You’ve been on top of the world, as you and your partner have decided to get married. As the wedding approaches, however, reality sets in: How will you and your partner manage your finances after tying the knot? Will all of your income go into the same “pot?” Will you keep your separate bank accounts, and each contribute to the monthly living expenses? What if you earn substantially more than your partner?
There are many different arrangements for how to handle finances during a marriage, and none are “one size fits all.” The best arrangement for each couple will, ultimately, depend on the couple themselves, their financial goals, their incomes, and where they are in life or their career. What are the different options, and the pros and cons of each?
First, the simplest solution: All income goes into the same place and is used for all of the expenses, both joint expenses as well as each party’s expenses and spending. Logically, under Nevada law, this arrangement can seem like the most intuitive for couples who do not have a prenuptial agreement. While any savings, retirement accounts, and property owned by a party prior to the marriage can remain the separate property of that spouse, given it is not commingled with community funds, all income earned by either spouse after marriage is technically community property under Nevada law – regardless of whether it is deposited into a separate account.
According to some, this arrangement may be best for your relationship overall. In an interview with managing principal and chief investment officer Zachary Bouck at Denver Wealth Management for Acorns by Sofia Pitt, Bouck stated that, in his experience, pooling all income seems to work better because there is no allegation of hiding assets.
Bouck also advises couples to communicate about money, including each partner’s spending habits and financial planning. Financial therapist Amanda Clayman stated in the article as well that financial transparency and participation is key.
The article also advises that even if one party to the relationship does not particularly enjoy being involved in finances, they should do so anyway and keep acquainted with both party’s accounts, assets, and the bills.
Others have made similar findings. In an article for Bloomberg View, Megan McArdle notes new research showing that couples who pool their money tend to rate themselves as happier in their marriage than couples who do not, with couples who keep things completely separate tend to rate themselves the least happy. Jessica Grose for Slate also surveyed several couples and noted that the longer couples were together, the more likely they were to pool their money.
Not pooling money is further complicated when couples have children. If a couple is keeping separate accounts and dividing expenses, having to divide up every expenditure made on the children can be complicated. Additionally, in heterosexual marriages where couples do not pool their money, according to Grose, women end up paying approximately 85% of the children’s clothing costs and 78% of childcare and school expenses.
There are other advantages to sharing funds during a marriage. It gets spouses talking about future goals, like purchasing a new home or vehicle. Ideally, spouses will also discuss their budget regularly as well, which can help prevent the not uncommon situation of one spouse feeling resentful of what they perceive as the other spouse’s overspending.
In situations where spouses’ incomes differ, pooling finances can create a sense of equality within the relationship, and stability for the lower-earning spouse. It can make paying bills easier, since they can all be paid out of the one single account. Pooling money also makes it more difficult for one spouse to hide income or one spouse to hide the extent of their spending. Further, a single savings account with a higher balance will, obviously accrue more interest than two, smaller accounts.
For some couples, however, sharing finances is not the best arrangement, and many individuals – millennials in particular – choose to keep their finances separate after getting married. Millennials are getting married, in average, older than any other generation in U.S. history – an average age of 29 for women and 30 for men, according to Pew Research Center. Millennials also have significantly more student loan debt than any other generation, which can have an effect on whether a couple chooses to pool their funds.
Some couples find that the best arrangement for them is to keep their finances separate but to have a joint bank account into which they both contribute for the payment of monthly expenses. Couples may either contribute the same amount to these expenses, or one party may contribute a higher amount.
Keeping separate accounts can allow for individuals to feel they have more personal freedom over their finances, and more privacy as to their spending. If an individual has a gift or inheritance from a family member into which they entered the marriage, which would be separate property under Nevada law, it may make sense for that individual to keep the remainder of their funds separate.
Going back to the student loan issue, separate accounts may also help to protect a spouse if the other spouse, for example, defaults on a loan and begins having their account garnished. Some individuals who out-earn their spouse also prefer to keep at least a portion of their income separate.
If a spouse wishes to keep all of their finances separate and not to have any community property, a prenuptial agreement will likely be needed. As stated, under NRS 123.220 all property acquired after marriage by either spouse is community property, except for gifts, inheritances, or personal injury damages. NRS 123A, however, allows spouses to contract with a prenuptial, or premarital, agreement. These agreements can be complicated and must be very carefully drafted in order to avoid issues with enforceability in the case of a divorce. It is highly advisable to have an experienced attorney prepare a prenuptial agreement. Spouses who are presented with a prenuptial agreement to sign should also have their own independent counsel to review the agreement as well.
Ultimately, the decision on how to manage money after marriage should be made jointly between the two spouses. If you have legal questions related to the management of funds during a marriage and the potential impact of divorce on certain situations, it is best to consult with an experienced family law attorney.