Money Management

Unsure whether you should share a bank account or keep your finances separate? Find out why you may want to avoid having a joint bank account with a partner. 

Some couples combine their finances. While sharing a joint bank account works for many couples, it’s not an ideal solution for all. Even if you’ve been with your partner for a long time or are married, there can be benefits to maintaining some or all of your bank accounts individually.

Still unsure of the best way of managing your finances with your partner? It’s a good idea to take some time to consider the pros and cons of having joint and individual bank accounts before making a decision. Here are a few reasons NOT to share a bank account with your partner.

1. You can continue to manage your money differently

Some couples maintain individual bank accounts because they don’t manage their money in the same ways. Adjusting to another person’s money management system can be challenging, especially if you’ve been handling your personal financial affairs for many years. Having individual bank accounts allows you to manage your money in a way that works well for each of you. It can also help you both feel more financially in control as individuals.

2. You’ll both learn important personal finance skills

Developing personal finance skills is essential. For some couples who combine their finances, one partner may be the person who manages the household finances. While this can work well for some, it can lead to one partner having much less financial knowledge than the other. Not sharing a bank account can allow you to develop good money management skills. When you lack financial skills, making choices about your money can be difficult.

3. It can give you an added layer of security

Many people get into a relationship expecting to spend a lifetime together. But life doesn’t always go as planned. Keeping your finances separate and having at least one individual bank account can give you an added layer of security if you split up in the future. Being financially secure is powerful and can allow you to escape a situation that no longer serves you well.

4. You can prioritize individual financial goals

You likely have individual and shared financial goals, and that’s normal. One couple may want to prioritize putting more money toward investing for retirement, while another may want to boost their emergency savings. Maintaining separate bank accounts can make it easier for both of you to work on your individual goals because each person has more control over their money.

You might consider having one joint bank account if you’re also working on shared financial goals, like building a shared emergency fund. For the most part, my husband and I don’t combine our finances. We have multiple individual bank accounts and manage our day-to-day finances separately. But we do have one shared savings account, which works well for us.

Discuss finances to get on the same page

Before getting into a relationship, make sure you talk about money. It may feel uncomfortable initially, but having these discussions can ensure you’re both on the same page and are a good match. You likely won’t agree on everything regarding finances, and that’s okay.

But, deciding how you will manage your finances and who will be responsible for what expenses during the early stages of your relationship can help you avoid disagreements in the future. As you navigate life as a couple, you may need to reevaluate some money management decisions. You can always check in with each other to ensure the current system still works for both of you.

Whether you decide to open a joint bank account or keep your finances separate, it’s best to have regular money talks. You want to ensure you continue to meet your shared financial goals and are both aware of your combined financial obligations. Good communication is key.

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Investing can help make you a millionaire, but the speed at which that happens will depend on a few factors. Check out what you need to know. 

If you want to become a millionaire, investing money can help make that happen. If you open a brokerage account and begin buying assets that provide a generous return, the money your investments earn can be reinvested and earn even more for you. This is called compound growth, and it’s a powerful wealth-building tool.

But just how quickly can investing make you a millionaire? Here’s what you need to know.

Here’s how fast you can become rich by investing

The timeline for how fast investing can make you rich is going to depend on two factors: how much you invest and the returns you earn when you do it. The table below shows when you’ll end up with $1 million in your brokerage account based on these two factors.

As you can see, finding more spare cash to transfer from your bank account to your brokerage account makes a huge difference in your timeline for becoming a millionaire. But so does the return you get on your invested funds.

So if you want to amass a seven-figure nest egg as quickly as you can, you’ll need to both invest as much as possible and be smart about what you put your money into.

How to free up more cash to invest and find the right investments

If you want to become a millionaire ASAP, you’ll need to work on finding more money to invest. You can often do this by:

Taking on a side job such as driving for a rideshare company, walking dogs, or babysitting, depending where your strengths are.Negotiating for a higher salary. You can ask for more money when you’re hired, request a raise at a performance review, or look for a better-paying job.Working overtime if your company allows you to do so.Making a budget that prioritizes investing and cuts discretionary spending.Keeping fixed expenses low, such as by switching to a cheaper used car instead of buying a new one and investing the money saved.

