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Is Merging Finances with Your Significant Other Right for You?

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August 01, 2021

Is Merging Finances with Your Significant Other Right for You?

Determining whether to merge your finances completely, partially, or not at all can be one of the single most important discussions you have with your spouse/partner as it creates a strong foundation moving forward. As a newlywed, a whole new wave of conversations have come up between my wife and I in recent months. One of the biggest has been around merging our finances and what that should ultimately look like. I also get this question a lot from clients who are planning to get married, were recently married for the first time or are getting remarried and depending on which situation you are in, your perspective on merging finances may vary. Here are some important questions to consider as you and your partner make your own decision.

To consolidate or not?

This tends to be the most asked question, and everyone seems to have a stance on whether it is a good idea or not. Whether you decide to do so or not, transparency is key in both situations. Meaning, that even if you don't combine everything together, you and your spouse/partner should be able to sit down and have an open dialogue around all the accounts they have set up, any debt they have outstanding, and what they are currently pursuing on a financial goal basis (adding more to 401(K), building a reserve, paying down debt, etc.).

If you do decide to consolidate finances, then you want to be sure you discuss the importance of joint decision making in this matter. Now that the money is not just yours, but both of yours, you will need to decide whether you should make the purchase or not. This can lead to friction, but in every good relationship there is give and take and you should maintain that stance with your finances

What should it look like?

The best thing to do is to set aside an hour or two and bring a copy of every account that you have to date. You will want to make the decision whether you are going to get rid of your individual checking accounts or keep them. If you do keep them, I would recommend putting no more than 10% in there per pay period to cover personal expenses when you aren't together or would like to purchase something that is not mutually beneficial. This can help reduce a lot of arguments around purchases and help you feel at ease when you are out with friends, and you spend money.

You should then take the other 70% or 80% (20% for financial goals) and direct that into your joint checking account. This is where all your bills will be paid out of (mortgage, phone bill, utilities, etc.). It is recommended that you have your checking account set up at a bank separate from where your savings account is and that that be at either a high yield savings account bank or a credit union. Then the 20% that is designated for financial goals is automatically deposited into that savings account.

Goals

Another important thing to discuss when merging finances are the goals that you both have. You may have discussed this in the past, but now is the concrete time to sit down write those goals out and make a concrete plan on how to achieve them. For most they aren't sure where to start or have a clear vision on their goals which is where your Private CFO can help in giving you that definitive plan moving forward to make the best decisions for you and your family.

Budget

Whether you merge or not one of the most important things is having the proper financial foundation which entails having a budget. I've mentioned this in the past, but you should follow the 50/20/30 model in the following order:

  • Needs | Write out all your fixed expenses and see where they stack up relative to net income (if its below 50% or not).
  • Savings/Debt Repayment | The 20% should be pulled to the side each pay period automatically and direct deposited in the savings account you set up.
  • Wants | The 30% is what's left over for variable expenses and this is the amount you can budget for monthly because it changes.

This should be set up in an online software tool like the Financial Dashboard you have access too or even a spreadsheet if you like manual input.

Sharing finances with your partner depends on comfort level, trust, relative income levels and, ultimately, the dynamics of your relationship. And most importantly, whether you do or do not, transparency is key. 76% of respondents to a survey by the National Endowment for Financial Education stated that financial infidelity harmed their marriage and 10% stated it resulted in divorce. Be sure to be in lock step with your spouse/partner and with clarity and transparency all things are possible as you embark on this new journey in your life.


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About the author

a person wearing a suit and tie smiling at the camera

Kurt Brucker

Vice President, Private CFO®

A native of Marietta, Kurt graduated from Kennesaw State University (KSU), Summa Cum Laude, with a BBA in Finance and a Coles Scholars minor (top 10 in the business school). Kurt used his experience in the business school to quickly transition and make an impact at oXYGen Financial. In 4 years Kurt has risen from intern all the way to Vice President & Private CFO®.

Kurt lives in Buckhead with his wife Megan and is very involved with the faith community including Passion City Church. He is a die-hard Atlanta sports fan and loves to play golf and meet new people. Kurt is a very driven and motivated individual with a passion for helping others see their dreams come true.

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.
Background and qualification information is available at FINRA's BrokerCheck website.

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