Getting Married? Consider This Before Merging Finances

Getting married means making a significant commitment to your future. Along with the fun and excitement of planning a wedding and navigating new life experiences as a couple, you’ll also need to think about your finances. With that comes a need for open communication, honesty and transparency about the state of your money, your financial habits and goals.

If you’re considering merging your finances, take these important steps first.

Commit to open dialogue

Get comfortable discussing finances with your partner. If you haven’t done so already, now is the time. Avoiding this conversation will only kick the discussion further down the road and potentially cause more discomfort.

Instead, consider this conversation as a way to build a stable base for your partnership. Among other things, you might think about how often you want to discuss your household bills and if weekly or monthly check-ins work for both of you. Additionally, while no one wants to think about the end of a marriage, consider a prenuptial agreement or will in case of divorce or death. 

Examine individual finances

Once you’re more comfortable discussing finances, it may be helpful to create a document or spreadsheet that lists all individual expenses for the past few months so that each partner can clearly see — in a non-judgmental way — how the other is managing money.

Debts and assets

Be open with each other about debts and assets. Talk about any credit card, student loan and other debts, and if they’re overwhelming, work together to find solutions. For example, if car payments are too high, refinancing a car loan could help make the monthly bill more manageable. Refinancing a vehicle could change the length of an auto loan and its other terms, which could help you lower the interest rate and monthly payments. Just be aware that if you lower your payments by extending your loan term, you could potentially pay more in interest over the long term. Be sure to do the math first and make sure the loan works for you.

It’s also important to be open about credit scores and the factors that credit rating bureaus use to calculate it—especially if one or both of you have a history of late or unpaid bills. Once you’re married, your partner’s credit score will have an impact on both of you. For example, it could affect your ability to qualify for joint credit accounts such as a mortgage or credit card.

Be honest about your individual assets. If one of you receives an annual monetary gift from a parent or grandparent, be open about how you want to use it. If one of you recently inherited money, disclose that to your partner and discuss your plans for it. The same goes for investments, additional savings accounts or other resources.

Spending vs. saving

How do each of you spend your money, and how do you save it? Budgeting and money management styles may be different, and that’s okay. However, if you plan to completely merge your money, or even partially with a shared bank account for joint expenses, you’ll each want to be clear about expectations.

Think about the following questions together:

• What are your spending habits? What do you consider a must-have versus a nice-to-have expense?
• How do you save money? Do you have automatic transfers set up from your checking account or paycheck to your savings?
• Do you have a budget? How often do you update it or review it to make sure you’re putting enough money away in an emergency fund or for retirement? 

Discuss priorities and goals

While you may not have exactly the same ideas about money, it’s helpful to find some common ground, particularly when it comes to individual financial expectations, priorities and goals.

Think about where you see yourselves in one year, five years or 10 years from now — what do you want to achieve? If buying a home, growing a family or starting a business together are long-term goals, think about how to best create a secure financial foundation to achieve those goals. In the short term, could more money go toward savings or debt payments? 

Decide how to combine your money

Another consideration is whether and how to merge your money. There are a few different ways to do this — it’s up to the two of you to figure out what works best for your relationship. Here are some ideas:

• Share everything. Close individual bank accounts and open new joint checking and savings accounts. 
• Keep individual bank accounts for discretionary spending and open new joint checking and savings accounts for household bills and other joint costs. Each of you will need to decide what your individual monthly contributions should be.  
• Keep bank accounts entirely separate and figure out who will be responsible for which household bills, groceries, car payments and so forth.

There’s no right way to combine your finances. Try different approaches and see what works best for you and your partner.

Have the tough conversations now for smoother sailing later

Discussing money with anyone isn’t easy. However, being on the same page about your finances is important for your relationship, and it will help build a secure financial foundation for the years ahead.

Notice: Information provided in this article is for information purposes only and does not necessarily reflect the views of pasoroblesdailynews.com or its employees. Please be sure to consult your financial advisor about your financial circumstances and options. This site may receive compensation from advertisers for links to third-party websites.