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BIZ Academy Podcast
Hosted By: Wyatt Yates

Money Myth: We Don't Need to Combine Finances



In this episode, I discuss this common myth that dooms couples with their finances and relationship. Are couples that combine their finances happier? Are couples that combine finances less likely to break up? How does combining finances improve your relationship? Listen to find out.

Action Steps:
1) Combine your finances with your spouse and eliminate all individually held checking and savings accounts.
2) Have fun money that each spouse gets to spend on whatever they want each month with no questions asked. Use cash for your fun money.

Episode Transcript:

Wyatt Yates Host 00:00 Money doesn't have to be complicated. You can achieve financial independence. This podcast gets to the truth behind the money mess you hear from your grandma, your broke uncle, the latest social media influencers and the so-called money experts. Welcome to Money Myths with your host, wyatt Yates. The myth we're going to cover today is we don't need to combine our finances. So this relates to married couples with their spouses that are managing their money separately and believe that they don't need to combine their finances and have a and account look at things as one big financial picture and instead you do your thing, I do my thing. So that's the myth we're looking at, and this is something that is more common now than ever. And another thing that's more common now than ever divorce. So are they correlated or is there a causation here? What's it look like looking at this myth? So where this comes from, one of the big pushes on this type of thought process is the feminist movement. So women now are earning income, they're in the workforce and they're earning income, and this gives by keeping your finances separate. It gives the woman financial autonomy and gives them more power in the relationship. Or is one thought process behind this Another thing that can lead people to go this route is the fact that one spouse is maybe not good at managing money and the other spouse doesn't trust them with having a joint account, or the one spouse has committed financial infidelity and they can't be trusted with the household finances. 02:03 But it doesn't really matter the reason why you may think this, or you're in the situation where you and your spouse have separate finances. How you got there doesn't matter. I want to look at why this is a huge mistake for a lot of couples and there is no reason or justification for why you should be doing this. There really isn't. If somebody's committed financial infidelity, there are things you can do with combining them that can establish that trust and you can get back to this, but the ultimate goal should be combining your finances. And let's look at why. 02:41 Number one I'll just say first hand, the people I work with, the couples I work with, and for this whole episode I'm talking about people that are actually married, not just dating. So I highly recommend, if you're just dating, you're not married, that everything should be separate because you haven't made that commitment. But I'm talking people that are married and why you need to be combining your finances. So, first, the couples I work with that have their finances separate, I will tell you first hand are the hardest to get on the same page and actually get progress and results. Because when you're separate you have this mindset is this is mine, that's theirs, but you're married, you are one. Everything is that is mine is yours and everything that is yours is mine. You don't have that mindset when they're separate and, as a result, they are extremely hard to work with and the success rate I have with married couples that follow this if I can't get them to come on the same page and combine their finances is much lower than people that already have their finances combined or are willing to make that change to do so. So that's just my experience and real world experience, what I've seen. 04:06 But let's look at the second thing here and that is a working paper that three college professors did. There's a professor from University College of London, professor from UCLA and a professor from Notre Dame, so the last two in the US, one in the UK and this working paper looked at five different studies. So they looked at five studies across different demographics, different countries, different age classes, and I'll include a link to the working paper PDF if you wanna look at the actual, real details of the study. But basically they looked at these five studies to see if there was correlation or causation between couples that combine their finances and couples that didn't it, and who was happier in the relationship. And in the white paper, these three professors' conclusion based off of all the studies, the studies proved that couples that combine their finances are both happier in the relationship and less likely to break up compared to couples that keep some or all of their money separate. And the third thing that one of the studies showed was that couples that combine their finances were just happier with their life as well. So you have to be careful when you look at studies like this. Is it correlation, which really, if it's correlated, it doesn't necessarily mean anything? Or is it causation? So the fact that couples combine their finances does that cause them to be happier and less likely to break up? Or is this just a correlation that couples that are happier already will have more of a tendency to combine their finances? So let's get a big leap that these professors had in their working paper. The most notable thing was that they assert this was actual causation, not merely correlation. So, directly from the report. 06:19 Our findings are not simply the result of satisfied couples being more likely to join their accounts. Rather, these results demonstrate that account management can also influence relationship quality. It seems that the mundane act of household banking plays into a more general sense of togetherness. It is not the financial autonomy or maintaining separate accounts is in and itself a disadvantage. Rather, it is important for couples to perceive their possessions and finances are shared, and our research identifies one practical way to facilitate this merging bank accounts. So that's directly from the authors. So to really have the leap in, the results are so profound in these five studies to say it is not merely correlation but it is actually a causation effect. So that right, there should have everybody that has separate accounts being like what are we doing? We need to rethink this. 07:21 No-transcript merged accounts and having joint accounts with your spouse is important and how it can help you with your finances. So number one first it gives you more flexibility to handle life's changes. So if one spouse has a medical emergency or something else comes up, you're not going to have to deal with oh, I don't have enough money in my account. We got to transfer money from their account into mine so we can pay for what's come up. I mean it's really ridiculous if you think about it. You are married to this person, yet you don't trust each other enough to where you have to deal with transferring money from one account to another If something comes up. I mean it's crazy. Think