You’ll also need to find the right investments. For some people, this means investing in shares of stock in individual companies. This approach can pay off big time if the company happens to perform well, but it requires a lot of specialized knowledge as well as time to research investments. It’s also riskier.

Alternatively, you could invest in index funds, such as an S&P 500 index fund. Index funds track the performance of a financial index, with the S&P 500 index tracking the performance of around 500 of the largest companies in the U.S.

Since index funds spread your money around many different investments, there’s a reduced risk of loss, and they are much easier to invest in as you don’t need to independently evaluate each company. However, the potential returns aren’t as high as buying individual stocks because your money is spread among so many businesses.

Ultimately, you’ll need to decide how much risk you’re willing to take on in search of higher returns. But remember that investing more and investing smartly can go a long way toward making you a millionaire much faster, so sacrificing a little to do these things can be a wise financial move.

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Roth savings plans are great. But read on to see why this writer isn’t using one. 

I’ve been saving for retirement for many years now. (Does that officially make me old?) And while it’s not always easy, I know it’s important.

The idea of not being able to pay my bills is a scary one. I’m hoping that if I save enough, I won’t have to worry about that down the line.

In the course of my retirement savings, I’ve funded a traditional IRA and a traditional 401(k). But I’ve yet to put money into a Roth retirement plan. Here’s why.

I’m trying to maximize my tax savings

With a traditional IRA or 401(k), you get a tax break on the money that goes into your account, up to a certain annual limit. This year, the limit, if you’re under 50, is $6,500 for an IRA and $22,500 for a 401(k). If you’re 50 and older, it’s $7,500 for an IRA and $30,000 for a 401(k).

Now, the downside is that with a traditional retirement savings plan, you’re looking at paying taxes on your withdrawals in retirement. That’s yet another expense to worry about.

Roth IRAs and Roth 401(k)s allow you to take tax-free withdrawals, which is a huge perk. But they also don’t give you a tax break on your contributions. And that’s why I’m not saving in a Roth.

Since I’m pushing myself to work very hard these days and maximize my earnings (largely to cover the exorbitant cost of raising kids and sending them to college), my income puts me in a fairly high tax bracket. I don’t expect to work or earn as much in retirement, so I’ll likely be in a lower tax bracket at that point. I’d like to get my tax break at a time when it’s worth the most to me.

In other words, let’s say I’m in the 32% tax bracket now. A $6,500 IRA contribution would save me $2,080 on taxes. But let’s say that come retirement, I’m in the 24% tax bracket. A $6,500 withdrawal would result in $1,560 of tax savings.

The one flaw in my logic

I think my logic in choosing a traditional retirement plan over a Roth is pretty solid. But it does have one gap, and it’s that we don’t know what tax rates will look like in the future.

If tax rates go up across the board, I could end up with a higher tax burden in retirement despite having a lower income. So that’s a chance I’m taking. But for now, I feel that it makes sense to take that risk. I really don’t want to give up the tax break I get on my traditional retirement plan contributions. In time, though, I might shift over to a Roth for savings purposes if my income declines and I find myself in a lower tax bracket.

What’s the best savings plan for you?

If you expect to be in a higher tax bracket in retirement than you are now, then a Roth IRA or 401(k) makes sense. Think about your current and future income picture when making your decision.

Of course, you can’t magically see into the future. You may want to hedge your bets and split your contributions between a traditional retirement plan and a Roth to get the best of both worlds — some tax savings now, and some in the future.

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Using a credit card for purchases makes good sense. But find out why carrying a balance on it should be avoided at all costs. 

Credit cards can be a great way to purchase items. When you buy something with a credit card, you can earn rewards for your purchase if you’ve chosen a good card. You may also become eligible for additional perks, depending on the card, such as an extended warranty on your item. Plus, using a credit card responsibly can boost your credit score.

