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For the last 11 years as a single mom, I’ve been learning and managing finances on my own. I started from the bottom, with no income and no career prospects. (You can read more about my story here.) It was a tough road, but I’m happy to say that I finally feel independent and confident in my ability to manage my personal finances.
But what happens when one becomes two? How do you handle finances in a relationship? Should unmarried couples combine finances? Should married couples consider maintaining separate finances? How would that actually work?
One question leads to another and in my quest to find answers, all I uncovered was general information and discussion, rather than a real How-To guide to actually address the pros and cons, let alone the details of how to go about merging finances as a couple.
In my mission to answer these questions for myself and my new journey into stepcoupling a blended family, I’ve outlined just what options should be considered when deciding how to handle finances in a relationship.
Whether you are newly married and navigating finances together for the first time, or coming together with separate finances and money management styles, there comes a point in the relationship when it is important to decide how to manage money together. This post provides tips and guidance on how to do just that.
How to discuss finances together: The Discussion
The first step in deciding whether to combine finances or not is to come together and have an open and honest discussion. Here are some topics to cover:
To combine or not to combine, that is the question
First, discuss why you want to merge finances. It might be a good idea to independently make a list of reasons why (or why not) it is important to combine finances. Some reasons to consider include:
- Nurturing a sense of partnership where everything is shared and discussed
- Creating transparency so that each partner is aware of family income and spending
- Ease of tracking and managing money in one place
- Building and maintaining a sense of equality
- Developing a shared purpose and goals
What are alternative solutions?
You can review all separate and shared expenses and determine who will cover what. By alternating bills, dividing expenses or simply splitting everything down the middle, you can still maintain separate accounts. During your initial discussion, include reasons why each of you wish to maintain independence and autonomy by keeping finances separate.
What to discuss before combining finances
What are your individual and common goals? What do you hope to achieve in the future? How do you like to manage money? Are you hands on with spreadsheets and financial apps already loaded on your smartphone or do you simply check your account balance at the end of the month to make sure you can cover the next cycle of bills?
Before you combine finances, you’ll want to discuss what works for each of you, why it’s important to work together and what common goals you’d like to achieve as a couple.
What you need to know about each other
Each partner comes to the relationship with an individual money personality. There will be financial differences between you. Perhaps one is natural saver and the other a natural spender. Before you combine finances, take the time to learn each other’s money habits.
It’s also time to lay it all bare. Whether you choose to do this during your initial conversation or plan this for another day, before you merge, you will each need to provide full disclosure of individual finances.
Are there any debts that your partner isn’t aware of? Is there a credit card you like to keep hidden? Unless you decide to keep finances fully separate, your partner should have full understanding of what you bring to the table. Both the good, and the bad.
Who will be CFO of the relationship?
While this isn’t critical, it does help to have one person take responsibility for overseeing the general management of joint finances. You will both still contribute and have access to accounts, but one partner will naturally fall into this role.
Why combine finances as a couple
When I initially considered the question of whether to merge finances in my relationship or not, the main reason I had was simple. Partnership.
How do you maintain a sense of shared partnership and build a new life together while maintaining financial autonomy and independence? I felt a big disconnect between the two.
As a couple, mine becomes ours. At least when you reach the stage of combining families, living together or marriage. You are effectively merging two lives and creating a new family.
When you merge finances, you create a shared purpose. You have a common budget and create new shared goals for your future.
If that financial sense of mine becomes more important than ours, a common budget brings everything together and prevents feelings of inequality. Even if your common goals include individual savings goals, that money can come from the combined budget to feed individual goals. The key is communication.
The importance of Money Dates
Money remains one of the top reasons for divorce. Don’t let that happen due to poor communication and lack of a shared sense of purpose and financial goals. You are a couple and a team, whether you combine finances or manage everything separately, you still work together as a partnership.
When couples lack open discussion about finances, resentments build and trust is lost. If one partner acts as CFO and the other partner is unaware of spending or savings, costly mistakes, or worse, can easily occur.
I speak from experience. My husband managed all the finances and I trusted his judgement. When he passed away, I suddenly became an unemployed single mom with no savings and no life insurance policy to cushion the financial blow.
We had combined finances but we lacked communication and shared goals.
