Merging Accounts When You Get Married
Financial problems are one of the leading causes of divorce. According to a survey of 1,000 people, nearly half of American couples fight over money. But no matter the state of your finances, once you are married, all of your assets are merged in the eyes of the law. Coming up with a financial plan that works for your marriage is therefore of the utmost importance.
Get comfortable talking about money
The earlier you get comfortable discussing money with your partner, the better. It’s important that you see eye to eye on spending habits and priorities. You can only build a budget together if you both agree on each part of the budget. If one feels the other is spending too much or that they are too frugal, it can be difficult to come up with a budget that satisfies all parties involved. Worse, misaligned financial goals can create pressure on the relationship. “If you can set goals together, then it is easier to get the other spouse on board,” writes Miriam Caldwell, budgeting and personal finance expert for The Balance.
Explore different financial arrangements
You don’t have to completely merge all of your money into a single account to combine finances. According to financial planning expert Paula Pant, these are three methods for combining finances: proportional, raw contribution, and complete. “There's no wrong way to customize your banking and bill paying, so long as it's fair, transparent, and sustainable for all parties,” Pant says in an article for The Balance.
The proportional method has couples contributing to combined expenses at a rate proportional to their income. The raw contribution method sees both individuals putting in a fixed amount regardless of how much they make. Both of these methods enable couples to maintain individual accounts for personal expenses. Finally, the complete method is a total merging of all money, with couples carrying only joint credit cards and contributing to a joint retirement account. This is the simplest method from a bookkeeping perspective but also the most challenging if you and your spouse are not completely on the same page.
Stay flexible and maintain open communication
As your marriage and your life evolves, so should your finances. A plan that works in your 20s may not work as well in your 30s. Salaries change, babies are born, debts are paid, and major purchases are made, perhaps even including a home. If you opted for a proportional method and the balance of earnings change, you’ll need to change the ratio of contributions to combined bills, which may create some friction if it was not anticipated and discussed beforehand.
You may even want to change strategies if the one you tried didn’t work. For example, completely merging all accounts may simply be the wrong arrangement for your marriage. Some people want to combine all of their money because it seems romantic, but millions of happy couples successfully maintain individual accounts. “Once you choose a method, don’t be afraid to tweak or change it,” Pant says. “As a team, you need to experiment with different strategies to find the perfect balance.”
The most important part of merging finances is to maintain an open and honest dialogue with your spouse so that both of your needs are clearly understood, thus enabling you to work together to meet those needs. Additionally, consider hiring an accountant. Budgeting is not always easy. Having an expert help you organize your finances can also lead to a happier marriage.