Are You Ready To Combine Your Finances?

September 10, 2018  |  

Happy young african american couple shopping online through laptop using credit card at home

Many cohabitating couples combine their finances to simplify money matters in their home, but it’s not a decision to be made lightly.

Before you can even think about pooling your money in a more concrete way, you have to consider each other’s financial habits to determine what that means for you. Looking at these factors could help you decide if combining your finances is the right move for you and your significant other. Not taking this step could put you in a spot where you are left picking up the slack every month.

Their Relationship With Money
Did they grow up financially comfortable or were they raised in a home that is familiar with debt? Find out what they learned about money management, spending habits, and prioritization of finances. This may inform their attitude about money and whether they see it as tool, a goal or both.

Their Financial History
Once someone is out on their own, they’re generally responsible for their own finances. Look at your partner’s financial history like credit card accounts, tax payments (if they freelance), student loans, overdrafts, and other debts and payment plans. Check that against their half of your joint monthly dues and see how the finances might line up to figure out if completely combining your finances makes sense.

Their Observable Financial Decisions
We make financial choices every day like going out to lunch or bringing it with you. Are you going to the theater for movie night, or are you staying home and curling up on the couch? Do you need that new pair of shoes you saw, or are the ones you got last season still in good shape? Are you going to the salon every week, or do you know how to do your own hair well enough? Are you going to get a bigger home out in the suburbs, or are you going to get a spot in the city that cuts down on your commuting costs? Consider the financial choices they make and how that might affect how your joint expenses would be covered.

Their Earning Power
It’s important for everyone to contribute their fair share, but how much that actually amounts to is another matter. You and your partner may not earn the same amount of money, so paying equal amounts of the same expenses could put one of you at a distinct financial disadvantage.

Once you’ve decided whether you will combine finances, the next thing to do is to figure out the best way to do it. Traditionally, many couples go for an all-in method where they get a joint account and all of their earnings as a pair are pooled there. This is typically called the “What’s Yours Is Mine” approach, but times are changing and people need different ways to comfortably bring their finances together. These might work for them:

Yours, Mine, And Ours recommends a number of ways for couples to combine finances, but the best of these options might be for a couple to create a joint account that they each pour money into while also keeping their own separate accounts. Your personal account would be for your disposable income, personal bills, and/or savings, but you would each equally contribute enough money to the joint account to cover your combined monthly living expenses. This works best for couples who make comparable salaries.

Take Your Pick
A simple way for couples to bring their money together is to decide among themselves who is responsible for paying which bill. For example, one of you may pay the mortgage, but the other one pays all the utility bills, insurance, and groceries. This may be a good option for couples who don’t make the same amount of money.

Your Fair Share also mentions a variation on the first method, in which couples combine to the joint account based on a percentage of their income. So, if you and your spouse aren’t earning on similar levels, then you decide on a percentage that you’re each comfortable putting in the joint account. For example, your monthly take-home pay may be $2,700 a month, while theirs is $6,000. You each agree to contribute a third (about 33 percent) of your take-home pay to the joint account. That means, you’re putting $900 into that pot every month, and they’re putting in $2000. This allows you each a way to contribute equitably to your expenses as a couple without hurting one your disproportionately.

Love and money are touchy subjects. Combining your finances has the potential to be volatile to your relationship. But the important thing is to sit down with your partner and work with them to determine what makes sense for you and what you each feel comfortable doing.

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