Make communication easy by setting monthly money dates with your partner. Whether this involves a nice dinner out or just a glass of wine after the kids go to bed, create the habit of meeting regularly to discuss your combined finances. Set the foundation early that this is a relaxed and rewarding experience to share together and aids in strengthening your relationship.
What to discuss during your money date
During your money date you will want to review how the past month went and what to plan for during the month to come.
If there is a designated CFO of the relationship, they might be the main person to review all transactions over the last month and highlight areas of over spending or review the overall budget. If you both track expenses throughout the month, you can use this time to discuss what went well, and what could be adjusted to work better.
Think about any upcoming large expenses and find ways to adjust the budget to account for the extra spending. Review goals and the progress made to achieve them.
Lastly, be sure to discuss how you each feel. What is working and what isn’t? Does everything feel equitable and fair? Does one partner feel resentful or taken advantage of? Deprived? Be sure to address issues and make adjustments such that you maintain a sense of teamwork and partnership.
Related reading:Marriage and Money: How to Talk to Your Partner About Money
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The How
I’ve read plenty of articles on the pros and cons of combining finances as a couple. But none of the research I conducted actually provided the nitty gritty How-To guide that I needed.
The reality is that it can be quite complicated to take two separate sets of finances and find a way to merge them together. Ideally, in an easy and stress-free way. Below is a list of 5 different methods to manage finances as a couple, providing varying levels to either combine or maintain separate accounts.
Method 1: Maintain individual accounts and create a new joint checking and savings account
Basic Structure: Create a new shared joint and checking account but maintain all individual accounts.
How it works: Transfer over a certain percentage of each paycheck from individual accounts into a new joint checking account. The percentage deposited may or may not vary based on who earns more income. The overall amount deposited is determined by the shared budget. All shared expenses are covered using the joint account.
For example, if one partner earns $80,000/year and the other earns only $40,000/year, you could agree to split everything using a 75/25 ratio. If after reviewing all shared expenses you set a combined budget of $5,000/month, one partner would deposit $3,750 and the other partner would contribute $1,250 into the joint account. Then, all shared expenses would be paid from this account.
Benefits: This method works well for a diverse range of relationships that may not be ready to dive into 100% “ours”. As a couple you can begin the process of turning “mine” and “yours” into a clearly defined category of “ours” yet still maintain individual established accounts and habits.
Method 2: New combined account for all finances with individual accounts
Basic structure: Similar to the last option, however all paychecks are deposited directly into the joint account. Money is then transferred to individual accounts for personal use.
How it works: With this option you will still set up your new joint checking and savings accounts. The difference is that more of your finances are now combined because income from each individual is now pooled into this combined account. As a couple you will then discuss shared expenses and budget, as well as individual goals, and transfer money from the joint account to the individual accounts for personal spending. Similar to an allowance, this allows couples to still spend (or save) guilt-free, but according to the overall budget that was established.
Benefits: This allows for full transparency of money in, but still allows for autonomy of saving and spending for individual needs and goals.
Method 3: Merge everything into new shared accounts
Basic structure: Begin by listing all accounts together. Decide which ones you will maintain and then add your partner or spouse to that bank account. Likewise, determine which accounts can be closed. The result will be one joint checking account, one or more joint savings accounts, and one or more joint investment accounts.
How it works: This is the option which provides full transparency and combined finances. You make all money decisions as a couple. It is important to maintain open communication with money dates and understand that each individual’s money habits will affect the other partner.
Benefits: This is the ideal option for younger newly-weds. Older, separate accounts aren’t as established or diverse. New habits are easy to start. As a couple you will work together to achieve future financial goals.
Method 4: Live off of one income and save the other income
Basic structure: Same structure as above, however one full income is transferred to savings.
How it works: As you discuss all shared expenses and financial goals, check if it is possible to cover everything with just a single income. This makes saving especially easy because one paycheck will go straight to savings and the other paycheck will fund the joint checking account to cover all other expenses.
Benefits: This method bears mentioning because it provides extra security in the event that one partner is laid off or otherwise experiences a loss of work, or if you eventually want one partner to stay home to raise children without childcare expenses. There is added peace of mind that as a couple you can cover all expenses with one income, then direct the extra income to a shared financial goal.
Method 5: Completely separate accounts
Basic structure: This is the easiest option, in that you come together as a couple but preserve the way each individual manages their personal finances. You each maintain your individual accounts and pay for expenses individually.
