It’s been a while since we’ve talked love. While we can schmoop out with the best of ’em, we’ll spare you the sappy stuff today and talk instead about our approach to money as a couple, and how it has impacted how quickly we’ve been able to get to our early retirement goal. And since you already saw the title of this post, I’m not spoiling anything to say:
We are absolutely going to be able to retire earlier because our finances are completely combined.
If we maintained even partially separated finances, we’d still be years away from our goal.
We’re big believers in “you do you,” so this post isn’t an attempt to say that fully combined finances are the best approach, or that they’re right for everyone. Every couple needs to figure out what works best for them, both financially and in terms of the feelings that come with the money. (Don’t discount the feelings! More on that in a bit.)
This is why we’re grateful to have figured out that a fully combined arrangement works best for us — and has actually sped up our progress.
First, a quick history of our finances as a couple. The way we think about and deal with money has changed a lot since we first got together almost 12 years ago, and the evolution of some of our thinking has mirrored our overall life goals at different stages of our lives.
Here’s a timeline overview of where we began, and where we are now:
When we first started dating, Mr. ONL was out of debt, but I still had about $30,000 in combined debt between my small student loan, a car loan (financed the Civic we still drive at 100%! D’oh!), and credit card debt. We dated long-distance for a year, which we’d do again in a heartbeat despite how financially ill-advised it was, but after we moved in together, we quickly decided that dealing with my debt was our top priority. Though we didn’t actually combine our finances, we divided up expenses to allow me to focus on my debt. Mr. ONL paid the rent and any anything we spent going out. I paid the utilities, bought most of the groceries, and otherwise spent very little — focusing on putting all the rest of my paycheck toward the debt. It also helped that we lived in a dirty cave of a rent-controlled apartment, and we had just one economical car.
Related post: When We’re Not on the Same Page About Money
With my debt dealt gone, we kicked off our baller years, but we also started saving in earnest to buy our first place, a goal we created before we got engaged. Our finances still weren’t combined, and we didn’t scrutinize each other’s spending, but we started to hold each other more accountable to our shared goal. And we kept the arrangement of Mr. ONL paying the rent, me paying for groceries, and then us splitting more of less proportionally to income the rest of our expenses.
Because we’d fallen into a dynamic from early on in the relationship of viewing our finances as a team effort, it was a no-brainer to combined everything once we knew we were in this for the long haul. We combined all of our accounts a few weeks before we got married in one epic call to USAA. There were new beneficiary designations, powers of attorney, lots of questions about why I wasn’t going to change my last name (still not sure why that was relevant, but it’s part of the script and I was making them deviate from that), and of course the opening of new checking, savings and money market accounts. We opted to keep our old individual checking accounts active because we agreed that we would pay ourselves a small monthly allowance to use as fun money that the other couldn’t question. Maybe it’s because we both have a rebellious streak, maybe it’s because we both felt the need to hold on to some bit of independence, but we both believed we needed that allowance to be happy in our financial arrangement. And so that’s where we started in our married financial life.
Fast forward a couple of years, and we found that we really weren’t using our allowance funds anymore. Maybe we each felt trusted enough by the other that we didn’t feel we had to justify expenditures from our shared accounts. Maybe we just felt like we needed to buy less stuff period. But soon enough, our allowance money was just piling up, and we would end up spending it on shared things like a trip, just to use it up. In the end, it wasn’t a hard choice to decide to stop giving ourselves the allowances, and it was a good reminder that there should be change and evolution in a relationship. We grew a lot as people — in a good way! — in the first few years of marriage, and it makes total sense that what we need from our financial arrangement would change as well. We no longer needed to flex our own individual independence, so we waved goodbye to the allowances and never looked back.
The final step in the timeline, until we retire, is our period saving up for FIRE so that we can retire in just over a year at most. We’ve gone through a lot of financial seasons together at this point — from debt payoff to big spending to big saving — and we’ve learned a lot about ourselves and each other along the way. What still feels most amazing for us is how instantly we both got on board with the early retirement vision. There was never a moment when one of us had to try to convince the other, though we did have a lot to learn at first. And there were growing pains, of course, as we found our comfort zone for saving for the future vs. enjoying life now. But by the time we started actively pursuing early retirement, we had already saved up to buy our first two homes and had plans to buy our rental property, so we knew how to save in a focused way, and we had tracking mechanisms in place that we were both comfortable with. I have always tracked actual numbers — account balances, spending, net worth — while Mr. ONL makes projections — how much we need to save each month to hit goal X by month Y, how much we’ll have at retirement if we save amount Z each month. (Yeah, we know how to party. But you’re reading this, so you’re a money nerd, too.) ;-) Transitioning from saving for property to saving for early retirement was far less traumatic than it could have been, as a result.
What Our Combined Finances Look Like
When I say “fully combined,” I mean fully combined. The only accounts we have that only have one name on them are our retirement accounts which must, by law, be for an individual only. So we each have our 401(k)s, and I have one tiny IRA from years ago. But for everything else, we hold property titles and financial accounts as “joint tenants with rights of survivorship” (JTWROS). That combined list includes:
- Title (and mortgage) on our home
- Title (and mortgage) on our rental property
- Vanguard taxable investment account
- USAA joint checking, savings, money market and investment accounts
- Ally “high interest” (eye roll) savings account
- Titles on our two cars
For now we each have separate points credit cards, which is easier to manage while we’re charging a lot of work travel expenses and need to reconcile things for reimbursement. But after we retire, we’ll most likely streamline that as well for simplified tracking.
