Love and money are two extremely complex subjects in their own right. When they're mixed haphazardly, it could create a recipe for disaster.
However, a compatible partner can actually move you closer to your goals of financial independence and freedom. It all depends on the ground rules, agreements, and financial strategies that you establish with your partner. Communication is key, and the earlier that communication starts, the better.
Here are some important financial factors to keep in mind as you begin melding your financial life with your partner's.
Not Every Couple Needs a Joint Account
Experts have spent decades debating whether single or joint accounts are better for couples. The two sides of the debate both have the same relationship goals: Create a stronger marriage while helping each other maintain financial responsibility. Some believe joint accounts create a sense of unity that is vital to a relationship. On the other hand, separate accounts allow each person to retain their independence, which can strengthen the relationship.
Unfortunately, there isn't a clear-cut answer for couples caught in the middle of this debate.
The best way to determine what type of account is best for your relationship is to consider your financial personality and that of your partner. If you actively manage your finances, enjoy controlling investment decisions, and take pride in your retirement accounts, it might be tough to suddenly let someone else start making money decisions on your behalf—especially if you feel they aren't as disciplined as you. A similarly minded partner, however, could enhance your decision-making process. They could help you strategize or split financial duties so you can focus on your favorite aspects of finance. The bottom line is that accounts should only be merged if both partners have the same type of financial personality.
Don't Let Investment Strategies Cause Friction
If you both enjoy investing, ensure that you have a similar investment style before you open a joint brokerage account. If an investment is too risky for one person, but they're forced into the investment through a joint account, it can strain the relationship. Even if the risky investment ultimately makes money, the personal drama between you and your partner could outweigh the gains. This goes both ways; an overly cautious investor could frustrate their high-risk partner.
This is an important conversation to have separately from more general conversations about financial personalities. Two people could consider themselves equally disciplined with money, but later find that they're total opposites when it comes to investment styles.
When in Doubt, Require Two Signatures
If you're on the fence about a joint account, or if one of you is worried about impulsive spending, you could open an account that requires both of you to consent to money moves. Common with businesses, these types of joint accounts require signatures from both account members before the money can be withdrawn, spent, or moved into investments. This can be a helpful tool in getting partners to communicate about expenses and prevent unnecessary shopping sprees.
Keep in mind that this dual-signature requirement isn't foolproof. Banks sometimes deposit checks first and ask questions later, and it's possible that a check could clear without both signatures.
Both Parties Should Assume Financial Accountability
No matter their working situation, both people in a relationship should feel they play a role in finances. Otherwise, money could start to feel like an allowance or paycheck handed from one party to the other. It isn't uncommon for one person in the relationship to take on more financial responsibilities, but both should be on board with the plan, and that plan should be communicated before it becomes the norm. This can be tough if one person isn't as responsible with money and needs to curb their spending through an allowance system. Like most financial issues, it's easier to handle if it's approached early and talked about openly.
Decide How You Will Split Up Bills
If one person earns more income than the other, the two may want to consider splitting bills to reflect that. Instead of splitting everything 50-50, a partner who earns 20% more every week may want to take on 20% more of the bill payments. These conversations should take place well before the first bill arrives in the mail. Also, a partner shouldn't assume that payments during the month counted toward their bill responsibility unless it's agreed upon beforehand. "But I paid for groceries" could lead to "but I paid for that dinner" and ultimately build up into a fight.
Ignore Gender Stereotypes
This one should go without saying, but gender doesn't determine who should make more money or control the finances in a relationship. If you are going to split up bill payments or assign money tasks to a single person, the decision should be based on who is more financially responsible, and nothing else.
Once you've established the basics like what kind of accounts you'll have and who will pay which bills, set your sights higher. Collaborate on financial goals based on a shared vision of your future as a couple. Where do you want to live, and how soon do you hope to buy a house there? Any big splurges on the horizon that you want to work toward as a team?
Every couple should do this, even if they decide to keep every other aspect of their financial lives to themselves. You don't need a joint account to plan for a vacation, and having a shared vision can inspire couples to keep each other accountable with savings goals.
The Bottom Line
These are the most important steps for couples to take when they decide to start merging their financial lives:
- Communicate clearly and as early as possible about finances to avoid letting small disagreements build up into fights.
- Joint accounts are best for couples with similar financial views and habits.
- Investment style is different than general financial personality and should be its own conversation.
- Ensure each person plays a role in finances, though the size of that role can depend on the person's level of interest.
- Set financial goals in your relationship and help each other reach those goals.