As we’ve discussed in part 1 and part 2 of our marriage and finance series, there’s a lot to consider when it comes to finances in any relationship. In this article, we’ll discuss three common approaches to merging (or not) your assets.
Before we get started, a few important reminders:
Different things work for different couples – make sure you find an option that feels right for you and your significant other.
Take into account legal considerations for combining money, assets (like real estate), or debt, especially if you’re not yet married. While there are legal rules for handling the division of assets within a married couple if something goes sideways, those rules aren’t the same for couples who are cohabitating or dating.
Financial conversations are never “one and done.” It’s important, whatever you decide, to continue to check in with your partner to make sure things are still working.
Option 1 – Completely merge your accounts and assets
One common option for handling finances, particularly for married couples, is to completely merge your accounts and assets. If you go this route, you’ll likely want to either set up a new joint bank account(s), or add your partner to existing accounts if that’s easier. With this option, you’d both have full access to deposit & withdraw money from all of your accounts.
You can have your paychecks deposited into these joint accounts, and also use these as the source of payments for expenses like loan repayment, credit card bills, and normal monthly expenses.
The advantage of this option is that it tends to be quite simple to manage. As the old adage goes, “what’s mine is yours.” On the flipside, however, is that it can be a bit of an adjustment if you’re not used to needing to confer with someone else about making big purchases. Additionally, if you and your partner have very different ideas about budgeting or vastly different spending habits, completely merging finances can sometimes be difficult.
Option 2 – Merge some portion of your money
If you’re not totally sold on merging all of your money, some couples find success merging only a specified portion of their assets. In this scenario, you might create a joint account in which you each deposit a portion of your income each month. You’d then use this account to pay for shared expenses like rent/mortgage, food, childcare, etc. Since not all of your money would go into that shared account, you’d each also retain some separate, personal accounts as well.
This can be a good option for couples that are living together but are not yet married because it makes it easier to manage shared expenses while not incurring the “risk” of completely merging your accounts before you’re legally married. (That said, many married couples like this option too.)
Option 3 – Keep completely separate accounts
If you’re not keen on merging finances at all, then you may just want to keep your money entirely separate – and there’s nothing wrong with that. In this scenario, you’ll want to make sure you have an agreed upon plan for how to divide up the household expenses fairly so it’s not uneven or haphazard.
With this approach, you each have the greatest degree of autonomy in terms of spending habits, and you can keep managing your money as you have been. The flipside, however, is that it can make bill paying a bit more difficult, and if you ever needed access to you partner’s funds in an emergency situation, it would be more difficult to get access.
Not ready yet?
Even if you’re not quite ready to make decisions about how to combine your money, there’s still plenty you can do as a couple to get ready for when that time comes. In particular, start talking openly with each other about your current financial situation and your longer-term goals. After all, the most important thing is that you’re both on the same page about where you are and where you want to get to.
It’s also never too early to start meeting with a financial advisor. A trained financial advisor can help you figure out how to plan your financial future even if your assets aren’t fully (or at all) merged.
To learn more about how Paceline can help you and your partner sort through the merging of finances or the creation of a joint financial plan, contact us today to request a Second Opinion.
Download Your Free E-Book on Marriage and Finances
This blog was written by Jeremy Bohne, Principal & Founder of Paceline Wealth Management. Paceline is a fee-only investment advisor serving clients in the Boston area, and on a remote basis throughout the country. Paceline specializes in helping tech and biotech executives, physicians, and those seeking financial planning services.