So you’ve been with your spouse or partner for a long time and you both want to take that next step.
In other words, you want to merge your finances together.
Congratulations! There are many benefits to combining your finances with your spouse/partner.
However, you need to be careful.
Merging finances with your spouse/partner can get messy quick if you don’t put in sufficient research and discussion.
Before I show you how to merge your finances together without causing any drama, let’s discuss a few benefits and drawbacks of merging your finances.
Benefits Of Merging Your Finances
Combining finances with your spouse/partner brings about numerous benefits, both financial and psychological.
After being with your partner for a long time, you start to act as a unit. This is especially true if you move in together.
Combining finances eliminates pesky financial issues like “who’s paying the utilities this month?” or “who’s paying for the date?”
With one bank account, those questions are answered for you.
You no longer have to keep track of who paid for what, as it’s all coming from the same money source.
An important part of combining your finances is creating shared goals among the both of you, as we’ll talk about later.
Putting everyone’s money into one account contributes to a sense of “we’re in this together”, which can help you guys concentrate on goals you both want to achieve.
Starting a family is no small feat; it takes time, effort, planning, and a whole lot of money.
When you have a child, the mother will most likely need time off to care for the child while it’s an infant.
There’s a potential loss of income that accompanies leaving work to care for a new baby.
Sure, maternity leave exists for a reason. However, it’s not always enough.
With combined finances, there’s more flexibility for the mother to take time off work since she can just as easily depend on her partner’s/spouse’s income while taking care of their newborn.
There won’t be any headaches about trying to transfer money between members of the family, as all the money will be in one place. This saves a ton of time.
If you’re a parent and you’re reading this, you’re well aware of how strapped for time you can be when caring for babies. Any time and stress you can save yourself and your spouse/partner is extremely valuable.
Drawbacks Of Merging Your Finances
Combining your finances may simplify your life and make your finances more flexible, but it’s not without its drawbacks.
Amplifies Existing Financial Issues
Everyone has a drastically different individual financial situation.
Some may have no debt and tons of assets, while other may be drowning in student loans or credit card debt.
You might love your partner with all your heart, but it’s unfair to you if your partner drags down your finances because they have bad credit or a lot of debt.
Before merging finances, we’d suggest that both of you ensure that your debt is minimized and you have solid sources of income. If one of you is much more well-off financially, you could even help the other person clean up their finances!
Nobody wants to talk about it, but there’s always a chance the relationship/marriage doesn’t work out.
Merging your finances can make divorce a lot worse for both parties, as it’s much less clear who’s money is who’s.
In a perfect world, you wouldn’t have to consider this.
But it’s an important consideration to make.
A Feeling Of Unfairness
As time goes on, one partner may begin to feel as if they are contributing more to the couple’s finances and not reaping any of the rewards.
Upon realizing this, the partner who feels as if they got the bad end of the bargain may start to feel less motivated to bring home the bacon.
This can lead to a lot of arguments.
The Key To Success
It’s never 100% possible to eliminate any chance of messy financial merging, but there’s one thing you need to nail down in order to minimize any problems you might have.
This one thing is critical to all aspects of all relationships, and it’s no different with money.
I’m talking about communication.
Open, honest communication.
A relationship can’t survive without this, and your merged finances won’t either.
Let’s look at a few steps you can take to communicate with each other to successfully combine your finances.
1.) Before Merging Your Money, Merge Your Plans
Before you two met, you might’ve had separate financial dreams.
You don’t have to sacrifice all those dreams now that you’re together, but you will have to make some compromises.
For example, when do you guys want to retire? Do you want to travel? If you aren’t married, do you want to be?
You’ll notice that not all of those are hard financial goals, but they have a financial component to them. The key here is to define what you want to do before you think about the money involved.
If you start thinking about money first, you’ll feel more constrained than if you chose the purchase/event first.
Also, make sure to define how much merging you want to occur. A complete merge means sharing everything, from bank accounts to credit cards.
You could also partially merge and only share bank accounts for regular expenses like rent or groceries.
Neither way is right; it all depends on your goals as a couple.
2.) A Snapshot Of Your Current Situation
The plan is in place, but now you have to determine where you stand as a couple financially.
Since finances can be a big point of contention in relationships, it can be hard to open up and have an honest discussion about this. However, it’s necessary if you want to succeed financially as a couple.
