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Author: rchabot Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 785  
Subject: accounting for separate incomes, accounts, etc. Date: 3/22/2000 5:36 PM
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I've read through many of these posts and I don't think I've seen the same scenario or questions I am going to ask here. (There are some that come close but they're not exactly the same.) Apologies in advance if these questions HAVE been asked before! :-)

My fiance and I will be getting married next June (2001). We are both of the same mindset (e.g. save for retirement, etc.) and we live below our means. I see no change here after we get married. (I have knonw her for over 5 years and have not noticed any deviancies from this pattern of bheavior.)

We are discussing how to handle our finances when we get married. She wants me to do most of the legwork and paperwork and tracking, etc. I have no problem with this - I am a CPA by education (and former trade). I am no longer in the field of accounting but am in the field of accounting education. We expect my salary to be higher than hers in the near future. Her salary might catch up eventually but we don't think this will occur within the next 5 years.

My asset base is at least twice the size of hers. We both agree that we would like to have separate accounts for discretionary type expenditures - that is, those sort of things that we would not need "approval" from the other. These won't be major accounts for either person - they will simply be "play accounts" with a few dollars in each account for us to spend as we like.

The question is how to accomplish this goal. Is it best to fund the discretionary funds first with, say, $50 each (or some other nominal amount), then the rest goes into the general pot for investment, housing, etc.? Or is it best to fund the general fund first then fund the discretionary funds by splitting the difference (of the remaining funds - whatever they are)? Has anyone done this before? I am in favor of the latter scenario.

And how to treat future inheritances? There was a discussion earlier about pre-nuptial agreements. (There is a strong likelihood of a sizeable inheritance from my fiancee's family within the next 10 years.)

This is a long winded way of asking the question - has anyone done this? If so, how have you done it and has it worked? Maybe the idea of separate discretionary funds is a bad idea? I dunno.

Minor apologies for the long posting!

RC
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Author: TMFDocumama Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 218 of 785
Subject: Re: accounting for separate incomes, accounts, e Date: 3/22/2000 5:47 PM
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Well, I've been married a whopping 2 months, living with him for 2 years. Here's what we've done so far.

3 accounts:

my checking
his checking
our checking

(plus whatever savings, money markets, etc. we brought into the relationship).

We put the bulk of our paychecks into our personal accounts. A set amount from each paycheck goes into the joint account. The joint account is used for household expenses (rent, utilities, groceries, etc.). This is the same arrangement I had with roommates in the past.

We are thinking through whether to change this as we meld financial goals more and more. I suspect we will continue up increase our deposits into the joint account (and decrease our deposits into our individual accounts) as we come to think of certain expenses as more and more joint (for example, vacation planning and car purchases).

It has worked well for us for two years. If you're not sure what to do, I'd suggest starting this way and living with it for 6-12 months while you see how it works. It's not necessary that you come up with the perfect solution right now and live with it for the next 50 years.

My .02 worth and worth each penny.

Kelly

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Author: rchabot Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 220 of 785
Subject: Re: accounting for separate incomes, accounts, e Date: 3/23/2000 9:52 AM
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Thank you very much for your input. This is exactly the sort of feedback I was seeking.

If anyone else would like to chip in her/his/their two cents worth (and worth every penny! :-) --> feel free!

Thanks.

RC

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Author: sandysmith One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 221 of 785
Subject: Re: accounting for separate incomes, accounts, e Date: 3/23/2000 10:17 AM
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I have been married 7 years and found that there are pluses and minuses that you need to consider for maintaining separate accounts.

My husband and I have always had separate personal checking/savings/investment accounts. The bulk of our inidiviudal earnings goes into our personal accounts. In the past we only put enough money to pay shared bills (mortgage, utilities, etc.) into a joint checking account for bill paying only. We recently added a savings account and each put $25 each into it bi-monthly. I asked for this savings account because when home maintenance and improvements were made, my husband would pay for the full amount and I paid him back gradually by taking on a greater share of the mortgage and utilities each month until he was repaid. When I took hold of my finances, I realized the negative impact this had on my ability to save, so I asked for the savings account. (In fact, I really need to increase the deposits!)

While this method lets each person control his or her own earnings and eliminates arguments about recordkeeping, my concern is that we are not a "team" in financial planning, knoweledge about each other's accounts/earnings/income and we don't have a shared plan for retirement. He has also made some large purchases without my input and would resent it if I had tried to place restrictions on how he handles HIS money.

By all means, go ahead with split accounts BUT be sure EVERYTHING is communicated right away and that you keep track of each other's progress. The tendancy is to treat income as MY money and HIS money. Not a healthy attitude for a marriage. I have found that how you handle money is a strong indicator of how your relationship goes. Needless to say, my DH and I have a relationship where each goes his own way. If that is what you want, fine. Just make sure that this is a joint decision at the outset that you both can live with, or when the honeymoon is over you will be in for some unnecesary conflicts. It is hard to change course in the middle of the journey. In fact, it is like trying to turn a cruise ship in a storm!!!

