5 Tips to Combining Finances

Combining finances with your spouse or partner can be challenging. A successful combination depends on recognizing you have different experiences with money, attitudes about money, and earnings potential. Unfortunately many couples do not get the money issues correct as it is one of the top reasons for divorce.

There are no right or wrong ways for combining finances but there are steps you can take to make sure money doesn’t come between the two of you. These five tips can help make combining finances smoother.

1. Know Your Money Behavior

Obtaining a better understanding of your money behavior can ease the transition. And knowing your spouse’s money behavior can help you understand how his/her approach may differ from your own.

Use this 20-question quiz to find out your type.  It’s a quick and easy way to get some insight into your money habits and behaviors.

The quiz categorizes your personality into one of five different money types:

  • Hoarder
  • Spender
  • Money Monk
  • Avoider
  • Amasser

The quiz authors state that each type has both good qualities and shortcomings, and that most people are in fact a mix of types.

Although some of the questions didn’t have the answer that I really wanted to choose, it validated my hunches about my money habits.

Discuss the results of the quiz with your spouse. It’s a good way to start the discussion about how you have used money in the past, your current worries, and your hopes for the future.

You can also include your credit reports in the discussion. Sharing your credit reports can help you both understand how you’ve handled past and current debt. Was it paid off quickly or was it delinquent? How much is outstanding?

Be open and transparent during the debt discussion. The past is passed. Remember the discussion is about understanding the past so you can move forward together. Exploring your debts and how they were repaid is a good starting point for the conversation.

2. Set Goals Together

Establish goals together for your money once you have an understanding of the past.

Financial goals are as easy as “we are going to pay off this student loan by such and such a time” or “we’d like to save enough money for a home down payment by this date.” Use the “how much by when” formation of goal setting. Doing so makes the goal more real.

But the goals should be broader than end points. Set rules for engagement.

Michelle Singletary, a nationally syndicated personal finance writer, has developed several rules for engagement based on trust and respect for each other. Her rules include:

  1. Be transparent – no hidden finances (maybe with the exception of birthday gifts…)
  2. Communicate regularly such as once a month when you do the bills or quarterly as you review your investment/retirement statements.
  3. Come up with a code to de-escalate agreements. If a discussion gets heated, think of a way to de-escalate it. She uses a funny example of how to do so.
  4. Confide in one another. This point should go without saying but it is one of the ways renew trust and move forward.

Besides these overarching process rules, some couples set up specific ground rules such as:

  1. Waiting 48 hours for big purchases – too curb the impulse.
  2. No individual purchases greater than $200 without consultation – to make sure both agree on the need for the purchase.
  3. Pre-set rules on how what counts as emergency spending.

You can probably come up with your own rules tailored to your specific situation. The key is to have rules that make sense to both of you.

3. Paying Joint Expenses and Savings

This is the “who pays for what” issue and the “who saves for what issue.” Now that you are a couple there will be some joint expenses such as housing, utilities, vacations. So how do you handle paying and saving for those?

One idea is to share them fifty-fifty. Or you can share based on your share of household income. If one person earns $60,000 and the other $40,000, then the higher wage earner pays 60% of all joint expenses and saves 60% of the savings goal.

If one person has a large student debt load or other debt, then deduct the debt payment from that person’s earnings before you calculate the percentages. So if the $40,000 earner has student loan payments of $10,000/year in the above example, then the $60,000 earner pays two-thirds of joint expenses and the $40,000 earner pays one-third of them.

Another way is for you to assign responsibility for each bill. One person pays the mortgage. The other pays the utilities, telecom bills, groceries, etc.
Or you can live on one person’s salary and save the other person’s salary.

The main point is to agree on a plan and to re-evaluate it once you have several months under your belt.

4. Mechanics of Combining Finances

This issue is the least important. I’ve seen couples use variations of three models to combine their accounts – checking, savings, and investment accounts.

  • Totally Separate – Each person keeps their own checking, savings, and investment accounts.  They assign responsibility for each bill.
  • All Joint: No more separate accounts but one joint checking and one joint savings. Each paycheck goes to the joint account and someone manages the money.
  • Hybrid. Each person has a separate checking savings but there also is a joint account for joint expenses. Each person contributes to the joint account using one of the techniques above.

The key in each model is to decide who pays for what and who manages the account.

5. One Last Consideration

Make sure both of you invest time in this process. Don’t leave it to one person to do all the work. Even if one person has the aptitude and desire, and the other has neither, it will not be in your collective best interest for one person to do all the work without the other being involved.

This advice doesn’t mean that one person can’t take the laboring oar such as paying the bills and looking for ways to save money. But at least have a quarterly check-in to make sure that other person knows what is going on.

I recently had a new client whose spouse passed suddenly. He was at a complete loss and had to fend for himself for the first time. He made several costly mistakes (and spent nights needlessly worrying) that in hindsight could have been avoided had he paid attention about their finances.

Finally, none of this is set in stone.  You can try multiple ways to combine finances. The key is to find a system that works for both of you and to stick with it.


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