Try making a joint Personal Capital (or whatever your favorite personal finance app is) account and put in every account you have.
Your entire financial situation as a couple will be presented in front of you, which makes the next step easy.
3.) Budgeting Time!
You both know where you stand and where you want to be.
Now, it’s time to figure out the path there!
Try to find a budgeting method that you both enjoy. That way, you’ll both want to be more involved in your financial situation. Communication becomes easier when you both play an active role in managing your combined finances.
And Now, Let’s Put It All Together
Those first few steps are critical, as it will clarify any differences between both members of the couple and help create a sense of togetherness when merging finances.
Now, we’re at the actual merging. You both should participate in this step as well, since it’s all your money now.
Here’s how to do it right.
1.) Joint Accounts
Hopefully, you have a few bank accounts already (a checking account and a savings account at the minimum).
Well a joint account functions the exact same way, but two or more people can own the account.
Depending on your bank, you can simply add your spouse/partner to your current account.
Otherwise, I’d recommend opening new joint checking and savings accounts (just like if your finances were separate and you had both types of accounts).
Use this type of account for all your activities. It’s easy to save for large financial goals as you can track all of your income in one place, but you can track your spending on essentials like groceries as well.
In addition, pooling your money together can give you access to various perks (such as a better interest rate) that you might not have had access to with a single income source.
Of course, communication is important when using these accounts. All owners of a joint account can withdraw funds without seeking permission from the other owner(s), so make sure that you and your spouse/partner maintain open lines of communication.
2.) Update Your Direct Deposit
Unless you recently got a new job, chances are you haven’t looked at a direct deposit form in ages.
Well, it’s time to bust out the good old direct deposit form once again.
Since you’ll most likely be closing your old account, you don’t want your money to accidentally end up there.
Just snag a direct deposit form from work and fill it out with your new account information.
This should only take a few minutes to knock out, but it will save you lots of headache in the form of bounced paychecks.
3.) Update All Your Other Bank Transactions
As someone who’s smart with their time and money, I bet you set up an automatic monthly transfer to your savings account.
Since you’re opening your new joint account, you’re going to want to disable that transfer and enable it on your new accounts once money starts flowing in.
Once your savings transfers are set, you need to switch over all your automatic payments.
Make sure that any automatic payments you have (rent, loans, subscription services) are all set to draw from your new account.
But wait! Don’t do this right away.
Your account needs some funds before you start paying your bills with it.
Put enough money to cover a month or two of those automatic payments so you don’t accidentally overdraw your account.
Then, switch all payment information for both of you to the new account.
This step sounds like a lot of tedious work, but trust me when I say that you can knock it all out in just a couple of hours.
You could even get creative and make it a fun couples activity!
Make sure to review everything once you’ve switched all your transfers and payments to the new accounts. Triple check if you have to; you don’t want any money disappearing.
With that said, it’s time to complete your merging of finances.
4.) The Time Has Come For Your Old Accounts…
Timing is important when it comes to this process.
You can’t just close your old account right away; it takes time for all the new stuff to take full effect.
Wait until you’re absolutely 100% sure that your old account won’t be drawn from anymore. Once you’re in the clear, set up a time to close your old accounts and transfer any remaining money to your new accounts.
And just like that, you and your spouse/partner have officially combined your finances.
5.) Periodically Evaluate Your Progress (And Your Priorities)
Personal financial management isn’t a “set and forget” activity. Both you and your spouse need to make a habit out of periodically evaluating your finances.
In addition, you should reevaluate your goals/priorities every so often.
Here’s an example: perhaps when you were younger, you wanted to focus on career and finances. Back then, you put starting a family on the backburner.
But now that there’s plenty of money to go around, you both want to have a child.
Goals change over time, and you need to continue to communicate about your goals as a couple.
Again, you can make this into a “date” of sorts. Set a regular time to discuss your goals, your financial standing, and your budgets. Get everything out in the open so you guys can talk about it.
It makes for a stronger, healthier relationship.
Drama-Free Financial Management
Relationships have their highs, but they can also have many low points.
Many of these lows are caused by a lack of communication between spouses/partners.
Finances are no different.
Just remember, communication is the most important part of merging your finances. Without it, your finances will quickly become a point of argument.
Don’t let money become a stressor in your relationship!