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The BIG DAY has finally arrived. Guests arrive, the wedding party is ready, and every final detail is complete! All that’s left is to say “I Do!”
Actually, getting married is only the beginning of building your life together. And one of the most important parts of starting your marriage is learning how to handle your finances, and work together on how best to manage your money.
In fact, in a 2017 study by Ramsey Solutions, they found that 94% of families with “Great Marriages” said they regularly discuss their money dreams together (vs. 45% with “OK” or “In Crisis” marriages). Getting on the same page about money with your spouse matters.
So, whether you plan on combining your finances after marriage or maintaining separate accounts, this guide reveals the pros and cons of each approach. You’ll also learn the benefits of working with a financial coach or financial advisor and what to consider if you prefer to do it yourself.
What Does Combining Finances Mean?
Combining your finances is the act of joining your bank accounts, assets, bills and every other financial account with your spouse. This means you will open joint bank accounts, add your spouse as a beneficiary or owner of your home, cars, life insurance, etc., and call your utilities, subscriptions and other services to make sure you are both administrators of the accounts.
This also means coming up with a joint plan for your finances going forward. You both want to be on the same page financially, so you will discuss your BIG GOALS and how to get there.
Potential Benefits of Combining Finances After Marriage
Combining your finances after marriage has many great benefits, and it affects more than just money.
Better Communication, More Trust
When you combine ALL your financial accounts together, it forces you to be in better communication with your spouse. Once combined, you are now both part of every money decision going forward, meaning that you will both need to work together and compromise on where your money goes.
This will mean more frequent conversations about money. Which is a GOOD THING!
In the study by Ramsey Solutions, they found that 54% of families with “Great Marriages” said they talk Daily or Weekly with their spouses about money (vs. 29% with “OK” or “In Crisis” marriages).
Combining your finances also means there is a less likely chance to commit financial infidelity. When you combine your money, you both are showing that you trust your spouse, and that you have nothing to hide financially.
Better communication = better marriage.
When your money is combined, you both become each other’s accountability partner with your spending habits. Assuming you’ve both put together a budget and a plan for your money, you can now both see where the money is going, and help each other stay on track toward your financial goals.
Yes, it may lead to some uncomfortable discussions, but will also allow you to help each other stick to the plan that you both agreed on.
With joint financial accounts, your day-to-day handling of money is much more simplified. Paying bills, managing a budget and planning your financial goals gets a whole lot easier if you are not trying to balance two separate pools of money.
Also, if the worst happens, and one spouse passes away, in most cases the other spouse has immediate access to all your money (and less paperwork/legal struggles).
Better Credit Scores
While combining your accounts does not directly affect your individual credit score, it can help you gain access to better joint rates and higher loan amounts once your assets are combined.
Plus, good credit activity on your joint accounts (on-time payments, lower debt-to-credit ratios) can have a positive impact on your credit score in the long run.
Potential Drawbacks of Combining Finances After Marriage
Combining your finances after marriage may not be for everyone. Here are a few possible downsides to combining your finances in marriage.
Difficult To Separate Accounts
If for some reason you split up with your spouse, separating all your accounts will take a bit of work. And not to mention there are legal implications during a divorce to getting your accounts separated, and it may get very complicated (and expensive).
Once your accounts are combined, you will both have eyes on each other’s spending. While this can have some good benefits, it can also feel like you are losing some of your independence. Having to account for everything you spend money on to your spouse may feel cumbersome, and could possibly lead to money fights.
Negative Impact To Credit
Combining your financial accounts doesn’t impact your individual credit score, but can lower your access to financial products such as loans and credit cards, if you apply jointly and one spouse has a much lower score or higher debt balances.
And if you start missing payments or running up the credit card and loan balances, it could negatively affect your scores as well.
One Spouse Can Take All The Money
Obviously this would be much more than just a financial problem, but combining your assets and bank accounts gives both spouses access to ALL the money. Which means, if things were heading south, one spouse could potentially “take the money and run.”
This is not a situation anyone plans for, but it has happened too many times to ignore (unfortunately). Combining your finances means that you need to fully trust that your spouse will not do this.
