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Sharing a life with somebody doesn’t have to mean sharing finances, but, it naturally brings up some conversations about commingling money. When a relationship gets serious, and especially when a couple gets married, you are sharing resources. He may get health insurance because of your job. You may both enjoy a discount on Internet, or your car, because of his job. You split the groceries. You split utility bills. You will encounter some situations where you can feel like keeping all of your money separate is just making some things more difficult. But, many couples do keep things separate. In fact, one survey found that nearly half of couples keep entirely separate bank accounts, and even those with some joint accounts still maintain separate ones. The survey even found that many individuals keep secret individual accounts that their partners know nothing about.
No matter how much you love or trust someone, everyone can get some feelings of resource guarding when it comes to money. Having anything (or anyone) mess with your money could have serious implications for your life. That’s why a lot of people say you just can’t involve your heart when you make financial decisions. That’s complicated when you’re talking about comingling finances with someone who has your heart. But here are things to consider before making that jump.
How long have you been together?
One fascinating chart published here shows that the chances of breaking up remain very high in the first few years of dating. They plummet around year five, but until then, unmarried couples might want to think twice about making any major commitments like buying a home together or going halfsies on a several-hundred-thousand-dollar investment. Imagine the nightmare if you break up with someone and still own an apartment together? Or have to touch base regularly to decide what to do with that stock you grew with joint funds? And if you aren’t married, you don’t have many legal protections surrounding those funds. So ask yourself: have I been with this person long enough to make this kind of commitment?
Is there total trust?
It’s easy, and common, to brush trust issues under the rug when all that is at stake is our hearts. It’s not “all” of course, because heartbreak is miserable, but you can fully heal a broken heart. You can’t fully heal a destroyed bank account. If you don’t completely trust your partner and haven’t wanted to face that truth, you’ll need to before comingling finances. There is no room to politely lie and say you trust someone when your money is at stake. That’s your rent. That could be a down payment on a home. That could be your retirement savings. This is no time to put those things at risk all because you didn’t want to admit that you don’t fully trust this person.
Do your spending habits match up?
Maybe you always find a coupon before making a purchase. Maybe you always go generic over name brand. Perhaps you buy your clothes at thrift stores. You make all of your meals at home during the week, only dining out on weekends. But your partner, he doesn’t know about couponing. And he has a thing for name brands. In fact, he buys $500 sneakers. He gets takeout or delivery meals nearly every day. It was funny when you had separate finances: it will become a serious problem if you comingle finances. If your spending habits are drastically different but you share a bank account or credit card, resentment will build.
Do your investing ideas match up?
If you’d like to make some investments together with your savings, it’s important that you have the same ideas about investing. It’s particularly important that you have the same risk tolerance. You may want to play it safe. In fact, research has found that women have a lower risk tolerance when it comes to investing than men do. He may want to go big. If he leans your direction, he could resent you if he sees riskier stocks rise. If you go his direction, you may resent him if your money plummets. And what about your values? You may want to invest only in what you deem “ethical” companies, while he’s more willing to just follow the earnings, wherever they take him.
How permanent is this?
It’s amazing how many big commitments couples make to each other before even asking themselves how permanent the relationship is. How often do you see couples sign a long lease, adopt a pet, or buy a property together when they aren’t even sure this is the person they’ll spend their life with? If you break up with someone and have so much as a Labrador together, or as much as a house, you’re in for a lot of headache and heartache. So, ask yourself: do you think you’ll spend your life with this person? You may not want to comingle finances with someone else if your answer is not a resounding “yes.”
Is this inherited money?
When it’s your money that you earned through hard work, it’s yours to do what you want with. When it’s inherited money, that’s only partially true. Other feelings are involved. If a grandparent, for example, left you a small inheritance, her hopes may have been that you used that to create some independent stability. So if you’re about to comingle that cash with a partner’s in a down payment on an investment property, you might be going against your grandparent’s wishes. Once you comingle inherited money, that’s community property. If you put 50K in an investment property, and your partner does the same, you now share a 100K investment. You don’t have separate cash anymore. But so long as you independently invest inherited money, that’s yours – even if you’re married.
Have there been accountability issues?
This is another time when you may need to face some realities you’d been blissfully avoiding. Maybe your partner doesn’t take accountability for his actions. You’ve been mostly protected from the consequences, but you may not be if you comingle finances. Take for example a partner who has an issue with authority, and keeps getting fired from jobs over it. He refuses to consider what he may have done wrong, making the same mistake at job after job. What happens when he wants to dip into your then joint account to cover his bills, when he loses another job? Only comingle finances with someone who you feel takes accountability for their actions and can hold down a job. Your hard-earned and saved money shouldn’t become his emergency fund.
How even will the split be?
This is how mixing money and love becomes awkward. Say you want to go in together on, say, a 50K investment, but he only has 20k and you have 30k. Presumably, your share of the profits should correspond to what you put down. Translation: when that interest check for $275 a month comes in, it would seem that you should get a bit more of it than your partner. But it gets awkward, splitting hairs like that. Imagine when those figures and earnings get bigger. You really don’t want to politely split, say, $1,000 a month in interest with someone who put down less than you. Are you ready for these conversations?
Why are you doing this?
Make sure you’re doing this for the right reasons. Never let someone pressure you to comingle finances. Nobody has a right over your money besides you (unless you’re married). When someone loves us, it’s easy to believe they know what’s best for our money. So when your partner insists you two should buy this property/invest in this fund, etc., he can be very convincing. But always speak to a financial advisor before making those decisions. She’ll look at the numbers using just her head, and not her heart, because she’s a neutral party. Make sure you’re doing this because it’s the best financial decision, and that’s all.
How would you feel if you had a windfall?
You’re making this decision based on your current financial situation. But, don’t forget to dare to dream! Comingling finances when you have very similar financial situations can seem like a no-brainer. But what if your career could take you down a path of a financial windfall? What if your personal income may quadruple in the next few years? You never know what could happen. How would you feel, then, to be sharing everything – including, perhaps, investment earnings? It’s okay to consider this. Maybe you’d realize, then, that you didn’t want to share everything. That’s okay. It’s just important to ask these questions now.