BTW, I am NOT in favor of pre-nuptuals. The courts can rule against them, especially if you have children, and unless you go into a marriage with a team attitude, you are certainly going to have trouble down the road.
Good Luck!

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Author: EllenE Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 223 of 785
Subject: Re: accounting for separate incomes, accounts, e Date: 3/23/2000 11:06 AM
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And how to treat future inheritances? There was a discussion earlier about pre-nuptial agreements. (There is a strong likelihood of a sizeable inheritance from my fiancee's family within the next 10 years.)

I can answer this one: when/if you receive the inheritance, put it in a separate, individual account. Inheritances are considered a gift, not joint propert, as long as they are kept in a separate, individual account. You shouldn't need a pre-nup for this.

I'm also getting married this year, and had similar concerns. My fiance and I make nearly the same salary, but my net worth is several times what his is, due to an inheritance I received several years ago and a retirement account from my previous job. I also looked into pre-nups (and boy did I get flamed for that one!) since we're in a community property state. I found that any assets owned prior to marriage are considered individual property, not joint. Since I was mainly interested in protecting the assets mentioned earlier, it looks like a pre-nup isn't necessary in our case. This is only valid for community property states, so do some research if you're not in one. A good reference is a book published by Do-It Yourself Legal Publishers--"How to get your legal protection through pre-marital agreement-The National Pre-Marital Settlement Agreement Kit."



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Author: jwagnertx Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 225 of 785
Subject: Re: accounting for separate incomes, accounts, e Date: 3/23/2000 9:55 PM
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Looks like all the advise up to this point has come from couples who fragment their finances in the hopes of retaining their individuality. Since it works for them it is a great solution. The fact is, you and your fiance need to decide how you want to handle your joint finances. If one of you has an aptitude for handling finances then that person should take care of that family "chore."

My wife and I have been married for 2+ years and I have been in charge of the finances from start to finish. She was making more than me until this year and now we make the same. I only mention that because it seems to matter to some people. In maintaing our finances I keep her up to date on how much we have left after recurring bills and what we put aside for investments. We make joint decisions on every purchase around $50 or more. There are no restrictions placed on either one of use, we just let the other person know we are going to be spending the money as a sign of mutual respect. We have a budgeted amount we take out of the bank every week and split it so we have "spending" cash for small purchases like lunch, gifts, whatever.

I guess in short, I am trying to say I feel a joint account for banking and investing is best if you truely plan to stay together. It gives you a feeling of working together to achieve your goals and helps you communicate (if you can't communicate this will never work). Good luck to you and your fiance. Being married to the right person and working toward common goals can be fun and rewarding.

Fool on ->

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Author: Parkway Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 228 of 785
Subject: Re: accounting for separate incomes, accounts, e Date: 3/25/2000 6:43 PM
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As far as each of you wanting "play accounts" for discretionary money, I prefer funding those with a fixed amount and putting the rest into the joint account. That approach implies 1) a certain budget for the play money, and 2) any "extra" money (savings) accumulates (and presumably gets spent or invested) jointly rather than separately. I also like funding the play accounts via direct deposit - saves a banking transaction and feels less like an allowance than it would if one person is cutting the other one a check :)

The main thing, though, is to stay open to changing the arrangement as your life together progresses. Here's my story.

When we first moved in together, we opened a joint account and also kept our personal accounts. We each direct deposited x% of net pay to the joint acct. (Note we went with a fixed percentage, not a fixed amount - we were a good socialist household taking from each according to his means.) All household expenses - bills, mortgage, groceries, etc. - came out of the joint account. I also dedicated one credit card (always paid off in full each month, like all our cards) for joint expenses - eating out, vacations, etc. That bill got paid out of the joint account.

We kept our personal bank accounts/credit cards so that we could do frivolous/personal things without feeling like we were spending each other's money.

Fast forward several years (during which we got married) and things have changed. Everything is now considered a joint expense. We have fairly similar approaches to spending and we don't have an official "check with the other person" spending policy, though we inevitably do discuss certain types of purchases.

However, because we handle money differently (I'm the anal one, he's very casual), we do still keep two accounts. I've cancelled my personal account and I "own" the joint accounts and get my spending money there. He still keeps a personal account. He direct deposits x dollars into his personal account each pay period, the rest goes into the joint account - which he does not have an ATM card for! This gives him spending money (cash and checks) that he can access without having to meet my strict record-keeping rules. He has a credit card to use for non-cash purchases, so having a personal account isn't really about budgeting his expenditures so much as making sure he doesn't make my checks bounce.

It's not that it's his money versus my money versus our money, it's just that I'd go nuts if he was pulling money from an account I manage and he'd go nuts having to account to me for every bank transaction.