Now that we’re in the post-allowance era, each paycheck goes into our joint checking account (with a chunk of mine carved off to get deposited straight into our joint savings account), and we pay everything we buy from that as well as transferring all of our investments out from it.
The Importance of Equality
We’ve always had an income imbalance in our relationship — Mr. ONL has always made significantly more, and even as my income has increased, his has still outpaced mine. If we maintained separate finances, I would always be comparing my income to his and would feel less than. Or I wouldn’t be able to afford to do things he could afford. We’d be on different levels even though we are married, which — at least for us — would undoubtedly lead to resentment one way or the other, either for the lower earner feeling crappy about that or the higher earner feeling held back.
And this imbalance is still incredibly common. Almost no marriages have two partners who earn exactly the same, or spend exactly the same or want to save exactly the same for big goals. There is almost always going to be some inequality. And that can lead to all kinds of problems: feeling like unequal partners in non-financial decisions, feeling like one partner is the “boss” and the other has to go along with it, the lower earner feeling like his or her work is pointless, the higher earner feeling the pressure to stay in an unsatisfying job that pays well just to maintain his or her relationship status, the lower earner feeling resentful of being able to afford less or having to pay an unproportional share of expenses, etc. Is it any wonder money is the leading cause of divorce?
Our solution to our income inequality was to combine everything, so there wasn’t his money and her money, there was only our money that we both have an equal say in. And as soon as that money comes in, it no longer matters who earned it, all that matters is that it’s our shared pool of resources to do with as we agree together.
Money Affects Feelings… Which Affect FIRE
Beyond making us feel like equal partners despite unequal income, having combined finances has worked better for us on a lot of different feelings levels, which has resulted in faster progress to fire.
Accountability — Accountability isn’t really the right word for this, because we aren’t breathing down each other’s necks, trying to micromanage each other’s spending. Instead, we map out shared goals, and we work together to reach those goals. If we don’t hit our savings target one month, we aren’t interested in pointing fingers (unless it’s at the IRS! Ha.), but instead create a plan together for how we can make up for the lost progress.
Team Mindset — For us, having the team mindset is probably the single biggest factor in our financial success. A quick example to illustrate this: We have both been in high-pressure jobs for our whole careers, and that has often meant working long hours at inconvenient times, and sometimes working on vacation. If we viewed our finances as separate, and pretend that Mr. ONL needs to work today, despite us being on vacation at some place we have flown to at great expense, I could easily interpret his having to work as a selfish act that’s disrespecting my limited vacation time, or as a sign of a failing on his part to create proper boundaries. After all, his work is only enriching him, not me. But instead, in the combined finances example, it’s easier for me to give him the benefit of the doubt, and know that he’s working so hard to get us to our shared goal as fast as possible. Sure, it still blows that he’s working on vacation, but I can interpret it in a more sympathetic light, knowing he’s also doing this for me, because we’re in this together. In our careers’ home stretch, we’re both working more than we’d like to, but we’re able to support each other in getting through these last months because we’re so excited about our shared goal.
Multiplier Effect — Everyone who has ever built a money spreadsheet knows how kick ass it feels to watch numbers get bigger. It’s motivating when it happens, and you pick up even more momentum as you go. This progress happens a whole lot faster when you have multiple income streams going into the tracker and funding your goals, making the momentum build that much more quickly.
Our FIRE Timeline — Together and Separately
We believe strongly that money doesn’t exist in a vacuum. How we relate to it is tied up in how we were raised, what we value, whom we trust or don’t trust, and how we view the world generally. There are so many feelings in there that can’t be explained on a spreadsheet or chart.
For us, we can’t imagine being where we are now in our FIRE journey if we didn’t have those feelings of equality, accountability, team spirit and momentum in place. All of them have undoubtedly sped our progress to early retirement.
But let’s put the feelings aside and just look at the numbers. Right now, as a joint effort, we’re about 86 percent of the way to our ideal early retirement scenario:
If we were keeping our finances separate, we’d each have to determine our own FI number, and though they’d probably be different given my risk-aversion, we’d certainly each be looking at a magic number that is well more than half of our combined magic number. We can live pretty comfortably as a couple on far less than double what either of us would need as a single person because of all the efficiencies we enjoy. If we then split up our assets proportionally by income, we’d see a pretty enormous gap:
Mr. ONL wouldn’t be in terrible shape, though the gap between his progress and his magic number would be slower to close on a single income, so he’d be about two years out instead of one. But in my case, I would all of a sudden be many years away from early retirement. A decade or more.
Bottom line: We’d both be farther from early retirement than we are now, and I’d especially be a lot farther from it.
Let’s say that we were willing to accept all of that to keep things separate. Let’s say Mr. ONL reaches his retirement magic number in two years and quits his job, while I continue for another eight or more. What then? The thing we most want to do is travel together, and we can’t do that if I’m still working. Even though he’s retired, he’s still limited by my vacation time. Which isn’t especially “free.”
We’re thrilled that our financial system is working so well for us and is giving us the momentum and trust to get to FIRE as soon as possible. But we’d love to hear from others! What works well for you? Any separate finances folks want to chime in to share how that arrangement works better for you? Anyone else found the momentum boost that we’ve had happen through the multiplier effect? Let’s discuss it all in the comments!