How to Discuss Combining Finances with Your Spouse
If you have decided to combine your finances after marriage, your conversations should start as soon as possible. In fact, if you are not yet married, start talking about it NOW, before you tie the knot!
Here are a few ways to start discussing combining your finances.
Before you get down to the dollars and cents, try sitting down together and having a “dream session.” This is a low-key way to talk about money without busting out a spreadsheet!
During this Dream Session, set aside some uninterrupted time to talk about what you want life to look like with your spouse.
Here are a few questions to get you started:
- What do you want life to look like in 5 years? 10 years?
- Where should we live?
- If money was no object, how would you spend your time?
- When do you want to retire?
- Do you want to buy a house?
You can talk about anything, including financial goals, but the goal here is to freely let your ideas and dreams about your future together flow.
The goal here is to build trust, and start imagining a future together.
Talk In Detail About How To Handle Your Money
Once you have talked through what you WANT life to look like, talk about some of the big picture ideas you have about money. This includes how to handle things like debt, investing, saving and large purchases (such as cars).
The idea is to see where you both align (and don’t align) in your beliefs about how to handle life’s BIGGER financial decisions.
If you come to a disagreement, this is where financial education comes into the picture. There are great blogs and resources to learn about personal finance, many of them within the Wealthtender Personal Finance Blog Directory. For each disagreement, do some research, and find out where you can both compromise to come up with a joint plan for your money.
Create A Budget
And finally, get on a written budget. This will be your roadmap for how to handle your money day to day. This includes discussing your income, bills, spending and saving strategies.
You should both discuss questions like:
- How much should we save?
- How should we handle debt?
- What are our investing goals?
- What should we spend money on?
- How much individual spending money do we get?
All of these details should be captured in your monthly budget plan.
Talk About What Accounts To Combine First
Once you both have some of your big plans discussed and are on a written budget, it’s time to talk about what steps to take first. Usually this starts with opening joint checking and savings accounts, and talking about how to handle things like paychecks and bills.
Make an action plan for opening the day-to-day money accounts first (more on that below), and then talk about other accounts such as debt (loans, credit cards), and investment accounts.
The goal is to talk about your next steps once you decide to combine your accounts.
How to Get Started Combining Your Finances
To get started on combining your finances, here are the first few steps you should take:
- Open a joint checking and savings account.
This will give you a place to make your day-to-day purchases from. You can also choose to use one spouse’s individual account to keep, add the other spouse to the account as an owner, and then move all the funds over (this should be done on the phone or in person).
- Set your direct deposit to your joint account.
This will funnel all your income to your newly created joint account. Talk to your HR Department to get this set up.
- Move your automated bill pay to the new joint account.
Before you close out any individual accounts, make sure any bills being automatically paid get moved to the NEW joint account.
- Close out any unused individual accounts.
If you want to simply use the new accounts going forward, make sure to set aside time to close out any individual accounts you will no longer be using. This usually requires a phone call and cannot be done online. (make sure all automatic bill pay and direct deposits are moved to the new account BEFORE closing).
This will get your day-to-day finances set up in a way that you can both manage them together.
Additional Accounts To Combine
In addition to your bank accounts, here’s a quick list of accounts to consider combining after marriage. Most of these are as simple as adding your spouse as an owner or beneficiary.
- Investment Accounts
- Life Insurance
- Mortgage (may require refinance)
- Other Assets
The idea here is the “what’s mine is yours” approach, and is the deepest level of financial commitment. And as you open additional financial accounts in the future, both of your names will be on them.
When to Consider Working with a Financial Coach
When you are building your money plan and coming up with a budget, you may end up fundamentally disagreeing on what to do with your money (and how to combine your finances).
At this point, it may be beneficial to meet with a Financial Coach. A financial coach is someone who helps you build a plan for your money (but does not manage your investments), and they focus on budgeting, savings, getting out of debt, and helping you plan your money together.
They are typically also well-versed in financial education, helping you understand WHY you should choose to do something with your money.
If you decide to meet with a Financial Coach, here are a few questions you should make sure to ask:
- How much do we need in an Emergency Fund?
- What is the best way to pay off our debt?
- How do we save money on our budget?
- What are the best practices in handling individual spending money?
- We don’t agree on ‘XYZ’, how do we handle this?
