How To Combine Finances After Marriage

Editor’s Note: The following is a guest post from Cora Gold, the editor-in-chief at Revivalist Magazine.

Combining finances in marriage can be challenging, but it’s also an opportunity to build a strong foundation for your future together.

When done correctly, merging your money can help you achieve shared goals and increase your financial stability. However, it requires careful planning, open communication, and a willingness to work together. That way, you ensure your economic union is just as strong as your emotional one.

Here’s how to combine your finances after marriage, through a budget, joint financial goals, and a sound money management system.

What Are The Pros And Cons Of Combining Finances In Marriage?

So, you’ve decided to merge your bank accounts. But what should you expect from here, and what benefits and obstacles might you face?

After combining your income and expenses, here’s what may follow:

Pro #1: It Builds Transparency In The Relationship

You’ll be happy to know that one of the biggest advantages of combined finances in marriage is greater relationship satisfaction and longevity. Financial transparency is one of the building blocks for openness and trust.

Being honest with yourselves and each other about something as deeply personal as your finances creates room for other conversations that may seem taboo. Sharing your money also reduces the chances of misunderstandings or sudden financial surprises like mounting student debt bills.

Pro #2: You Create A Stronger Financial Foundation

When do you want to buy a house together? What’s your dream vacation location? When do you hope to retire?

It can help to think of your finances as stepping stones for these dreams. Figuring out how to combine finances after marriage makes it easier to manage a cohesive budget and work toward these life-long aspirations as one.

Joint investment decisions can also lead to better returns and more long-term stability. This is because you can craft one optimal portfolio that is diversified with stocks, bonds, and alternative investments.

This can even create more security if one of you wants to start a business, pursue a graduate degree, or change careers.

Pro #3: You Can Streamline Financial Management

Everyone has strengths and weaknesses, and this is especially true when it comes to money management. But if you have taken a course in financial literacy or your spouse has read countless investing books, you can apply that knowledge to both of your financial futures.

Plus, you can reduce the administrative burden of managing multiple accounts. More money in fewer accounts makes managing bills, qualifying for perks, and earning interest all that much easier.

Con #1: You Have Less Individual Financial Autonomy

Combined finances mean every purchase warrants an explanation. This requires you to sacrifice economic independence and autonomy for the greater good of your marriage.

If one partner is okay with a splurge here and there while the other prefers a tight budget, this can become a challenge. However, by compromising on a budget – and adhering to it – you can avoid many of these uncomfortable situations.

Con #2: Increased Risk

If you live in one of the nine states with community property laws, marriage means that you owe and own everything equally.

If one partner has significant debt entering the marriage, combining finances makes it your responsibility too. Even if you start with a clean sheet and then one partner accumulates a liability, both of you must contribute funds to reduce the repayment.

This law introduces risks that may strain your account and affect the relationship in tough financial times.

Con #3: It Can Cause Relationship Strain And Disagreements

As a couple, you are likely coming together with different backgrounds and ideas on how to handle money. Maybe one of you prioritizes buying a house, while the other expects savings and investments to outperform in the long run.

Or, you may have different ideas on what constitutes a solid budget. If you join your finances, there will be conflict, so you need to prepare to compromise and work on your resolution skills.

How To Combine Finances After Marriage In 5 Steps

While planning the big day, you may have proactively written out a wedding budget with allocations for the venue, the rings, and food.

Maybe you chose to get married during the offseason or hosted your ceremony and reception in the same place to save money. That was a preview of your combined financial planning.

Explore these 5 easy tips to keep up that momentum as you start your life together.

Before You Get Started

Pick a regular time to sit down with your partner and discuss money matters. Choose a time when you both are focused, relaxed, and ready. This could be a specific afternoon every weekend, or once a month before bills are due. From now on, this will be your money talk time.

Before every meeting, make an informal agenda. In this first instance, it will be about combining your finances. In the future, you can have check-ins, goal-setting, and discussions on investments, retirement, and savings.

You may also want to set a few ground rules, such as the following:

• Create a judgment-free space: Considering that 41% of Americans feel money causes tension or fights in the family, you want to create a space where you can share without shame. This makes it easier to conquer obstacles together. As time goes by, you will discuss major expenses, changes in financial circumstances, and financial commitments to either drop or continue.
  
  
• Agree on accountability rules: These differ from couple to couple. Is it essential to track every expense in detail and explain them to each other, or can you let things slip as long as you both follow the budget? What counts as a purchase you need to discuss?
  
  
• Be flexible: Things will change as you grow together. Perhaps right now, the most important thing is paying off previous debts. Maybe in five years, it will be saving for a house. While you may set rules for yourself, allow space to evolve goals, priorities, and methods.