Don't know if any of this is relevant to you, but it's just an example of how our handling of the spending money issue has changed over time.

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Author: CCSand Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 229 of 785
Subject: Re: accounting for separate incomes, accounts, e Date: 3/28/2000 1:08 PM
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sandysmith wrote:

BTW, I am NOT in favor of pre-nuptuals. The courts can rule against them, especially if you have children, and unless you go into a marriage with a team attitude, you are certainly going to have trouble down the road.

This pretty much sums up the reason why my husband and I chose not to have a pre-nuptial when we got married a year and a half ago.



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Author: maddiemcwa Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 230 of 785
Subject: Re: accounting for separate incomes, accounts, e Date: 3/28/2000 4:04 PM
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Hi, RC

My husband and I have three checking accounts--his, mine, and ours. The individual accounts are the same accounts we had previous to our marriage 10 months ago. Our paychecks and any other income go into the joint account. We then transfer a set amount for discretionary spending, and also budgeted personal amounts (auto gas) into the separate accounts. Extra money goes for joint purposes. This has worked well for us in that we don't have to pay attention to how our purchases (or accounting habits) from our individual accounts will impact the joint budget. I like being able to quickly scan my checkbook and know about how much I need for gas, etc. and that's about all I have to worry about. The joint checkbook, on the other hand, is taken much more seriously.

The problem I would see with the extra money going into discretionary accounts, is that it would be easy to lose track of money that otherwise might be available to build up savings or invest. If that money was part of the joint account, it would presumably be subject to joint decision-making, but when part of discretionary accounts, it would be easier to "blow".

Good luck!

maddiemcwa

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Author: daoffer Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 238 of 785
Subject: Re: accounting for separate incomes, accounts, e Date: 4/12/2000 4:15 PM
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rchabot >>The question is how to accomplish this goal. Is it best to fund the discretionary funds first with, say, $50 each (or some other nominal amount), then the rest goes into the general pot for investment, housing, etc.? Or is it best to fund the general fund first then fund the discretionary funds by splitting the difference (of the remaining funds - whatever they are)? Has anyone done this before? I am in favor of the latter scenario.

I thought I'd chime for grins. In the early days, DH and I had separate accounts from the premarriage days but we immediately started a joint checking account. Any purchase over $100 had to be discussed. All paychecks eventually got direct deposited to the joint account and the separate accounts were closed down. The "fun" money issue never really came up because our interests are so similar, we both abhor debt and our incomes are substantial. We've only actually started investing in the last few years however. Now, the only separate accounts we have are the IRA's and his 401k which legally can't be in both our names. Also, the kids' accounts have me as the guardian because I couldn't put both our names on them and I'm the CFO of this partnership. After I had some problems paying bills on time, I traded the dish washing chore for the bill paying chore. It's helped him understand how much money it takes to run our household, we haven't had a late bill since and we actually have clean dishes to eat off of every night. :-) As a frame of reference, these changes didn't take place very quickly. Our 15th anniversary is tomorrow and we've been together for 20 years.

Debora
- wondering if exercise equipment could count as an anniversary gift -

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Author: barbararoth Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 369 of 785
Subject: Re: accounting for separate incomes, accounts, e Date: 7/30/2000 2:10 AM
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BTW, I am NOT in favor of pre-nuptuals. The courts can rule against them, especially if you have children, and unless you go into a marriage with
a team attitude, you are certainly going to have trouble down the road.

This pretty much sums up the reason why my husband and I chose not to have a pre-nuptial when we got married a year and a half ago.

This is pretty much why I decided to have a pre-nuptial for my second marriage. Mostly to protect the rights of my son from my first marriage. My understanding is that there are limits of how and when a pre-nuptial is overturned. Such as gross unfairness (such as one party ending up in poverty), benefit of children, underhandedness in negotiation (undo pressure, no legal advice, fraud), other than that I believe they tend to hold and at the least provide clear documentation of community and separate assets.

Jack

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Author: barbararoth Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 370 of 785
Subject: Re: accounting for separate incomes, accounts, e Date: 7/30/2000 2:30 AM
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We've been married for 2 years. Our process works fairly well but we're constantly talking and tweaking the process. What works for us, may not work for you.

We each have a separate checking accounts into which we put our paychecks. This way we can each be responsible for our own accounts and don't accidently bounce checks. Our bills are informally divided so we each have somewhat the same spendable amount (She covers the mortage, food, her CC bills and part of my AMEX bill. I cover utilities, long-term bills (new roof, cars, college). We both save 15% toward retirement. If one person runs short, the other covers. We also generally discuss purchases over an amount or purchases which have an impact on both of us, such as home decorations.

I found it useful to create accounts for a purpose. One account is for long-term bills, money which will be spent within this year or the next several years. Another account is for retirement money which won't be spent for decades. Lastly, our checking accounts contain only spendable and this month's money.

