One of (if not THE most) common questions I get from clients is whether they should combine finances or not. As always, the answer is: it depends. There are many factors that go into this decision, such as your age, relationship, and experience with money.
While there are successful marriages and relationships that have maintained separate accounts, studies have shown that combining finances can lead to more happiness and stability. Being that money problems is a leading reason for divorce, I’m typically a proponent of combining finances with your partner.
Here are some steps to take to combine finances with your partner:
Successfully combining finances starts with one important virtue: transparency. How can you expect to merge finances if you have no idea whether your partner has $50,000 in the bank or $100,000 in student loans?
Before you can start combining accounts, all your assets and liabilities should be laid out on the table (or excel spreadsheet). To do this, each of you should list all of your bank accounts, investments, retirement accounts, credit cards, student loans, etc. on paper or on a balance sheet.
You can use this template here.
Review your expenses
Once you have a good understanding of your accounts and loans, you will need to review your current spending. For most couples, this may be the first time they’ve ever really looked at what each other spends.
To get started, you should review your current checking account and credit card statements to find what your average spending is for various categories. While your rent and utility expenses can be fairly simple to estimate, your grocery or take-out expenses might be a little more difficult. Sites such as Mint or YNAB have helpful tools to determine your monthly spending.
You can use this template here.
Discuss your goals
As individuals, we have our own dreams and goals. Whether that is to buy a home, get your master’s degree, travel to Italy, or complete a marathon.
As partners, you will also have joint goals that you both want to achieve. Some common goals that couples share include saving for their wedding, home down payment, vacation, or child’s college fund.
Prioritizing both your separate and joint goals can help ensure that you save appropriately and create a timeline. This can be done by making a list with a pen and paper or creating an online vision board. Sites like Canva are a great place to start designing a board.
Now that you know how much money you currently have or owe, how much you are able to save, and what goals you are saving for, you are ready to take action!
A common approach is to open a joint bank account to pay for all joint expenses. Individual expenses, such as shopping or gifts, are paid for out of a separate account. Any surplus cash can go into your separate accounts. This tends to support separate goals.
Another strategy is to only have a single joint account to pay for everything; both joint and separate expenses. With this method, you can mutually decide on a dollar amount that you can spend each month on personal expenses. This tends to support joint goals.
Understanding the basics of combining finances with your partner can help avoid stress and achieve your goals. If you would like to work with a financial planner to walk you through your options, I would love to help you!
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Disclaimer: This blog is for informational purposes only, and should not be considered advice or recommendations. All opinions expressed herein are solely those of Amaral Financial Planning, LLC, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made to another parties’ informational accuracy or completeness. You should consult your financial advisor, tax professional or legal counsel prior to implementation.