Insure Your Future Self with Separate Finances

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Must-read for every bride who is getting married. It's awesome that you're in love right now, but the numbers don't lie: you might end up divorced someday. Take action now to protect your future finances.

Very few people walk down the aisle with the expectation of pending divorce. Yet only 52% of women will see their first marriage reach its 20th anniversary.

The odds of experiencing this life catastrophe are high. But unless you’ve got money coming into a marriage and drafted a pre-nup, we do almost nothing about it. Most of us do nothing to financially protect ourselves.

To give you some perspective on the numbers, here are some things we do tend to financially insurance against–along with the odds that they will actually happen.

  • The odds that your household will experience a fire bad enough to report is 25%. Yet we insure against this risk with homeowner’s or renters insurance.
  • The average State Farm auto policy holder gets into an accident once every nineteen years, making the odds admittedly higher than divorce in a first marriage. You’re about half as likely to get divorced in the first 20 years of that marriage than you are to get in a car accident in 19. Still, we insure against auto crashes.
  • If you’re an American woman, your current odds of dying between ages 15 and 60 are 7.4%. Yet how many of us carry life insurance?

We insure against all of these instances of tragedy or inconvenience, yet only one of them is more likely to happen than divorce.

Insure Your Money Against Divorce with Separate Finances

The cultural default is making all of your accounts joint when you get married, with both partners having full access to all of the money.

But just because it’s the default doesn’t mean you have to follow tradition.

You could just as easily keep all of or a portion of your finances separate throughout your marriage. This allows you to maintain your own savings, and prevents the other person from absconding with money out of a joint account should the worst happen someday.

There are many different ways this can work. Here are just two of them.

Completely Separate

Keep everything in your name only. Bank accounts. Car loans. Etc. And have your partner do the same.

If you’re going to have a marriage with separate finances, it doesn’t have to be contentious or self-guarding. You can still work together towards financial goals, budget together, and talk about money transparently and openly while keeping everything legally separate.

In community property states some of your accounts may be up for litigation anyways. But with a joint account, your partner doesn’t have to wait for litigation. They can legally drain the account, hoping your attorney won’t hold them accountable for the funds later. If you can even afford an attorney, that is, now that you’re broke.

Separate accounts create a barrier of litigation, which is better than someone legally just up and leaving with all the cash.

Separate Savings

Some couples opt to have their own accounts for things like personal savings, personal spending and birthday/anniversary surprises. Their paychecks are deposited here.

But then they send some of that money to a joint account every paycheck. This joint account covers things like the mortgage/rent, groceries, kids’ activities, etc.

You can split these costs 50/50 or work out  a different ratio that makes more sense for each spouse’s respective income.

Separate Finances Do Not Demonstrate a Lack of Trust

Some argue that if you can’t trust each other with money, you shouldn’t be married. I agree with this. You should be able to talk about money matters and work together towards financial goals.

But some take the argument even further to say that having separate finances is a protectionist move that demonstrates an inherent lack of trust. To this point I argue.

First of all, taking a rational look at the statistics, it’s not about not trusting your partner; it’s about a rational mistrust of long-term relationships in our culture. You have to trust the data rather than your current feelings in the moment.

Second of all, just because you have separate finances doesn’t mean you don’t trust each other. In fact, I view it to be just the opposite.

When you trust each other enough to believe the other partner will follow through on the money moves you have discussed and budgeted for together — even though you don’t have access to their bank account and can’t touch the money yourself — you’re demonstrating the exact definition of trust.

I’m of the opinion that partners that decide on separate finances can have an incredible amount of respect for each other on top of trust. It takes a lot of respect to say to someone, “I know there’s an almost 50% chance I may hurt you someday. I don’t plan on ever joining that group, but I love you and respect you enough to encourage you to protect yourself. I’m not going to take offense.”

But we’re never going to not be in love.

I really hope you’re right.

But so many people before you have thought the exact same thing and ended up divorced. Women in particular tend to end up on the short end of the financial stick. They’re more likely to have cut back their careers to support the marriage, have gaps in their resume, and are often thought of as adversarial (even when they’re not) by a judicial system that is dominated by male officials.

