It used to be that merging finances was a simple thing. Everyone pretty much got married young, before they had any money, and the man both made most of the income and controlled it. But times have (thankfully) changed, and these days, people tend to marry later after years of accumulating their own earnings, accounts, debt, and investments. Merging finances can now be complicated business.
This complexity, plus the fact that money is the number one cause of arguments and divorce among couples, means that knowing how to successfully manage finances as a couple is crucial to the success of the relationship. While most married couples opt to put all their combined earnings in one pot and pay for everything out of that account, others opt to keep everything separate and divide up the expenses, or do a combination of the two.
Whichever way you decide is right for your relationship, here are four things to keep in mind:
Honesty Is Key
The first and by far most important step to merging finances is to sit down and come completely clean about where you stand financially. Each partner must tell the other absolutely everything about their finances, including all debt, savings, and investments. Even if they end up keeping separate accounts, not coming clean about all financial matters is starting off the relationship based on a lie, which is like relationship kryptonite.
Once the accounts are merged, even though one partner may do most of the bill-paying or make investment decisions—it’s common for one person to be more interested in these tasks—the other should always be informed about what’s going on. Financial decisions should always be jointly approached so that there isn’t an unexpected surprise for one partner down the line. The key is to make sure everyone is fully informed and on the same page at all times.
Share the Burden
Debt can be a major issue in a relationship, especially if one partner has more than the other. While you might be tempted to tell your free-spending, indebted partner that his debt is his problem, debt is one of those things that becomes your problem, too, if you get married. The better way to approach debt is to look at it as belonging to both of you and figure out the best way to pay it off together. If you’re following the full-disclosure policy, future indebtedness will be agreed upon by both parties, so debt shouldn’t be a cause for disagreement down the road. If the debt you now face as a couple is overwhelming, debt management centers can help consolidate and set up a payment schedule so you can pay it down as quickly as possible.
Adjust Your Attitude
It’s easy to approach financial co-mingling as if you’re going into battle. Partners often differ in terms of income, debt, and spending style, and it can cause a lot of stress in a relationship if one person feels that the other is an irresponsible spendthrift or overbearing tightwad. The thing to remember is that combined finances are for the good of the family as a whole, and approaching it with a business management attitude can help keep emotions at bay. Approach all financial decisions with the attitude that you are working together for a financially solvent future.
Budget, Budget, Budget
When the money (or even part of it) is all in one pot, spending differences can end up being a point of contention. If one person is a spender or the other is a saver, it’s easy for misunderstandings and resentment to occur. Solve this problem by creating a household budget together—one that not only covers basic expenses, but savings for the future and an emergency fund as well. If you don’t put everything in one pot, use percentages to figure out who pays which bills. For example, if one partner earns 40% more income than the other, that person should pay 40% more in bills.
You should also budget for big-ticket items, especially if money is tight. Come to an agreement on how much money goes toward necessities, and how much will be put away for extras to prevent unpleasant surprises or misperceptions about spending.
