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How to Separate Your Finances

We’re all raised to believe that sharing is caring, and in a general sense, that’s a good lesson to live by. In a kindergarten classroom, sharing is almost always a solid plan—not only are there a limited number of resources, sharing is a great way to learn the importance of working together and helps practice patience and compassion. However, real life is rarely like a kindergarten classroom. 

And that’s unfortunate, because the world would be a better place if everyone had a nap, story time, and recess daily. 

Sometimes keeping separate finances in a relationship becomes necessary for a wide range of reasons, and not all of those are negative. Whether you’re keeping separate finances as a couple in an effort to keep the peace or separating your finances to prepare for a new independent beginning, un-sharing can serve as yet another good lesson in the importance of working together, even if you’re moving forward separately. 

How to Separate Finances as a Couple 

“Happily ever after” doesn’t have to follow one set path. Maybe your happily ever after involves not having conversations about how much you spent on video games this month or why the stuff you bought at Target was essential. Maybe your happily ever after has evolved to enjoying your solitude as an individual instead of as half of a couple. The reason for keeping your money separate doesn’t matter, but creating a plan for separating your shared money is important. 

Let’s cover the two most likely scenarios when it comes to the decision to split up your money:

Keeping Finances Separate in a Relationship

Money can be an emotional subject and a significant source of stress. In some relationships, maintaining separate bank accounts and budgets ends up being the most financially responsible choice, but how do you do it fairly? 

Your best bet may be to keep separate accounts and budgets for personal use and spending money and to establish a shared budget and a joint account where you combine finances to pay household bills and save for shared long-term goals. 

So, let’s say that Jack and Jill tie the knot (because they love each other, sure, but also, because their names inspired so many hilarious wedding hashtag options.) 

Jill was the kindergartner who kept her pencil box pristinely organized and Jack was the kid who ate Play-doh. Their spending habits are reflective of those past behaviors (but Jack almost never eats Play-doh anymore.) To keep the peace, they do the following: 

  1. Budget their paychecks separately: Jack and Jill both have their own budget connected to their personal account with their own categories for discretionary spending, individual debt, gas money, and whatever other bills they don’t share. When they get a paycheck, they fund their personal categories with that money. They also each have a category in their personal budget called “Shared Budget” and they put a predetermined amount from each paycheck into that category. (If one partner makes more money than the other, it may be more fair to contribute based on a percentage of income.)
  1. Contribute to a shared account: Jack and Jill also have a joint checking account and a budget with categories that include household bills, shared expenses, and savings goals. They move their funds from their personal “Shared Budget” category to the budget (and account) that they share. From there, it can be assigned to cover their shared expenses. 
  1. Budget shared expenses together: From here, Jack and Jill make decisions about how to assign the money in their joint account to the budget that they share. They would also work together to make decisions about their savings goals, long-term financial plans, and how to prioritize funding things like vacations or home improvement projects. 

Read more about budgeting together with separate accounts.

How to Deal with Finances During Separation

Now, let’s say that getting married because you had a clever idea for a wedding day hashtag doesn’t end up being a good idea and Jack and Jill decide to call it quits. 

Separating your finances during a break-up or prior to a divorce is a more daunting task—not only is it likely that both parties are emotional, but the decisions being made now could potentially have legal ramifications. Talk to your lawyer or financial advisor for the best advice, but here are some preliminary steps to consider:

  1. Make a list of your assets and debts: Figure out what you owe and what you own and start thinking about how to divide that up. You’ll have a better understanding of what your options are once you have a comprehensive idea of your actual financial status. It’s a good idea to print or download copies of your account statements to have a record if needed (we hope it’s not needed).
  1. Open separate accounts: If you share a joint account, it’s a good idea to open your own personal account and to have future paychecks deposited there instead, especially if your partner has been less than responsible with your financial life together. If you’re going through a divorce and open a new account, be sure to let your spouse and the court know about the new account, and just because it’s in your account doesn’t mean it’s considered off-limits in divvying up until the divorce is finalized. 
  1. Create your own budget: Much like in the example above, now is a good time to create individual budgets. Make a list of your personal expenses and create categories for expenses you may need to save money for, like attorney’s fees or first, last, and a security deposit on a new place. This is also a good opportunity for you to figure out how much you actually need to live alone, and to identify areas where you could cut back on spending. Make a category to cover any remaining joint expenses too. 
  1. Make a plan for joint expenses: Even if you’re no longer officially a couple, you’ll most likely still have shared expenses; for instance, if you own a home together, share child-related expenses, or have credit card debt to pay off. Try to work together to pay down any shared debts in order to have a little more freedom in the future. Figure out how you’ll pay for these expenses—will you divide them up equally and take responsibility for the ones you’re assigned to? Maintain a joint account that you contribute to and set up bill payments from there? 
  1. Look forward to the future: Breakups are hard. Add a heaping helping of life changes to the pile and it’s tempting to hide under the covers. Don’t panic. Don’t retreat. Don’t despair. (I mean, you’re allowed to do a little bit of each but keep it reasonable and temporary.) You are the main character, the architect, the author, the artist, the star role, director, and producer of your future. Read personal finance books, save money when and where you can, take naps when you need to, and have faith that things are going to get better and that you’re building a life you can love. 

Ready to build more control into a chaotic time? Try YNAB for free for 34-days and make as many budgets as you need with a supportive community along the way. Learn how to set up your budget with the Ultimate Get Started Guide.

*This is meant for educational purposes and should not be interpreted as legal advice.

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How to Separate Your Finances