How it works: Decide together who will cover which bills each month and assign certain expenses to just one person. Alternatively, you can rotate bills each month to keep things even. Continue to track expenses together and meet often to review what each person covered and make adjustments as needed to maintain fairness and equality. Some expenses will arise that are more than expected or bills simply change over time. You will want to establish together how you will divide these expenses, whether you try to maintain equal 50/50 split of expenses or a different ratio based on individual earnings.
Money dates are especially important with this method to prevent feelings of inequality or unfairness.
Benefits: Allows for full autonomy for couples that aren’t ready to combine finances or relinquish control of personal money management.
How to track combined finances and create a new budget as a couple
Just as with managing your personal finances, the process of combining and managing your new shared finances begins with income and expense tracking.
As a couple, you will likely find that one person is more excited about this process than the other. It may work best to assign one CFO of the relationship who will be the main person to track and monitor the money. Regardless of whether you do everything together, or just one person does the tracking, you should both have easy access to the information and maintain frequent communication with your regular money dates.
Not everyone has an ingrained love of spreadsheets. Luckily, there are some really great online options to make tracking and managing money as a couple very easy and accessible.
Here are three that work well:
- You Need a Budget (YNAB)
- Mint
- Personal Capital
YNAB
Pros: While I haven’t personally used this app, there is certainly a very large, very loyal fan base. YNAB makes tracking finances easy but their true strength is in training you how to manage every dollar. The power is in the budget.
Establishing your new budget is simple to do. With the help of the app, you then assign every dollar deposited a specific job to do. That job could be covering living expenses, paying off debt or saving for a financial goal.
How it works: The easiest way to utilize YNAB is to go with any of the above options 1-4. With your new joint checking and savings accounts, you will establish all expenses and create your new joint budget. You create one YNAB account, to which each partner has access to. Money is then divided according to your shared expenses and financial goals.
Cons: Annual fee to use.
Mint
Pros: Mint is free to use and a great way to track your income and expenses with personalized categories. With Mint, you can see a snapshot of all accounts and track your overall net worth, view individual banking transactions, view and monitor your budget, view your credit score each month, receive helpful tips on how to optimize and improve your finances, track investments and set and monitor financial goals.
How it works: When you set up your new combined account as a couple, you will create a new Mint account with one email and password. Mint will prompt you to connect all relevant banking accounts.
The first tab you see when you use the Mint app is a snapshot of all accounts and your net worth according to these accounts.
The next tab is for tracking all your banking transactions. Once you combine your finances as a couple and create your joint checking and savings accounts, you can easily view all transactions and assign spending categories.
Using your personalized expense categories, your budget is automatically created. You can then make adjustments and set new spending limits for each category in your budget. You will receive notifications as you approach spending limits or go over budget.
Cons: There is currently no option to merge existing individual accounts. Each partner will access the same account to view tracking and budgeting information.
Mint also provides credit monitoring so you can track your credit score. Since you can’t merge two accounts or separate one account into two individuals with shared banking, you will only see the credit score for one partner.
Personal Capital
Pros: Personal Capital is ideal for those that wish to track expenses, monitor budget and view investment performance all in one place. The true power is in wealth management, with retirement planning tools.
How it works: Very similar to Mint, you will create an account using one email and password, then link the banking and investing accounts you wish to follow.
Once you have linked your various accounts, you can view a snapshot of overall net worth, individual account balances, banking transactions by expense category, cash flow month to month, overall budget by expense category and investment portfolio balance and performance.
Additional tools include an investment checkup, retirement planning and access to a financial advisor.
All basic tools are free and you have the option of using Personal Capital for investment management and advice based on a percentage of total assets managed.
Cons: Excellent and free resource for wealth management, however it is more in-depth and detailed for those looking to simply track combined expenses and budget. They do not offer the ability to merge separate accounts into a new joint account so couples will need to create a new account together.
Bringing it all together
Regardless of which method you choose, it’s important to remember the “personal” in personal finance. There is no one-size-fits-all solution. As a couple you will discuss what works for you, then start the process of creating a method that works for your unique situation. Through frequent and consistent money dates you can discuss how to make adjustments and continue to personalize how you manage money as a couple.
The important take-away is that as a couple, you keep the conversation going. Develop your individual and shared goals and work together to achieve the financial future you want.