Jack

Jack

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Author: EllenE Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 371 of 785
Subject: Re: accounting for separate incomes, accounts, e Date: 7/30/2000 3:20 PM
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BTW, I am NOT in favor of pre-nuptuals. The courts can rule against them, especially if you have children, and unless you go into a marriage with a team attitude, you are certainly going to have trouble down the road.

This pretty much sums up the reason why my husband and I chose not to have a pre-nuptial when we got married a year and a half ago.


*****

This is pretty much why I decided to have a pre-nuptial for my second marriage. Mostly to protect the rights of my son from my first marriage. My understanding is that there are limits of how and when a pre-nuptial is overturned. Such as gross unfairness (such as one party ending up in poverty), benefit of children, underhandedness in negotiation (undo pressure, no legal advice, fraud), other than that I believe they tend to hold and at the least provide clear documentation of community and separate assets.

There's a lot of misinformation out there concerning prenuptial agreements. My husband and I (married one month tomorrow :-)) decided we wanted a prenup, even though neither of us has been married before or has children. Ours is very simple--it merely overwrites our state's community property laws, and allows each of us to keep separate, individual property (such as investments, retirement accounts, real estate, etc.) in the (unlikely) event of a divorce. Because of the simplicity, the whole process took less than an hour total, and cost $125.

(Now, if you're in a situation like Catherine Zeta-Jones and Michael Douglas, the process becomes much more complicated, time-consuming, and expensive... BTW, most prenups are not like this. This sort of publicity gives these agreements a bad name.)

According to Jane Bryant Quinn, courts in fact love prenuptials, because it makes their job easier! Instead of them trying to divvy up property in a "fair and equitable" manner, here's a document, signed and approved by both parties, that does that dirty work for them. And I think most financial planners these days highly recommend them if one party has children.

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Author: bfdebt Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 782 of 785
Subject: Re: accounting for separate incomes, accounts, e Date: 3/24/2009 4:09 PM
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Parkway,

Your first plan sounds exactly like what I'd like to do with my fiance's and my money when we get married. And I also like your revised version.

My "burning" question is this: what do you do about car payments/purchases and insurance? My fiance and I make roughly the same amount. He just bought a car, and he's handling the payments solo. But I anticipate needing a new car in about 5 years, and this car will more than likely be somewhat more expensive than his (he bought an economy car, whereas the car we'll replace is more of a mid-range). I've already put a hefty chunk of change into a CD that is earmarked for the new car, and my goal is to pay for it in cash. But inevitably it will be the "family" car when we have kids, etc. Since he doesn't drive my car very often, should we split the cost? Should I help him out with his car now in anticipation of him helping me out with "mine"? And should car insurance be lumped in with other joint expenses/bills? I've been mulling this over and just can't seem to come up with a good solution.

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Author: Spaminetti One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 783 of 785
Subject: Re: accounting for separate incomes, accounts, e Date: 3/24/2009 6:41 PM
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bfdebt,

In honor of your reply to a nine year old post and the resurrection of dead boards, I salute you.

You may also note that I am not Parkway, but here's my two cents.

My DH and I put practically everything we need or want on our joint expenses. Our personal money is for stuff the other doesn't equally value. For us, we paid together for each of our cars without regard to the fact that one was much less expensive than the other. Our car insurance likewise is lumped in with the joint expenses. Perhaps also worth mentioning is that we chose to combine our assets at marriage. So that CD that is earmarked for the replacement mid-range car would have become "our" CD.

You may well chose differently, but here's how we did it: Everything was put in both names except for IRAs and one checking/savings account each. Those individual accounts were started with roughly the same amount in them. Both paychecks are deposited directly in the joint account and monthly transfers send money from there to the personnal accounts. Anything we choose to budget for is paid with the joint money. That includes cars that are primarily driven by one or the other of us and multi-car policy insurance.

Good luck.

Spaminetti

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Author: bfdebt Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 784 of 785
Subject: Re: accounting for separate incomes, accounts, e Date: 4/1/2009 1:04 PM
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Thank you so much, and thanks for finding me! I had no idea this was a dead board, for all intents and purposes!

Thanks again!

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Author: XWordPhile Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 785 of 785
Subject: Re: accounting for separate incomes, accounts, e Date: 4/1/2009 8:46 PM
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DH and I have always kept our cars separate. Works for us. Our insurance is under the same policy, but we get separate statements and pay our own insurance. DH had to get a new car last year, and he's paying for it himself. Whenever I get a new car, I'll pay for it myself (FYI, when we met, we both drove older, paid-off cars; this is the first new car to enter our relationship in 10 years!). We seldom drive each others' cars.

In our case, there are no kids to chauffeur around. I can see where that would complicate matters, and I can't help there :-)

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