Four Things to Consider When Merging Money with a Life Partner
by Robyn Kehoe
If you’re combining households with a new partner or spouse you’ll need to discuss joint financial responsibilities and decide how money will be handled and who will handle what. Hopefully, if you’re at the point of moving into the same home, you’ve already discussed income, debt, and attitudes about money (check out YNAB’s 84 Questions to Ask Your Partner About Money if you need a little jump start). Here’s how to get started:
Where will you keep your money?
For couples where both partners work, and especially if you’ve both been earning independently for awhile, the “yours, mine, and ours” approach to bank accounts often works best. The idea here is that each person has some money set aside that they are free to spend (or save!) without discussion and there’s also a shared account for the bulk of your expenses and shared financial goals. You’ll need to decide together how to allocate income among these accounts and what rules you might need or want for spending from the shared bucket.
If you decide to keep your bank accounts separate (as is the case for many couples), decide up front who is responsible for paying which bills and discuss how you’d handle things if job loss or illness/injury changes household income.
Who is responsible for day-to-day money matters?
Whether you’re paying bills from a joint account or divvying them up between you, you’ll need to decide how to keep track of everything and who is responsible for doing so. Having a household budget can help keep things on track and gives everyone an understanding of where the money is going. It can be as simple as a list of regular monthly expenses, a spreadsheet, or you can use one of the many available apps to keep track of income and expenses in a variety of ways. Nerdwallet has a breakdown of their favorite budgeting apps to help you decide what might work for you.
Once you have a budget, decide if one person will be primarily responsible for keeping it up-to-date, or if this will be a shared responsibility. If one person is “better” with money, more of a natural with numbers, or simply has more time to devote to keeping family finances in check, they might be the official budgeter, but it’s a good idea to regularly set aside time to discuss and make adjustments together.
What’s important to you financially?
Whether you combine all your money, keep it all separate, or choose a hybrid approach, you’ll need to discuss shared financial goals – paying off any individual or shared debt (like student loans); how much to keep in your emergency fund; what you need to save for retirement; whether you have goals like saving for a house, going to college or grad school, or having a college fund for children – and then make a plan for how to reach those goals. The Motley Fool has some advice for setting financial goals with your spouse. Getting on the same page financially can help avoid some of the most common relationship stressors and give you successes to celebrate together.
How will you prepare for the worst?
No one likes to talk about a partner or spouse becoming severely ill or passing away, but being prepared in the event something happens to one of you is an important part of your financial picture. It’s a good idea to have a plan in place for emergency access to funds if one of you is ever incapacitated, so you don’t run the risk of missing a rent or mortgage payment or experiencing other financial hardships at an already stressful time. Making sure your beneficiaries are updated and having a list of all accounts will make things a little bit easier at a terrible time. The Consumer Financial Protection Bureau has some good advice on things to share now to avoid problems later.
Like other parts of your shared life, decisions about finances may change over time. If you’re merging established households, already have minor or adult children, or own a business, your needs may be very different from a young couple just starting out in life. Equifax has some tips for finding financial compromise with your partner that can be a useful jumping off point at any age or stage. Maintaining open communication about finances is an important piece of any successful partnership.
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