about it. If you can't trust them with your money, why are you trusting them with your life? 08:18 Now, another reason why this is beneficial is that it helps simplify your shared financial responsibilities and financial goals. So you are married, your financial responsibilities are shared amongst the two of you and your financial goals have to be shared as well. And when you have the joint bank accounts, it's easier for you to keep track of how you're doing on your financial goals and your shared financial responsibilities, like paying off debt or any other bills that need to be paid, and it just simplifies the whole process. The third thing that this shared accounts does is it creates a stronger sense of equality what's mine is yours, what's yours is mine. We're together in this, we're together in our marriage, we're together in our finances and our goals as a couple. The fourth thing is it makes budgeting easier and more transparent. You're not having to find all these different accounts and track spending in the separate accounts. It's just a much simpler process when you're budgeting and transparent to both spouses. A prime example we have the alert on our bank account when we spend money. It pops up on our phones here's how much you spent, so there's accountability with that. It makes it very transparent to my wife if I go to the gas station and get gas and she's going to get an alert on her phone. You just spent 50 bucks on gas at this gas station, right? So it's very transparent to each spouse and it's easier to budget. And the last thing is it's easier to hold each other accountable and it limits opportunities for financial infidelity or financial surprises. When you're in this together and you both have access to the same money, you will hold each other accountable. You've set your goals together and when you have a joint account, it's easier to hold each other accountable to your goals and to make sure that you're both being responsible with your money. 10:36 Personal finance is hard enough. When you create the separation in a marriage, what else ends up getting separated? It's proof that you're going to have a better relationship. You're less likely to break up because you are on the same page and you're in this together. It's why this is a really bad thought process. It's one of the worst things you can do with personal finance for your marriage. Marriage is hard enough. You don't need to just add additional things that you know are just going to complicate it and make it harder. So let's just summarize this and get to our action steps. 11:18 So the myth was we don't need to combine our finances, and this is referring to married couples only. It's not your boyfriend or girlfriend, it's you're actually married and you have this thought process or you're following this myth, and it's more prevalent now than ever. This whole thought process and this myth and keeping separate bank accounts Part of it's the feminist movement. It's marriage being looked at differently in our culture, and study after study and I'll keep I'll put the link in the show notes here show that it's actual causation between having joint accounts and happiness in your marriage and likelihood that you'll stay together. So everything goes against this myth being true and something you should follow. If I want to know what is important to you, all I have to do is look at how to do it, how you spend your money and account for your money, and when you're unwilling to combine your finances with your spouse. You are telling them that they are not that important to you. 12:32 Not combining your finances with your spouse is like this. Think of it if you had a football team, an offense on a football team that had two different playbooks. The offensive line is running one playbook while the quarterback and Reimbach and receivers have another playbook and they snap the ball. Offensive line starts run blocking while the quarterback drops back for a pass play. They're not on the same page. And what happens? Right, there's too many illegal receivers downfield because offensive line is now down the field and they get a penalty and they go backwards. 13:09 When you're not combining your finances, you can't go after the same financial goals because you're not on the same page and you're only going to go backwards. You'll go backwards with your finances, you'll go backwards in your relationship, you don't establish that trust and you don't establish that sense of accountability and pride that you'll have in going after the same financial goals and shared responsibilities, and you're not going to get there going at it alone. So what can you do and what are our action steps this week? The first action step is pretty obvious here Combine your finances with your spouse and eliminate all individually held checking and savings accounts. You have to get on the same page and you have to do this together. 13:55 Now, one thing that my wife and I do, and that a lot of couples that I've worked with find very helpful especially if you've been individual with your accounts and now you're merging is each month, in your monthly budget, you should have some fun money. We have fun money for my wife, fun money for myself and fun money for our family as a whole each month, and what we do is you just take the cash out at the beginning of each month, so there's no questions asked. You can spend it on whatever you want. So and it can be whatever dollar amount It'll depend on where you're at in your financial processing goals, and if you're getting out of debt, obviously it's going to be less money versus if you have enough safe retirement and you're financially independent, it can be more money. But basically, the second one is you have each spouse has their fun money and each month you just take out that much cash and you can spend it however you like. So that's your second step. So first, combine your finances, if they're not already. Second is create that fun money account, and your budget is a line item that each spouse gets and give each spouse that much cash at the beginning of each month and you can spend it on whatever you want. 15:16 Just don't fall victim to this myth. 15:18 It will ruin your relationship and ruin your progress towards your financial goals. 15:24 You got to be on the same page with your spouse and when you have things separate, you're not on the same page and you're going after different things, which is never good in a marriage. Thanks for listening, but to achieve financial independence, go to ruggedfinancialcom where you can download my free PDF of the 12 Things to Do to Win With Money, and you can also sign up for my weekly money tips emails, where I cover the same tips and tricks and advice I walk all my clients through so you can begin your journey to financial independence. Thank you for watching and listening to this episode of the Money Myths Podcast. Please do me a favor and, if you found this episode interesting, subscribe to the podcast so you can make sure you get all the future episodes. Also, leave a rating and review so you can help us grow this podcast, so we can leave more people to financial independence. And, lastly, please take a screenshot of the episode, share it on your social media channels and tag us using atruggedfinancial. We will see you later. 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