If you’re reticent to believe me, I’d highly encourage you to research Terry Hekker’s story.

It’s about numbers–not love.

At the end of the day, we can’t let our feelings cloud our judgement. The numbers show a statistical likelihood of relationship breakdown that can’t be ignored.

We wouldn’t ignore those numbers if we were talking about car accidents.

We wouldn’t ignore those numbers if we were talking about house fires.

We wouldn’t ignore those numbers if we were talking about death.

It’s financial folly to ignore these numbers simply because we’re in love.





This is a part of the Personal Finance Pro/Con Series organized by PeerFinance101. You can read the opposing view here.

14 thoughts on “Insure Your Future Self with Separate Finances

  1. Pingback: Why Every Couple Needs Joint Financial Accounts

  2. Penny @ She Picks Up Pennies

    This is one of the first posts about separate finances that points out community property states. We aren’t a community property state, but most cases ended up with a 50/50 or 60/40 split (what a weird thing for me to research and talk to lawyer friends about, right?). It’s definitely interesting! We put all of our money in “one pot”, but we also spend a lot of time talking about divorce. We’re happily married, don’t get me wrong. But I honestly think that one of the most money-conscious things people can do is talk about how working as a team benefits your money and what impact a separation would have.

    1. femmefrugality Post author

      You’re super ahead of the game—though hopefully not! Ha. I do think it’s a good thing to think about/talk about. Because the likelihood of it happening is so high. Totally curious–how did you initially broach the subject?

      The biggest area I’m hesitant with one pot finances are the ones that are more liquid. While ours are completely separate, I theoretically like the combined approach. You can have that joint account with joint expenses and healthy ratios per each partner’s income, but still have your own savings. Because while splits may be more even after litigation/mediation, you’re not going to have money for litigation/mediation if your partner runs off with liquid assets that they legally withdrew from a joint account.

  3. RAnn

    We are one pot people and have been from the beginning. Most of our big money is tied up in our house (jointly owned and this is a community property state) and our retirement accounts. We’ve always kept our retirement accounts pretty equal–since I’ve had work plans more than he has, his IRA is bigger than mine. However, Louisiana considers them all community property and if we divorced, the assets would be split evenly.

    1. femmefrugality Post author

      I think that’s great! For a little over half of people, there’s no danger in having joint finances. It’s just a huge gamble to assess if you’re going to be one of those people or not–especially at the beginning of a marriage/relationship.

      I know a couple women who had their partner drain and hide funds from retirement accounts (and other accounts) right before litigation. Because the money was so unevenly distributed, they could only afford a worse lawyer than their spouse who didn’t do enough to contest those retirement assets that should have been split. While the partner had to pay taxes/penalties, they didn’t have to do 50/50 as they should have legally.

  4. Gary @ Super Saving Tips

    You make some compelling arguments for separate finances. However, my wife and I have joint finances and we are happy with the arrangement, despite each having been divorced in the past. Having joint finances allows us both to “trust, but verify” that we are doing what we say with our money. It also allows us to pool our resources for banking arrangements and other benefits. It certainly makes things more convenient on a daily basis but it also evens out any situation where one person is making significantly more than another, or even where it is a one-income household. In any case, I think it is a very personal decision for a couple to make and what’s right for one couple isn’t necessarily right for another.

    1. femmefrugality Post author

      I hear you—like I told R’Ann (sorry for my repetitiveness!) for a little over half of people it’s not even a potential problem. And you make a great point about income differences.

      I think you can still overcome those differences with the combined approach, but I respect that it’s not a decision everyone is going to make. Joint is the cultural default and does have some advantages. I do still think that at least one savings account in your name only is a good idea to buffer against vindictive exes…some of whom you wouldn’t peg as “that type” before the split. Even if everything else is joint, that way you at least have some savings you know no one else can touch in order to litigate the split of all those other joint accounts.

