A reader sent me the following question: “What are the indicators that it is time to open a joint account, when couples have been dating for a while and things are getting serious? How do you start sharing accounts and for what? What is the exit strategy if something goes south?”

My reader then went on to provide me with a link to this article on how and when to open a joint account. She was looking for commentary.

Great question! The article? Not so great. The latter pretty much states that if you don’t eventually share everything with respect to finances, you’re a) making life complicated for yourself, and b) not really living the partnership all-in.

To which I say, “What?!”

To join or not to join?

So you’ve met someone who makes your heart skip a beat, you’ve decided to share an address, and you’re pretty sure that this person is a keeper. Exactly when should you join your finances?

Hold on a minute – that’s presupposing the outcome. Who said you have to join finances? Sure, a lot of people do, but does that mean it necessarily makes sense? Does that mean your relationship is all the more real or meaningful or destined to last if you do?

No.

I’ve spent the last ten years working with people who have been through major credit and debt issues. Want to know what was, by far, the biggest cause of financial trouble? Relationship breakdown. When people break up, they sometimes (OK, more often than we’d like to admit) do nasty things, including racking up debt, draining accounts, and refusing to pay for joint commitments.

Any joint financial instrument is a point of financial vulnerability for which you are liable, including a bank account.

But what if you insist your mate is awesome and you really want to create one financial pot? That’s great, go ahead. Just go in with your eyes open about the consequences if the relationship goes south and your ex behaves badly. Here’s the thing about bad behaviour: no one expects or predicts it. In my book Protect Your Purse, none of the divorcees I interviewed saw the divorce coming. Of those who experienced traumatic break ups, none foresaw the degree of nastiness they encountered. And money played a starring role in the problems.

It happens. If you’re comfortable taking that risk, then proceed.

Is separate banking really so painful?

It doesn’t need to be. I have just interviewed sixty-nine women, from coast to coast, about their finances. These women range in age from 24 to 73. I can tell you that the “one big pot” approach is no longer the common practice that it used to be. A lot of families are splitting up their finances, typically on a proportional basis. That is, if you earn 60% of the household income, you pay for 60% of the household bills. Some divvy up who pays which bills, others collect bills and reconcile once a month, and so on in an impressive array of variations.

One common approach is to have separate personal accounts and one joint account for the management of household costs, such as the mortgage and utilities. Each person contributes on a monthly basis and they keep the rest for their own expenditures, savings, and investments. One of the things that proponents of this system like is that they are then free to spend their money as they choose without being questioned or second-guessed by their partner. It turns out that having discretionary, “no questions asked” money to spend is essential for a healthy relationship, according to Alice Lurie, a psychotherapist (Q).

The bottom line is that these families have selected an approach that works for them. They see no need for a fully communal approach. And it’s worth noting that these unions are not weaker because of administrative separation.

The propensity to assume that “pooled together is best” overlooks the fact that such an approach can also lead to headaches if one partner has a tendency to spend significantly more than the other. If both parties aren’t keeping track of balances, problems can arise with missing funds and NSF payments. It’s not all roses and ease.

What are the indicators?

My reader’s original question was about understanding the markers indicating it’s time to open a joint bank account. There are no definitive markers; it’s more a matter of preference and comfort level. As much as it may seem odd to do so, it helps to think of this process as going into business with someone. You probably wouldn’t take on a business partner unless you have a good understanding of the person’s habits, ethics, values, assets, and skills. The same goes with money. Before you consider joining forces in any capacity with someone, you need to understand their financial position. How do you get there?

Sweat the details

In the early days, pay attention to your mate’s habits:

• How does he treat money – frivolously, carefully, or somewhere in between?
• How does he talk about money? The language we use says a great deal about who we are and how we feel about a subject.
• If what you see and hear sets off red flags, pay attention to them and ask specific questions to get a better understanding.

Once you’re living together, start slowly by sharing bill payments. Perhaps he takes care of the hydro bill, you pay for gas, and you both work out who owes what at the end of the quarter to re-balance. If that goes well, you might move onto a shared chequing account in which you contribute money for rent and utilities.

Once things get serious and you start talking about marriage (or a more permanent union), this is where you move on to the next step.

Full disclosure

You need to know what you’re getting into, and the way to do that, beyond asking questions and paying attention to behavioral markers, is to look at your partner’s credit bureau report. This is essentially a snapshot of his/her credit history. It’s what lenders use to determine how likely your mate is to repay debts. You need to know this too, especially if you’re signing on the dotted line for an expenditure with several zeros in it, such as a mortgage.

If you don’t feel that you can or should ask for financial details, then why do you feel you can or should share financial instruments or assets?

For more points to consider, read my blog post about four financial questions to ask before getting married.

Talk, talk, talk

In the article referenced above, the author recommends chatting about money for 10-15 minutes every month, possibly while driving to a “real date” rather than setting up a date night to do it, as I recommend in my book.

Back to my earlier comment: What?! Do you really think you can cover anything real and get anywhere in ten minutes? Ten? Do you seriously think you can discuss budgeting or spending or credit card statements or planning or investing or financial priorities or what happened in the last thirty days in ten minutes?

I can just hear the conversation now: “Hey honey, I’d like to chat about our credit card statements. We’ve been carrying a balance for several months now and I don’t think that’s smart. Careful, there’s a cyclist. So, what do you think? OMG, did you see that guy just cut in front of you? What a jerk! Anyway, I think we should do something about our spending. Oh look, there’s a parking spot over there….”

I personally wouldn’t bet on the odds of a favorable outcome if all you’re willing to commit to the process is ten minutes, regardless of the frequency. Let me ask you a question: How important is nailing your finances in order to achieve your ultimate life goals and peace of mind? The answer should fall somewhere between crucial and essential.

It can be fun if you do it right. Just ask my friend Mandy, who went from thinking that talking about finances (and, in her case, investing) is about as much fun as cutting the lawn with nail clippers, to enjoying monthly wine and finances nights with her husband to review and fine-tune their family plan. And therein is the huge upside to doing this on a monthly basis: you will work as a team with your partner, learn more about your finances, and achieve more of your goals because you are paying attention, following up, and doing the work. While drinking wine!

If your retort is that talking about debt and cash flow issues is exactly 0% fun, you’re right – it’s not my idea of a good time either. But I can guarantee you that it will become even less amusing if you ignore it.

The bottom line is that there isn’t a single best way to organize your finances as a couple. Mixing it all together has some advantages and it also has risks. If the relationship goes south, you’ll be dependent on the good will, and good behaviour, of your ex when it comes to splitting the assets and liabilities, including a chequing account. If he empties the account, even if it contained all the money from your recent pay cheque, there’s not much you can do about it; it’s a joint account after all. Bye-bye exit strategy when one party behaves badly.

One final point: Sharing a joint chequing account is one thing. If your ex empties it and a cheque bounces, it won’t affect your credit score, despite what the article implies (bank accounts are not included in credit bureau reports). However, sharing liabilities is a whole other level of risk. If you have a joint credit card, or a joint line of credit, and your ex racks up debt, you’re on the hook for that.

Unfair? Yes. Reality? Yes.

Proceed with caution.