Couples share a lot with each other.
But they shouldn’t be splitting all their money in one joint bank account, says Suze Orman.
“I would never, ever have a single joint account, and that’s it. Never, never, never, ”Orman recently told us during a NextConsultant interview on the occasion of Pride Month.
The personal finance icon and his wife KT, short for Kathy Travis, have been together for 20 years and have never opened a joint bank account. She says that a single joint account with a spouse or partner could lead to power imbalances and loss of independence in a relationship, especially if it turns sour.
Other experts agree. “When it comes to joint bank accounts, I never recommend that everything be combined”, explains Tori Dunlap, 27, founder of the financial education company His first $ 100,000. “You need your money and you don’t want to think that money is the reason you stay in a relationship. It makes you strangely more confident in your own relationship.
Should you get a joint account?
A joint bank account works the same way as a regular bank account, but several people have access to it. Anyone on a joint account can deposit or withdraw funds there, which can be handy for paying shared bills.
A bank account, joint or not, does not directly affect your credit. But keep in mind that the bank may send collection agencies to try to collect if you have any unpaid charges or a negative balance on the account, and this stay on your credit report up to seven years.
It can also be a testing ground to see how you mix your finances with another person. Married couples most often open joint accounts, but there are certain situations in which long-time couples or business partners may decide to open a joint account.
Orman advises adding a joint account if it works for you and your partner or spouse, but also to keep separate accounts. If you don’t have a separate account, you and your partner should have an open discussion about opening individual bank accounts.
“It depends on what you have in the relationship, but I absolutely recommend that you have at least three accounts: one for yourself, one for your partner or spouse, and a joint account where you pay for common expenses,” Orman says. .
How couples should pay their bills
By following Orman’s advice, you can use the joint account to pay for all of your common expenses while keeping the majority of your own hard-earned money separate.
But how much money should each person contribute to the combined expenses of the household? Should invoices be split in half in a relationship? Orman says no and points to a simple equation that makes it fair for both partners.
Orman says your combined bills should be divided according to your income. Add up your take-home pay and your partner’s and see what percentage you each contribute to determine how much each person should contribute towards the combined expenses.
Let’s say you bring home $ 3,000 after tax and your partner brings in $ 2,000, which equals a total monthly household income of $ 5,000. Your income is about 60% of that amount, and their income is about 40% of that amount. So if your common expenses are $ 1,000 per month, you would contribute $ 600 and they would pay $ 400.
“I would have at least three accounts or two accounts, one yours and one yours,” Orman says, “and then you decide how you’re going to split the bills. “