But while you may want to pay for things with your credit card instead of taking money out of the bank, you do not want to carry a balance on your card. You’ll always want to pay off the card in full when the statement comes.

Wondering why that’s the case and what the problem is with carrying a balance? Here are some key reasons why you should aim to avoid getting stuck with outstanding credit card debt.

You will pay a fortune in interest

The single biggest downside of carrying a credit card balance is that doing so could leave you paying an absolute fortune in interest.

As of August 2023, the average credit card interest rate was 21.19%. Let’s say you owe $2,500 on a card that charges you the average rate and that sets the minimum payment at the lesser of 2% of your balance or $25. If you pay only the minimums, it would take you 34.9 years (or 419 total payments) to repay the remaining balance due. During that time period, you would end up paying $11,239 in interest.

The interest costs in this scenario add up to many times the amount you initially paid for your items. The problem is you’ll get stuck in debt for a long time if you pay only the minimum due, and your interest rate will be so high that you will pay a literal fortune in financing charges over the coming decades.

You’ll reduce the income you have to spend in the future

Remember, in the above example, you would have to make 419 payments on your credit card debt before you would be free of your debt.

If you get stuck making a minimum credit card payment for a shocking 34.9 years, then for the next several decades you will have already committed yourself to spending future income you have not even earned yet.

In every single month that you get stuck paying a credit card bill for past purchases, you’re going to have less money left in your checking account to spend on anything else. You could find yourself without the funds needed to save for your future or accomplish anything else you desire because a good portion of your monthly income will still be going toward your decades-old debt.

If you’ve committed future income to past purchases, you’re robbing your future self of the chance to do what you want with the hard-earned money coming in. Instead of having those funds available, they’ll be going right out to line the pockets of your creditors.

For both of these key reasons, carrying a credit card balance simply isn’t something you should do. Use your credit cards to earn rewards, but try to pay the bill in full each month so you don’t end up costing yourself money or your future financial security.

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There are reasons the wealthy seem to always get ahead. Read on to learn about some of their tricks. 

Some people are born into wealth. But a lot of people who end up wealthy don’t start out that way. Rather, they come from modest means and end up rich through hard work and savvy investing.

Now, it’s probably not a secret that a lot of rich people are able to get to where they are by putting their money into stocks and other assets, like real estate, that can gain value over time. But here are some lesser-known ways the rich can grow their wealth.

1. They hold their assets for a long time

A big part of growing wealth is being patient. The stock market has a long history of rewarding investors, but sticking with it is key.

If you invest on a short-term basis, you might actually lose money in the stock market. If you invest over many decades, you’re likely to make money.

Over the past 50 years, the stock market, as measured by the S&P 500 index, has averaged an annual 10% return. But rest assured that the market had plenty of down years during that time. Overall, though, its performance was strong. And so anyone who started investing 50 years ago without having bailed on their holdings during downturns is likely looking at a large sum of money right about now.

2. They benefit from tax breaks

Investing in a tax-efficient manner is another way rich people can get even wealthier. Investing in a traditional IRA or 401(k) plan means getting to invest with pre-tax dollars and enjoying tax-deferred gains. Investing in a Roth IRA or 401(k) means benefiting from tax-free gains.

The wealthy are also likely to know that holding investments for at least a year and a day before selling them at a profit can lead to lower taxes. That’s because investments in this category are subject to long-term capital gains taxes, which are less expensive than taxes on short-term gains (those that apply to investments held for a year or less).

The wealthy can also invest in assets that result in tax savings. Those who pay a mortgage to own a home, for example, can deduct the interest they pay on the loan.

This isn’t to say that the wealthy cheat the system or don’t pay their fair share of taxes. A recent report from the Tax Foundation found that the wealthy’s share of the U.S. income tax burden has never been higher. Rather, the wealthy most likely read up on the tax code and use it to their benefit (or spend some of their money to hire accountants to help them maximize their savings).

