To Merge, or Not to Merge

Several years ago, my then-girlfriend (now wife of eleven years!) and I called our respective parents to give them the Big News: No, we weren’t engaged. We were taking a big step and opening joint checking and savings accounts! While they were happy for us, it wasn’t quite the Big News they were hoping for. Regardless of our parents’ feelings, I believe merging our finances was an extremely important step to building a healthy relationship. So, whether you’re newly married or contemplating moving in with your significant other, read on for my thoughts on the subject of merging finances.
All couples bring different financial strengths and weaknesses to their relationship. Most couples I meet with did not learn personal financial skills in school – which is unfortunate and something I’d like to change. Personal financial skills, habits, and beliefs (or lack thereof) were usually taught or modeled by family members. As you can imagine, these differences often cause stress in a relationship.

In addition to bringing their individual financial strengths and weaknesses to the table, it’s not unusual for one individual to take on most of the financial responsibilities, such as paying bills. This is great for the individual that doesn’t like dealing with finances. However, I believe imbalances such as this cause unneeded stress and can make it more difficult for couples to achieve their short- and long-term goals.
So, how do you reduce financial stress and have a better shot at achieving joint goals? Here are some tips:

  1. Share all financial information: This means assets AND liabilities. For example, it’s important for both parties to know how much student loan or credit card debt the other has. Once you know how much debt there is, if any, you can come up with a plan to pay it off.
  2. Establish joint bank accounts: At a minimum, I recommend opening a joint checking and savings (AKA the emergency fund) accounts. Other accounts, such as house or travel funds, can be opened later.
  3. Share your short- and long-term goals with each other: Take some time to discuss what each you want to achieve. My wife and I set goals when we first moved in together. We no update them at least once a year.
  4. Get a joint credit card: You’ve been building up your personal credit, right? Now it’s time to have a shared card. Make sure both of you review the transactions on the monthly statement.
  5. Agree upon a spending threshold: Come to an agreement about how much either of you can spend without checking in with your significant other. For example, you could agree that buying anything over $200 requires a conversation.
  6. Allow yourselves some “fun money”: Think of this as an allowance. You each get to set aside some money that can be used for whatever you want – no questions asked. Do you want to buy something more expensive? Save some or all of your monthly allowance until you have enough for it.

I understand couples may be wary of merging finances because it can mean giving up some financial freedom. From personal experience, at home and in my financial planning practice, couples that merge finances have a stronger relationship and are much more likely to achieve their goals.

Listening / Reading / Watching

Here's what's got my attention this week:

  • Hillbilly Elegy: A Memoir of a Family and a Culture in Crisis by J.D. Vance. I'm about two hours into this book and really enjoying it. Summary from the publisher: Hillbilly Elegy is a passionate and personal analysis of a culture in crisis - that of white working-class Americans. The decline of this group, a demographic of our country that has been slowly disintegrating over 40 years, has been reported on with growing frequency and alarm but has never before been written about as searingly from the inside. J. D. Vance tells the true story of what a social, regional, and class decline feels like when you were born with it hung around your neck.