      At the end of the day, money problems between partners boil down to communication and selfishness IMHO. If you can do both of those things, you should be good no matter how you choose to bank. While you can gauge and assess how someone acts and communicates today, projecting that into the future can be a gamble–which is why I’m way more comfortable recommending at least partially separate savings.

  5. Vickie@ Vickie's Kitchen and Garden

    We have always had a joint account and we are fine with that. Although I worked a lot there were times I was a stay at home Mom and what would I have put it to my own account anyway? He made most of the money throughout our marriage and I made sure we spent it in the right way. ha ha . Truly i have been his financial partner in that respect.
    He always took this as his responsibility to care for his family so it never was a problem.
    Did it keep me from divorce? In a way yes because I couldn’t help but think of how I would support myself and my children if I ever thought along those lines. So no snap divorce or separation papers were issued! Usually things were resolved in a way that kept us together through the thick and the thin. In the end that’s old fashioned and we love that!

    1. femmefrugality Post author

      I hear you on this! Different strokes for different folks. And I can definitely see how joint would be easier with an unbalanced income situation. Maybe there could still be a separate and transparent savings account for each partner, but I can see how mostly joint would be beneficial in some situations.

      The only thing that concerns me here is the idea of not leaving a marriage because of a lack of economic power. I feel like I’ve “known” you a while (online friend love!) and from everything I know you and your husband have a super healthy relationship. For those that don’t, though, a lack of economic power often become a horrific barrier. I don’t think separate bank accounts make snap decisions more common, but I do think having at least some savings in your own name that no one else can touch can make leaving easier should you find yourself in an unsafe or unhealthy situation. (And that’s the universal “you” here–not you personally! 🙂 )

  6. Alexis Schroeder

    My current relationship involves having separate finances, and I honestly don’t see me being the type of person who could have a joint account. I’m CRAZY about saving money, and feel like there would be trouble down the road if I shared my finances with my partner… but it also seems to be the norm. I guess it would really depend on how good the other person is with money.

    1. femmefrugality Post author

      I hear you on this. I’m obsessive with every last penny. I did have joint finances in a prior marriage and while I’m sure my crazy frugal habits were annoying, it was the draining the bank account think that ultimately made me wake up. I had done joint just because that’s what everyone else I knew did. But if I could go back in time I’d definitely change the decision I made.

  7. Done by Forty

    You know, we’ve been a combined finance household ever since we moved in together. Our thought was that if we’re going to share a bed, our finances would be shared as well.

    The catch now is that I totally see the advantages of keeping things separate if a union were to end.

    Very complicated subject for me, as I, like everyone, don’t plan on our marriage ending. I mean, who does?

    Lots to think about here. I honestly don’t think we’d revert to a different system now. It would cause too much tension/mistrust/etc. to make that change to separate accounts now. The juice, in our case, probably isn’t worth the squeeze.

    1. femmefrugality Post author

      “Very complicated subject for me, as I, like everyone, don’t plan on our marriage ending. I mean, who does?”

      ^This. This is the thing. While our relationships are healthy, we don’t think it will ever be us. But prob & stats. Unfortunately.

      I really recommend reading Terry Hekker’s story. She was a staunch SAHM advocate. (Which is cool. I don’t judge either way. I’ve done both myself.) So much so that she was on Oprah and everything. Later in life, her husband left her for a younger woman, left her with very little money, and she had a hard time getting a job because holy employment gap. Now she advocates the other way, encouraging women to keep their resumes up to date even if they think it will never happen to them. Because she sure as heck didn’t and she suffered the consequences.

      ANYWAYS. With an already established system, I can see how this would oftentimes drive an unnecessary wedge. My goal in this is to both participate in a fun exercise Joseph put together and to warn brides and grooms to be (but especially brides) against the hazards of sharing every last thing. Again, because math, and because while I rebounded all right from a less than desirable situation (also I didn’t have a lot of money to begin with) I know other women who have fared far, far worse. It can be devastating. Sometimes in perpetuity.

      But I do also like the mixed approach even though I don’t practice it myself. Most money together. But also some separate and transparent savings.

  8. Pingback: Keeping Separate Finances in Your Marriage - Beyond The Dollar Podcast

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