The do’s and don’ts of combining finances with your partner
Not looking forward to the “money talk” with your partner? There are no set rules, but here are some tips to make the transition easier.
The percentage of adults cohabitating with their partners is on the rise.
Maintaining a healthy relationship with your partner can be tough. Throw money into the mix and it can make or break your financial life.
There is no set formula for how you should combine finances with your partner. However, we have some do’s and don’ts from relationship and financial experts on how to navigate shared finances in a relationship. Plus, we offer some scenarios for merging finances that have worked for couples just like you.
In this article:
The “do’s” of combining finances
Do: Address your concerns upfront
Being open and transparent plays a huge role in any difficult conversation. Especially this one. Be honest with your partner about your concerns. Write them down and encourage your significant other to do the same. Then, have an open discussion about each of your concerns and consider potential solutions.
Don’t be afraid to ask the hard questions. How much do they make? What if you break up? Does he or she have money management techniques that are questionable? Addressing your concerns is not a way to bash your partner. Try to find solutions to make it work for both of you.
Do: Discuss which accounts you will be combining
Are separate bank accounts or combined accounts better for you? This answer varies from couple to couple and will depend on where you are in your relationship and financial lives. The short answer — you have to do what’s best for you.
For some couples, that means preserving separate finances, but also maintaining a shared account that each can contribute to. Joint accounts like these should be used for shared expenses such as rent, mortgage, utilities, and groceries.
If you do decide to combine finances, both you and your partner will have access to the funds, such as a joint checking account. Meaning both of you can legally take out the money and spend it on anything you want. You both are also responsible for any debt that incurs on the account and there’s potential to affect each other’s credit score.
Do: Create a debt repayment plan
Stress around debt can cause serious problems in a relationship, so you want to try and eliminate it where possible.
Start by having an open and honest conversation about your debt and come up with a financial plan. Ask questions like how much debt do you have? What are the monthly payments? How high are interest rates? You may not be able to pay off all of your debt at once, such as student loans, but you can start by eliminating smaller debts like credit cards.
What if it’s your partner who is carrying the majority of the debt? Again, this answer will be subjective to you as a couple. You may want to do everything you can to help your partner financially. However, it’s essential to be realistic about the support you can offer. Communication is critical. Brainstorm ideas on how you can help the other person get back on track and provide emotional support where you can.
Do: Establish a budget
How much is “too much” when it comes to your spending habits? Establish a budget to guide you and your partner. This will give you an idea of what merging your finances will look like. Gabriel Kaplan, a CFP® and CPA in New York City, told Money Management International that he and his wife “agreed on a savings rate, deducted from our living expenses and then allocated what was left over to ourselves … Things have worked out because we stick to our budget and we both trust the other person who is responsible.”
Create a budget for the first two to three months. Include groceries, rent, household expenses, and date nights. Figure out how much you might typically spend in a given month or week. This will give you a realistic snapshot of where the majority of your money is going and how much you should save. Set a budget and use it for the first couple of months then adjust as you go. Don’t feel restricted by your budget, instead use it as a guideline for spending.
A budgeting app can help you save money and track your spending as a couple.
Do: Start an emergency fund
Building an emergency fund should be one of your first financial goals together. Throughout your relationship, you will most likely encounter unexpected expenses. One of you may lose a job, major home repairs may arise or health problems can surface. An emergency fund is there to help soften that blow.
It’s a safety net of cash that will be used for emergency expenses so you don’t have to incur any debt. A good rule of thumb is to save around 6 to 9 months’ worth of living expenses.
Make sure to put this money in a separate account so you won’t feel tempted to make a withdrawal. Consider a high-yield savings account so that your money can earn interest over time. Try to replenish your money as you spend it and only use it for emergencies.
Do: Save for retirement
About Tom Anderson
Tom Anderson is an award-winning financial journalist whose work has appeared in CNBC.com, Kiplinger’s Personal Finance, Money, Monocle and Wired. He was a 2008-09 Knight-Bagehot Fellow in Economics and Business Journalism at Columbia University.
Read more by Tom Anderson
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Haven Life is a customer-centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.
Our editorial policy
Haven Life is a customer centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.
Our content is created for educational purposes only. Haven Life does not endorse the companies, products, services or strategies discussed here, but we hope they can make your life a little less hard if they are a fit for your situation.
Haven Life is not authorized to give tax, legal or investment advice. This material is not intended to provide, and should not be relied on for tax, legal, or investment advice. Individuals are encouraged to seed advice from their own tax or legal counsel.
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