Matrimonial Bliss - Pros and Cons of Merging Your Finances

Congratulations on deciding to tie the knot and making it official by getting married! Before you happily embark on your wedding preparation and honeymoon plans, it is absolutely necessary to have a transparent and thorough conversation to articulate how you and your intended spouse will decide how to handle financial matters and assign responsibilities.

Prior to having this discussion and even contemplating marriage, be certain to first learn and understand your spouse-to-be’s financial personality, goals, and values toward saving and spending money to determine the optimal means of tackling your family finances together. In addition to elucidating your financial aspirations, make sure you disclose your past financial affairs, including credit rating and any money history outstanding obligations (i.e. credit score and bankruptcies) to reach a mutual agreement before the wedding as to how you will handle them.

Should you establish separate or joint checking, savings, and credit card accounts? Would it be prudent to pool health insurance coverage and how can you and your new spouse share or maximize your employer-sponsor plan benefits? When should you make joint decisions and when will it be suitable to make them independently?

Be cognizant of the following pivotal perspectives and evaluate these advantages and disadvantages in blending or separating aspects of your finances.

Carefully assess the pros and cons of merging your bank accounts to decide on the mechanics of managing your budget.

• Foremost, you and your future spouse need to build an initial and detailed joint budget to track your current sources of income and expenses (i.e. fixed and discretionary). Developing a combined budget is vital to fostering a sound lifetime plan and adeptly managing your collective finances in light of respective differences in income and money behavior. Do not forget to also create a shared recordkeeping and filing system that will readily enable both of you to find significant documents. Find a financial planner to guide and provide ongoing advice to you and your new spouse on pooling money and paying bills.
• How do you and your spouse perceive money in your banking accounts should be handled? Do you wish to share a joint bank account that all of your income goes into and all of your bills are paid from or will you have separate bank accounts to split the bills between you? Keep in mind that joint checking and savings accounts can lower monthly maintenance fees and reinforce recordkeeping. 
• Whereas joint money management accounts can facilitate enhanced communication between you and your partner on money matters, the separate checking and savings account setup can afford you and your future spouse to have greater accessibility and individual responsibility over your finances. Keep in perspective that it may be difficult to track the deposits and withdrawals that you and your new spouse make to a single bank account, which can lead to bounced checks and frequent disagreements.
• Alternatively, you can consider a combination of joint and separate accounts, an adaptive arrangement that may be best if you have financial support obligations (i.e. alimony and child support) or bring outstanding debts (i.e. student loans) you will be paying down on your own. Determine if having individual accounts for your discretionary expenditures and a joint account for fixed expenses would be the most suitable means of mutually approaching your common money management responsibilities and overall financial situation.

• Consider having a joint household budget and a separate budget for your individual needs.

Be wary of you and your spouse’s individual credit quality and assess the appropriateness of maintaining credit in your own name.

• First, peruse Tips for New Couples: How to Handle Recent Credit Card Rule Changes to gain timely and invaluable insights pertinent to you and your new spouse’s credit rating. Request a free yearly copy of your credit report from one of the three major reporting agencies to evaluate your credit score and credit and be accountable for debt. Enlist the help of a credit card counselor in your region at the National Foundation for Credit Counseling to guide you in resolving your issues of paying off or paring down your individual or joint debts sooner.
• Ensure you maintain credit in your own name and have at least one credit card in your own name. Utilize this card periodically and commit yourself to paying off the credit card balance each month to avoid paying high interest rates in the future. Securing a strong credit history where you have immediate credit available for basic needs is essential, particularly if you find yourself on your own in the event of death or divorce.

• In addition, you may desire to establish individual accounts to prevent creditor attachment of joint funds to pay for you or your newlywed’s incurred debt. If you choose to keep separate credit, consider that it may be more difficult to qualify for mortgages alone than if your spouse’s income could also be factored into receiving this home loan.

Jointly prepare your financial life plan to maximize employer benefits, insurance coverage, and long-term savings.

• Seek the assistance of a financial planner and devote significant attention to preparing both your short and long-term income and retirement plan together to optimize earnings. If you and your new spouse partake in an employer-sponsored retirement plan, make sure you review each of the plan’s characteristics to decide which plan provides the best benefits. If possible, attempt to contribute to the maximum in your own plan and take advantage of any applicable employer match.
• Perform a cost-benefit analysis to compare the rate for one family health insurance coverage plan against the cost of two separate plans. If you have a more favorable health insurance package than your partner, be certain you are both covered by the better deal. Similarly, review premiums and think about combining your auto insurance policies with one company, if you and your new spouse have different auto insurance carriers.
• Collectively begin strategizing to achieve long-term goals in your financial life plan, as well as preparing to handle unexpected job loss or unforseen expense. Build a sturdy safety net in the event of unwelcome surprise and construct an emergency cash reserve fund of at least three to six months of non-discretionary living expenses.

You may or may not share common attitudes toward saving and spending money with your new spouse, but be sure to determine your newlywed’s financial personality in making money management decisions. Ultimately, you can do whatever you agree works best for the two of you by having careful conversations about handling finances jointly or separately. 

It is always a good practice to seek a neutral objective party such as a financial planner to guide you at the beginning and help you build a platform to succeed and mitigate difficult money conversations.

FPA member Elaine King, CFP^®, CDFA™, is the Author of Family & Money Matters. FPA member Philip Herzberg, CFP^®, MSF, is Director of Media Relations & Public Awareness for FPA of Miami-Dade.