1. Conduct A Combined Financial Audit

A financial audit will help you identify your financial strengths and weaknesses, and it may reveal some money-focused goals you should set for your marriage. An easy way to do this is to create a document with three tables.

In the tables on either end, list each person’s assets and liabilities. In the middle table, document what has already been combined, like wedding gifts or shared rent.

This isn’t a scorecard to see who’s winning or losing, but a way for you to speak about both of your financial positions honestly. The audit may also open up a dialogue about how you currently handle money and where you can change.

2. Discuss Shared Goals

Setting joint targets will help you focus on what you can do together instead of bickering over your differences. Agree on the big-picture goals, and then work backward to see how you can create systems and practices toward them.

During your next check-in, ask the following:

• What are your most important goals?
• What are you willing to sacrifice to achieve your goals?
• What are you not willing to sacrifice?
• What is the timeline for each goal?

3. Set Your Budget

Your goals will largely determine your budget.

For example, a savings-focused plan may look like the 30-30-30-10 method. Whereas, a responsible yet more balanced budget may resemble the 50-30-20 plan.

To stick to this budget throughout the month, you may want a system to track where your money goes. For this, consider an app like Honeydue or You Need A Budget. Alternatively, you can use a dashboard like Empower, complete with expense trackers premade financial templates.

Finally, be sure to assign responsibilities or roles. Who’s better at planning taxes and paying bills on time? Who knows more about investments or is a star saver? Divide responsibilities to make your plans stick.

4. Create Your Financial System

Along with your budget, you will need to create systems for your combined finances. Oftentimes, this means opening a shared account or merging your bank accounts to pay for expenses like rent, utilities, and groceries.

Next, start growing a combined emergency fund. A popular rule of thumb is to devote 20% of your joint income to savings. Then, place half into the emergency account until you have 3 to 6 months worth of expenses set aside.

For retirement, consider prioritizing whichever account has better perks. For example, if one partner has a 401(k) plan with a salary match and the other owns a small business, it may be better to start with the salary match. This way, you can take advantage of the “free” contribution from the employer.

Next, you can move to the solo 401(k). This will enable you to enjoy higher contribution limits and broader investment opportunities.

5. Foster Transparency And Healthy Communication

Financial goal setting, budgeting, and expense tracking are all important, but the most important part of combining finances is doing it in a way that positively impacts your marriage.

So be sure to carefully consider each person’s point of view, even if there are areas where you disagree. After all, the keys to a successful marriage include compromise, accepting each other’s strengths and weaknesses, and finding ways to get on the same page.

When making decisions, consider these points:

• Do you both feel heard and supported in making the decision?
• Does the choice feel fair to you both?
• Is it aligned with your shared goals and individual values?
• What can you do to make the process easier?

Alternatives To Combining Finances After Marriage

While merging your money is a convenient and efficient way to manage your household expenses, it’s not the only option.

Here are some alternatives to combining finances you may want to consider:

Separate Bank Accounts

One alternative to combining finances is to keep separate bank accounts. This means you will have your own checking and savings accounts, and you stay responsible for managing your money.

You can still contribute to joint expenses – such as rent or mortgage payments, utilities, and groceries – but you will need to transfer funds into a joint account or use a shared credit card.

Pros:

• Maintains financial independence and autonomy
• Can help prevent disagreements over spending habits
• Allows for easier tracking of personal expenses

Cons:

• Requires more effort to coordinate financial decisions
• May lead to unequal contributions to joint expenses

Joint Account with Separate Subaccounts

A joint bank account with separate subaccounts allows you to maintain a shared pool of funds while still keeping track of your individual contributions. You can set up subaccounts for expenses like groceries, entertainment, and travel, and allocate a certain amount of money to each one.

Pros:

• Easier to track joint expenses
• Encourages communication and collaboration around financial decisions
• Can help ensure equal contributions to joint expenses

Cons:

• May require more effort to set up subaccounts
• Administration may take longer

Envelope System

The envelope system is a low-tech way to manage your money without combining accounts.

With this method, you divide your expenses into categories – such as housing, transportation, and food – and place the corresponding amount of cash into labeled envelopes. When one runs out of money, you know the category is depleted. This prevents any overspending before the envelope is replenished on the next pay cycle.

Pros:

• Helps to stick to a budget
• Reduces overspending
• Promotes mindfulness around spending habits

Cons:

• Requires frequent trips to the ATM
• May not be suitable for larger purchases or emergencies

Combining Finances In Marriage

Ultimately, there’s no one-size-fits-all solution for how to combine finances after marriage. The best approach is whatever works for both partners, considering your preferences, financial goals, and communication styles.

Whether you combine all your finances after marriage or choose a hybrid approach, it’s worth experimenting to find a system that promotes transparency, teamwork, and financial success.

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