3. They can afford to take on more risk in their investment portfolios

The wealthy have a lot of money at their disposal, so much so that it allows them to take on risks that the typical person can’t. For example, we learned that the stock market’s average return over the past 50 years has been 10%. Investing in the stock market is risky, but it’s a moderate risk due to historical data pointing to strong returns overall.

Someone wealthy might be able to put $100,000 into a truly risky investment that’s likely to yield a 20% or 25% return because that sum might only represent a small fraction of their total assets. Someone who only has $100,000 in total generally can’t afford to take that chance.

How you can follow wealthy people’s lead

Some of the strategies available to the rich are equally available to average earners. If that’s the category you fall into, you should know that you could do quite well for yourself by investing in the stock market. Putting $10,000 into an S&P 500 ETF and leaving that money alone for 45 years could grow it into $729,000, assuming a 10% average yearly return.

You can also use the same tax tricks to minimize your IRS burden and grow more wealth. That means holding investments for at least a year and a day, and saving in tax-advantaged accounts like IRAs and 401(k)s. Plus, you should know that you don’t necessarily need a ton of money to hire an accountant or financial advisor who can walk you through different tax strategies.

Also, while it does take quite a bit of money to buy a home, once you do, you can benefit from the mortgage interest deduction if you itemize. You may also be able to deduct the cost of your home office if you’re self-employed or run a small business from home.

The one strategy you may not be able to employ is taking on added risk in your portfolio — meaning, risk beyond the general risk of buying stocks. But otherwise, you still have options. And if you make the most of them, you may find that you’re able to grow quite a lot of wealth over time.

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If you have a personal loan, you may have the option to make extra monthly payments. Read on to decide if that’s a good idea. 

When you get a personal loan, you’ll have a fixed repayment schedule. You’ll be told how much you must pay each month out of your checking account in order to repay the loan in full by your designated payoff period. Usually, this is a period of around two to seven years, but could be longer or shorter depending on the agreement you make with your lender.

If you have extra money, you may decide you want to pay off more than the amount you’re required to. But is this the right way to use your extra funds? Here’s how you can decide.

What is your personal loan interest rate?

The interest rate on a personal loan impacts how much the loan costs you over time. The higher the rate you’re paying, the more advantageous it is to pay the loan off early because your return on investment (ROI) is the interest saved.

The average interest rate on a personal loan was 12.17%, as of August 2023. That’s a pretty high rate — although not as high as the rate you’d pay on credit card debt (which was 21.19% as of August 2023). Many reasonably safe investments aren’t really likely to consistently provide you with returns at or above that level, so paying off your personal loan early could make good sense.

If you have a personal loan at a lower interest rate, though, like at 5% or 6%, the ROI of early payoff is much lower and it may not make as much sense to pay more than the minimum on this debt.

Is there a prepayment penalty?

Most personal loans don’t come with prepayment penalties among their loan fees, but some do. If your loan has a penalty for early payoff, then paying more than the minimum to free yourself from this debt may not save you as much money. The penalty would offset the interest saved, so there’s little benefit to paying extra rather than just sticking to the agreed-upon payoff term.

You’ll need to read the fine print of your personal loan to find out if there is a prepayment penalty, how much it will be, and when it applies to decide whether this added fee (if applicable) should dissuade you from early payoff.

What else could you be doing with the money?

Finally, you need to think about the opportunity costs of paying more than the minimum on a personal loan. Any extra money you send to this debt can’t be used to pay off costlier financing (like credit card balances or payday loan debt, if you have it). It also can’t be used to invest for the future, to save for a home down payment, to save for emergencies, or to accomplish other financial goals.

Sometimes, you’ll decide it’s worth making extra payments or paying more than the minimum because being debt-free is important or because it really is the best way to improve your financial situation over the long term. But until you ask yourself these questions, you won’t know for sure if that’s the case. So consider the answers before sending any extra money to your personal loan lender.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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