Should You Combine Finances After Marriage?
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Your wedding day will likely be the best day of your life (hopefully? Maybe?). However your day nets out, provided you file the correct paperwork, you are now legally bound to this person. While not necessarily the most romantic picture of marriage, it is the reality. With reality, comes real discussions on shared goals, values, and ultimately finances. Back in the day, combining finances was the norm. In fact, I grew up believing couples had to combine finances as my parents wouldn’t have it any other way. However, couples have the option of pursuing a multitude of different financial strategies. Ultimately, however, the question of should you combine finances after marriage always comes up. To decide where this strategy is right for you, consider the following questions:
1. Are you and your partner open about finances?
This is always a tough question to confront and one that you should really discuss before walking down the aisle. However, a 2019 Sun Trust survey found that only 51% of couples discuss finances before marriage, 41% disclose their salaries, and 36% discuss debt. (1) Many couples avoid these conversations over fear that it might curtail their wedding plans. However, if you can’t bring these things up with your partner before marriage, it will be all the more difficult after marriage. Talking finances is crucial. Being transparent about everything from salaries, to debt, to goals and savings habits will not only provide more insight into your partner, but will also lay everything on the table and avoid future surprises. Combining finances after marriage is a big step, one you don’t want to take without knowing what you’re getting into. If you’re having trouble with this type of conversation or don’t know where to start, check out our FREE couples finance worksheet. This worksheet will provide you and your partner with a structured and easy way to approach tough financial questions.
2. How did your family handle money growing up?
How we spend as adults can be heavily impacted by how we saw our parents handle money growing up. If you grew up in a very frugal house like mine, parting with money as an adult became very difficult. In fact, it took me years to be able to let go of money and invest as I was terrified of it disappearing. My family was also very financially open. My parents openly talked about bills, spending , and saving so having transparent and honest conversations about money came easy to me. My husband however grew up in a home that was much more tight lipped about money. He never knew what his parents made, how they spent, or how they saved. Not only does this environment make it harder to have more open conversations later in life, but it also negatively impacts your financial literacy as a young adult. Pay attention to how your spouse/partner describes his/her experience with money growing up and how he/she grew to understand its value. Learning more about this will allow you to gain a better understanding of his/her spending habits today and their root. Please note however that growing up in a home that incurred bad spending habits or poor money management does not necessarily make someone financially illiterate as an adult. Habits change and evolve with new knowledge. Knowing this information is just here to give you insight into why your partner may be spending or handling money as he/she is as an adult.
3. Is there a major gap in assets or liabilities?
Another way of asking this question, is what is each of you brining to the table? Couples should be able to honestly speak to income (salary plus any side income), debt (mortgage, student loan, credit cards, etc), and investments (retirement, stocks, etc.). While it may sound at first like you’re being audited, the point is to offer the other person full transparency. Remember, marriage is a contract and withholding information from the other person shows poor intentions and lack of good faith. Understanding where each person stands can also help formulate a game plan for the future in respect to a savings or retirement goal. Remember to approach these conversations with empathy and understanding. Each of you may have come from very different backgrounds and situations which have affected your ability to achieve certain goals. Sometimes couples with major gaps in income and debt prefer to maintain separate accounts. I have a friend who prefers to keep separate accounts because her husband both makes less and does not spend as responsibly-maintaining his own account forces him to be accountable for his spending.
4. What do you hope to accomplish in the next 2 years, 5 years, 10 years?
Combining finances after marriage may also be dependent on financial goals. Write down the big financial goals for the next ten years. Perhaps it’s saving for a home, traveling, having children, etc. Now estimate how much you will need to accomplish that goal by a certain point in time. Whether or not to combine finances may be dependent on whether or not you need each other to be where you want to be. For example, a couple may want to invest in the market to be able to withdraw $50,000 in two years for a downpayment on a home. Accomplishing that $50,000 goal may be reached easier and faster utilizing one single joint investment account and taking advantage of compounding interest. For couples with lofty goals combining finances after marriage may be a better solution as it allows them to track spending and income from a singular point and they can take advantage of greater compounded interest. For older couples who possibly don’t want children or are already set with retirement plans, combining accounts may not make sense for that stage of their lives.
5. What are your emotional attachments to combining finances after marriage?
For some couples, the decision to combine finances does not stem from careful calculations, but rather emotions. Some couples value the tradition of a combined account. Others feel it strengthens their partnership and intimacy. Whatever the reason, make sure to understand your partners emotional motivation. Being attune to your partners emotional driver can help you evaluate the health of that motivation. For example. combining finances after marriage for the sake of tracking your partner for fear of infidelity or other such things may be indicative of larger problems that should be addressed. On the flip side, simply valuing the tradition may be a perfectly healthy reason to join accounts.
But Remember it's not a one size fits All
One thing to remember is that combining finances is not a one size fits all situation. For some couples, a singular joint checking account is enough. These couples may prefer to maintain their own financial independence and prefer that “separation” in their marriage. For many, that financial independence is necessary to maintain a strong sense of self. However, there are many benefits to combining finances after marriage including easier budgeting, more transparency, and a shared sense of equality. The route each couple takes should depend on their own situation and level of comfort.
If you’re still unsure as to whether or not combining finances after marriage is right for you, consult a tax attorney, CPA, or certified financial planner who can offer advise based on your situation.
Source: 1 17 Conversations to Have About Money Before Getting Married. Sarah Graves. Money Crashers. https://www.moneycrashers.com/money-conversations-before-getting-married/ (accessed November 18, 2021)