A Financial Coach can walk you through the details of each question, help you see what is the best fit for your marriage, and come up with an action plan to implement.
When to Consider Working with a Financial Advisor
Once you start diving into the details of investing for your future, it may be beneficial to meet with a Financial Advisor. A financial advisor is someone who helps you build a long-term plan for your money, and can invest your money according to your goals (and risk tolerance). You want to work with a licensed professional, which means finding a Registered Investment Advisor (RIA) or a Certified Financial Planner (CFP).
If you are meeting with a Financial Advisor, here are a few good questions to ask during your appointment:
- How much do we need to save monthly to retire by (your desired retirement age)?
- What should I invest in?
- How much are the fees for your service?
- What are the fees associated with my investments?
- What are the tax implications of investing?
Overall, you want to make sure your Financial Advisor is qualified, a fiduciary (legally bound to put your interests first), and has an understanding of your goals and risk tolerance. They can help you build a lifelong investing plan to ensure you hit those BIG goals in life.
Or Just Do It Yourself
If you are comfortable combining your accounts and building your own financial plan, well done!
The key to healthy communication about finances in your marriage starts with financial education. Here are a few places to get started on your financial journey:
- Budgeting – How To Budget In 8 Simple Steps – Jacob Wade (iHeartBudgets)
- Debt Payoff – How to Pay Off Debt – Dave Ramsey
- Saving Money – 100 Simple Ways To Save Money Fast – The Simple Dollar
- Investing – JL Collins Stock Series – JL Collins
You can also learn from the life experience of others sharing their stories in articles on personal finance blogs. Use the Wealthtender Personal Finance Blog Directory to discover writers whose blogs you may want to follow.
How to Maintain Healthy Habits After Combining Your Finances
Once you have combined your financial accounts, you want to make sure everything runs smoothly going forward. Here are a few tips on making your combined finances a dream come true (and not a nightmare!).
- Have A Monthly Budget Meeting. Honestly, I recommend doing this weekly for the first few months. There are typically a lot of moving parts, and keeping your communication open about your combined finances is the key to avoiding money fights. Review your budget, talk about what worked, what didn’t, and how you can make next week (or month) even better.
- Keep and eye on your transactions. Once your finances are combined, it’s a good idea to keep a close eye on your transactions. You are both used to spending on your own schedule and timeline, and missed communication about a purchase might lead to an overdraft. I recommend setting up transaction alerts to make sure you can both see what’s going on.
- Assign money roles. In most marriages, it’s rare that both spouses want the same level of involvement when it comes to the day-to-day finances. Typically one likes more detail than the other (in our marriage, that’s definitely me!), and may take over the budget and bill paying. Find out who wants to take on the bulk of handling the accounts and details, but make sure to not let that spouse TAKE OVER completely. Combining your finances is a two-way street, and both of you need to know exactly what’s happening with your money, so even if you don’t check account balances daily, you have an idea of where your money is going.
- Celebrate your wins together! This is an important habit to start. Especially when one (or both of you) brings debt into the marriage, it can feel discouraging. But celebrating your financial milestones (paid off a credit card, saved an emergency fund) can have a huge impact on your financial happiness and your marriage overall. It also gives both of you confidence that you are in this together, and making progress.
Final Thoughts On Combining Finances After Marriage
Your marriage is built on trust and compromise, and combining your finances can help you learn both. It will build more trust and communication, and help you both learn the give & take of compromising on your life decisions.
If you are looking to combine your finances, make sure you take your time, discuss everything openly, and if needed, bring in a financial professional to help you create a money plan you are both excited about.
About the author:
Jacob Wade is the budgeting expert who started iHeartBudgets, a place where Millennials and young families come to learn EXACTLY how to build a budget that WORKS.
Jacob quit his job in 2018, sold his house and 95% of everything they owned to take off on an adventure of a lifetime and RV around the USA.
He is now on mission to spread the message of Financial Freedom around the country, and help others build a “Freedom Plan” of their own!
Also, he has a thing for Doritos…
Disclaimer: The information in this article is not intended to encourage any lifestyle changes without careful consideration and consultation with a qualified professional. This article is for reference purposes only, is generic in nature, is not intended as individual advice and is not financial or legal advice.