it comes time to pay mom’s nursing home expenses? Or is it better to segregate out some funds to provide for those extra needs?

I don’t think there is any one, best answer - it’s just that sometimes things can be complicated, and the solution may also depend a lot on the relative earning strength of the partners and the assets they have to begin with.

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The only thing I can tell my kids is to talk it over with their partners, be transparent and make sure they could live with the expectations.

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@calmom, I agree with you that what works depends on the circumstances. ShawWife and I married in our late 20s and I had an income and she had some likely inheritance. No prior baggage. It was clear I would make more than her, but I would say it wasn’t clear I would make that much more (I could make between 6 and 50 times as much depending upon the year). So for us, one for all and all for one makes sense.

But, one of my friends wrote one of the best selling business books of all time. When he married, he segregated his past assets from the joint property. When they divorced a few years later, he was quite generous but without tapping that wealth.