When “Mine” & “Yours” Become “Ours”

Financial Advisor Jacqueline Battista fills us in on how to share finances with your one and only.

When a couple makes that exciting decision to bring their lives together, it’s inevitable that their financial lives, too, will become intertwined. And while the sentiment that “love conquers all” may overshadow financial concerns early on in the relationship, the reality is that how each partner handles money could have a major impact on their shared financial future.

The biggest thing to remember with this big life step is open communication. With that in mind, here are a few key areas that every couple should discuss before merging their finances:

Income and Expenses

One of the biggest decisions you should agree on is how much of your income will be directed to individual accounts or to a joint account. Individuals who are used to managing their money may want to maintain their own account or have a separate account for discretionary spending. If this is your preference, discuss who is responsible for each expense. Opening a joint account that both parties contribute to is a common way to pay for shared expenses, like rent or mortgage payments, utilities and food. If you decide only to have a joint account, discuss how you’ll handle discretionary spending. Many couples agree to discuss any purchase made above an agreed-upon amount, so both partners feel involved in the decision.

Existing Debts

If one or both of you is bringing debt to the relationship, such as student loans or credit card debt, it is important to agree how those will be paid off. Will both of you contribute to loan payments, or will the person who brought those debts to the relationship take sole responsibility? Reducing and eventually eliminating these debts should be a priority.

Emergency Fund

It’s important to have money saved for emergencies or to fund special opportunities that may come up. A general rule of thumb is to have six-to-nine months of income set aside in a cash account that is easily accessible when the money is needed. Communicate what type of expenses warrant dipping into this fund in order to avoid a potentially stressful situation.

Financial Priorities

Before you merge your finances, talk about your financial goals. Put together a plan that prioritizes each goal and factors in the ideal timeframe for achieving each goal. Also, talk about your spending habits, your approach to saving and how you will resolve disagreements about money. Be upfront about any issues you might have had with money in the past and how that might affect your lives going forward. Putting it all on the table now can help avoid problems related to money matters in the future.