Yahoo Finance Kevin O’Leary warns women to never completely merge their finances with their spouse — believes 'having your own money' is in everyone's best interest. Do you agree?
What’s mine is yours — except for my financial identity, that is. At least, that’s how entrepreneur Kevin O’Leary encourages newlyweds or long-term committed couples to look at managing their money.
The “Shark Tank” investor says successful couples have no need to marry up all of their finances. Specifically, he urges women not to merge their bank account with their husband’s account after getting hitched.
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“He will respect you for having your own money,” he said in a 2015 interview on HuffPost Live. “Let him have his and set up a third account where you merge your dollars together.”
Historically, it has been quite common for men to carry the financial baton in relationships — even when they’re not the sole breadwinner. This makes some sense when you consider that not only are men thought to have more financial confidence than women, they also don’t often need to take long absences from work to take care of children or contend with the gender pay gap.
But O’Leary stressed it’s important for women to build their own financial identity and to have some control over their personal finances, should disaster strike and their partner or husband “gets run over by a bus” or “in case you divorce.”
“Women should have their own credit cards in their own name, pay their own bills off when they want to [and] keep a credit record, so they have their identity their whole lives,” he added. “And men too.”
Here’s three ways to fortify your own financial identity, while helping your joint finances flourish.
Set up a joint account
When you’re ready to make money moves with a partner or spouse, O’Leary says you should set up a joint account that both people deposit money into for shared expenses like rent or your mortgage, utilities, groceries, child care, travel and so on.
While building individual financial identities remains important, a recent study indicates that newly married couples who have only a joint account are able to better align their financial goals, which also leads to a happier marriage.
Before you do this, it’s important to have a conversation with your significant other about how you plan to share your earnings and expenses. Some couples opt for a 50-50 split where they work out an average budget — broken down into necessities, wants, savings and debt repayments — and both contribute the same amount of money each month.
Another option is to split your monthly income down the middle and put half of it into the joint bank account, or toward joint expenses or purchases. While this arrangement is easy and convenient, it could also lead to hard feelings if one person earns considerably less than the other.
For couples with a big difference in incomes, another option would be to split shared expenses in proportion to monthly earnings. So if Partner A makes $100,000 and Partner B makes $50,000, the couple may agree that Partner A covers two-thirds of the monthly expenses, while Partner B covers the remaining third.
Beyond finding a mutually agreeable way to share your expenses, there are other benefits to opening a joint account as a couple. For instance, it puts larger sums of money in each partner's credit history, which could snag you higher interest rates on your savings, lower fees and even free checking. Using the joint account could also help you save enough for major life purchases.
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Save for your future
As O’Leary reiterated, even if you’re in a loving relationship and you’ve merged most of your finances with your partner’s in harmony, it’s still important to maintain your own financial identity and security in case something in your life or your relationship goes awry (and because it feels good to retain some independence.)
This means keeping a solid credit score by managing your spending and paying down your debts in a timely fashion. It could also mean saving a portion of your income for your own personal wants or needs — or for the worst case scenario that your partner passes away or you break up.
Looking after your personal savings is especially important when it comes to retirement planning — although you can plan together for how you plan to spend your respective nest eggs and enjoy your golden years.
Whether you have a 401(k) account through your employer or an individual retirement account (IRA), you are the sole owner of those retirement money pots, though you can typically name your partner as your beneficiary. But the two of you can share the advantages offered by your separate retirement accounts, including a reduction of your taxable income if you're using a traditional IRA or a 401(k).
Protect yourself (and your loved ones)
No one wants to spend money on insurance, but carrying adequate coverage can protect your financial security (and that of your loved ones) if something unexpected were to happen.
Everyone knows that health emergencies in the U.S. can come with eye-watering bills, so having sufficient health insurance to release some or all of that financial burden when disaster strikes is really important. You may be able to save on insurance by getting coverage under the same plan as your partner or spouse by joining their employer-sponsored plan.
If you have an accident or illness that results in you becoming disabled before retirement, disability insurance can cover a portion of your salary — and help your family unit stay afloat. If your employer provides you with coverage, make sure it’s enough to meet your expenses. If not, consider purchasing additional insurance.
Life insurance can be another important financial tool as your beneficiary (typically your spouse, children or other dependents) will receive a death benefit determined by the amount of coverage you bought after you die. You may receive some life insurance coverage through work, but you may need to purchase additional coverage on your own — and it’s wise to discuss this with your partner.
Finally, you should consider creating a will to determine how your assets will be distributed after your death. Remember to update your will as your life changes, like say you get married, divorced or become a parent.
While having a will in place won’t protect your loved ones from the emotional distress of your death, getting basic documents in place can shield them from any extra financial anxiety, stress and uncertainty.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
