Do you have any recommendations for how to merge finances with my spouse? We got married young and were advised to set up “My Money Accounts” and “Our Money Accounts.” We still organize our finances that way. We each have our own separate checking and investment accounts for personal expenses, and we don’t need to consult with each other on how we spend that money. We also have joint checking and investment accounts. Our incomes go into our separate checking accounts, but we’re both required to replenish our joint account to pay our joint bills. The amount we contribute is based on our income and calculated annually based on raises, job promotions, etc. At this point, our incomes are about even, and we spoke with our advisor to see if it makes sense to fully merge our finances. I’m curious to hear from you. When is the best time for a couple to merge their finances without losing autonomy?
I’d like to start by saying that whoever advised you to set up your finances in the way you just outlined should be forbidden from giving financial advice in the future. Money issues are the top cause of divorce in the country, and this “advisor” is overcomplicating your life and setting you up to clash with your spouse. These recommendations for a young, newly married couple are nonsensical, unorganized, impractical, and foolish. The good news is that you are revisiting this decision now because you realize that something is amiss with your current process.
Since I don’t know you personally, and there may be information I don’t have, the best I can do is provide a framework to consider. Hopefully, you and your spouse (and Jewish Press readers) will find it helpful in your financial lives.
Getting off on the right foot: While I realize that your question is post marriage, it’s worth pointing out that a couple’s approach to money should be in sync and laid out BEFORE they tie the knot. It’s not possible to understand your future partner’s full relationship with money before being married to them, however, you can pick up on a lot during the courting stage of a relationship. You should have a shared view of money and how you plan to use it to build your life together. If you differ on certain matters, discussing them and going into the marriage with eyes wide open is imperative.
When to keep money separate: It may be helpful to first start with the reasons to not fully merge your finances. The situations that may warrant having separate pools of money from your spouse are:
1) Second marriage: If you are marrying for a second time, you presumably already have financial obligations, commitments, and goals associated with your first marriage that your new spouse may not share (e.g. supporting your son in kollel or paying alimony). Financial commitments that stem from a previous marriage should be segmented from your current relationship. The commingling of funds when they pertain to these other expenses may lead to arguments, which can easily be avoided.
2) Marriage later in life: Similar to the above point, if you are getting married in your 50s or 60s, you presumably have spent most of your career making smart, or not smart, financial decisions. Your new spouse shouldn’t necessarily be a partner in what you spent decades accumulating. It doesn’t make sense to immediately make the new spouse co-owner of all their spouse’s accumulated assets and liabilities.
3) Entering marriage with significant assets or debt: If one spouse comes into a relationship with millions of dollars saved or saddled with tons of debt, merging assets all together is ill-advised. The correct approach to handling this should be discussed before the marriage, as well as a strategy on how it should be managed in the future. This may be an article for another time, but it is understandable if the wealthier spouse does not want to merge funds at the commencement of a marriage.
4) Large inheritance: Understanding the boundaries on money that is inherited from a loved one is important. Even though both spouses are on the same team and function as one unit, it’s important that the party who received the inheritance take the lead on how this inflow of capital is handled. The other spouse demanding that those funds be used for specific goals is not the right approach.
All these suggestions are general guidelines. As previously mentioned, a candid conversation needs to be had, well before tying the knot, to figure out how each party envisions the finances of the relationship working out. If one party has unrealistic expectations for how the money will be handled, it can lead to a turbulent road ahead. The key is being frank and upfront about these issues from the onset.
When to merge finances: Merging finances should be the default for all newly married couples where the above exceptions do not apply. You married young, so assuming you had a similar level of assets (or lack thereof), you should have merged most of your finances immediately.
Keep in mind that a young married couple should always view themselves as being on the same team. This is true in all aspects of life. When one spouse is struggling, you are both struggling. When one spouse has a major success, you should both be celebrating. This is also true with money. Your income is OUR income. Your expenses are now OUR expenses. When you get married in your 20s, you build your life together and therefore all money should be considered “our money.” You worried about losing autonomy, but this is no different than all other aspects of your life once you are married. If you’ve aligned your goals and best practices and trust each partner to act in accordance with that framework, then you won’t necessarily need to consult your spouse on every single spending decision. Out of respect for your partner, a courtesy heads up or quick discussion may be prudent if it’s a large purchase outside of normal spending patterns.
How to merge finances: The best way to merge your finances is to just do it. Everything that can be merged should be merged. This obviously excludes accounts, like retirement accounts, that must be in the owner’s name. You may also want to speak to your estate planning attorney about the best way to title certain accounts for planning purposes. Beyond that, merge your finances and start working together as a team. Your net-worth will likely benefit from this decision.
Handling financial disagreements: If you are having budgeting problems, disagreements on how to allocate your money, or one person is a spendthrift, you should have a conversation about how to get control of your finances.
If there seems to be a financial impasse, instead of getting angry, hire an impartial third party to help. Throughout my career, I’ve been asked to play the bad guy to help couples get control over their finances. Each spouse feels less emotional when discussing these issues with me than with each other. I can also offer objective advice without all the baggage that may come from interacting with a family member. At the end of the day, it’s better that a couple gets mad at me and my advice than be upset with each other.
There may also be unique situations for each couple, like the ones I mentioned at the beginning of this article. In those situations, instead of implementing generic advice it may be helpful to hire a financial advisor to offer customized financial solutions.
Recipe for a financially successful household: I recommend that couples have regularly scheduled meetings to discuss their finances. They don’t always need to be serious meetings discussing difficult topics. In fact, most of these meetings should be exciting. Each spouse can express their vision for how they want to use their money to enhance their lives together. Regular communication about financial matters will help ensure that a couple is on the same page and will allow them to navigate the inevitable financial speedbumps along the way.
Setting a specific time to discuss these matters is great. Practically, in the chaos of everyday life, having regular meetings may not be so easy. Agreeing, at minimum, to spend a few minutes and discuss matters as they arise or when something is top of mind is a good policy.
When married couples communicate openly about their finances and work in unison to achieve their financial goals, it will help lead to household harmony and financial success.