We’re Married. Should We Merge Our Finances?
Newlyweds often ask us if (and how) they should merge their finances? Considering their most recent decisions involved honeymoon spots, cake flavors, and dance playlists, I’d rank this decision as less-than-exciting. But it’s not as painful as you think! There are multiple ways to approach it, and following some good guidelines will help you create a rewarding money life together.
Income, Debt, Assets, and Spending Transparency are a MUST.
Good or bad, you absolutely must know what your partner’s money situation is. You may be the most independent married couple, but in the eyes of the government you are seen as one entity (if Married Filed Jointly) and your money habits and history will affect each other. Not only do you need to share details of your assets (IRAs, 401(k)s, properties, cars, partnerships, cash) and liabilities (credit cards, student loans, car loans), but we recommend sketching out monthly expenses as well. Even for the closest couples, this is excruciatingly vulnerable. We all have different spending values and money habits, so this is a time to be kind and gracious with each other!
You should also know the ins and outs of each other’s income. What benefits are available through their employer? What are they deferring into their retirement or HSA accounts? Is medical insurance covered? There are reasons beyond transparency to dig into these details. For example, you may actually be able to lower your joint expenses if one of your employers offers a more generous medical insurance benefit or retirement match.
Are either of you receiving help from a family member? Maybe it’s as small as your cell phone bill or maybe it’s a promised future down payment on a house. Conversely, are either of you supporting another family member?
Our suggestion is to take an evening (it doesn’t have to be pre-wedding!), open a wine bottle and your computer, and gather all your info. I guarantee you’ll have to reset five passwords and you’ll be surprised by at least one thing, but it’ll be worth it.
This is also a great time to update the beneficiaries on your accounts (i.e. If you pass away, you want to be sure your spouse is named to inherit your accounts. We know, not a fun topic, but super important!). This also applies to investment accounts, retirement accounts, and insurance policies.
Shared Accounts? Maybe. Shared Goals? YES.
- Shared accounts are the most efficient route for couples. You both have access, there’s complete transparency with income and spending, and you have fewer accounts to keep track of (less statement overload or username frustrations). Sometimes though, couples feel like someone is monitoring their spending. This can be especially uncomfortable if you’ve lived an independent life for many years before getting married. Which leads us to…
- Have a shared account for all income and shared expenses, but each of you have separate accounts (or credit cards) for personal expenses. Maybe you need the freedom that you can spend X amount each month without any judgment. That’s totally fine! We just advise you both agree on that figure. We also advise all saving comes from the shared account so it’s a joint venture.
- The most independent option is to truly have separate credit cards and bank accounts, and you simply decide who pays for each joint expense. It takes a lot more intentionality to have transparency in this case. This plan isn’t our favorite as it’s easy for a couple to be disjointed with their money. There’s the risk of redundancy (both enrolled in AmazonPrime?) and inefficiency (are you sitting on too much cash?).
Even if you don’t share bank accounts, you must have shared goals to work towards in a way to keep each other accountable. Below are some examples:
- As a couple, what do we want to put towards retirement accounts this year? Will we do that through our employer plans or through an IRA?
- Are we saving for a down payment or a baby? Where should we set up this account and how much are we saving each month?
- Do we want to increase our giving this year? By what percentage? Do we need to cut other spending to make that happen?
- Should we contact a financial planner to help with our finances? (YES!)
- Are we hoping to earn more income? Do we ask for a raise or do a side-hustle?
In the end, your goals will matter SO much more than where you do your banking.
Consolidating, closing, and merging checking and savings accounts can be a PAIN. Be prepared to show your marriage certificate, produce cashiers checks, and receive pushback from banks you’re leaving. Also be aware some banks will require you to do this in person, and most banks close after 5PM (and have limited Saturday hours). Arm yourself with what you’ll need: marriage certificate, banking details, and a coffee togo — then take a Saturday morning and tackle this.
Something not on a bank statement or in Excel is whether there are people in your spouse’s life who they ask money questions to. Your spouse may ask her mom for advice about investing or car financing. It’s definitely okay to have trusted people you can go to, but as a couple you should be each other’s first stop with money decisions. Get ahead of potential conflict and hurt by gently asking if there are other decision makers or helpers in your spouse’s life.
Whatever way you decide to structure your money, it’s important to have check-ins with each other. This gives you a chance to see if anything has changed or stalled, and to see if you’re hitting your money goals. Aim for 1 to 2 times a year. You may be intimidated having to go back and review statements and dig through data again. We recommend using a personal financial aggregation site like Mint.com, PersonalCapital, YNAB, or TillerHQ. These sites let you log in to all your money accounts and will help organize your spending, income, and net worth growth.
Avoid future money stresses by getting on the same page with your new spouse. It is well worth the effort. For further help or questions, reach out to an Abacus financial advisor today.