Combining Our Finances Before Marriage

I’m a big fan of taking traditional finance advice…and tearing it apart. Okay, obviously there’s a lot of great traditional financial advice. But sometimes, a “rule of thumb” just doesn’t cut it. My future wife was offered a job last week, which means we’ll now be DINKs (Dual Income, No Kids) for the time being. We’re not getting married until next summer, which brings up the question of when to combine our finances.

Combining Finances Before MarriageNow that our income is “more even” and my future wife is no longer a student, we have more reasons than ever to combine our finances. Two of the biggest reasons people later get divorced are 1) dating the person is very different than living with them, and they just aren’t as compatible as they thought 2) irreconcilable disagreements about the family finances and spending habits. We’ve already been living together for two years, so #1 isn’t a risk. Now, that leaves the finances. We’re both very open about our finances. Before looking at her accounts, I could probably have guessed her net worth within about 10%. She obviously can see all of my finances by checking the blog at any time. She knows I have a Starbucks addiction, I impulse shop at Amazon on the daily, and I enjoy going to hockey games and concerts. She accepts all of these spending habits. I am also not one to micromanage finances. I prefer to take a macro approach and I don’t budget or prepare income statements regularly (I only create these occasionally for planning purposes). I have no problems with her spending “our” money getting her nails done, buying clothes, or getting drinks with friends. We’re in this together and what is mine, is absolutely hers.

I also think that combining our finances now will allow us to enjoy the early stages of our marriage. I don’t want to have to be running around to banks the week after our honeymoon to close accounts and move money around. Whenever I know something stressful is on the horizon, I prefer to tackle is sooner rather than later. It just feels good to accomplish these types of tasks.

With all of the positives, I obviously recognize there are some potential pitfalls to combining your finances before marriage. Firstly, if we didn’t get married, all of our money would be co-mingled. This really isn’t much of a concern for me because I’m just that confident that we’re going to get married. And if for some bizarre reasons we didn’t, and then we divided everything back out, I’d maybe lose $5k or so. That’s not really a big loss nor a big concern for me. The relationships that you have with people are worth more than money, and not getting married to my fiance would be 1,039,397 times more devastating than losing all of my money.

With all of that being said, combining finances (at any time) raises some complications for the tracking of my finances and goals. Firstly, I no longer have my finances; we have our finances. My goals, combined with her goals, become our goals. And that means that I need to reassess the goals I had set at the beginning of the year. Also, check out our balance sheet after combining finances.

Original Goal #1: Save $5,000 toward new car
This year I saved $5,000 toward a car, which, combined with the $1k I already had, gave me $6k for a car. I expect to purchase a car in the next couple of days, so this goal is now completed. Next we’ll need to buy a car for my fiance.

Original Goal #2 & 3: Save $5,000 toward wedding and $5,000 toward honeymoon
I’ve managed to save $7,218 for our wedding/honeymoon. Together I think we will easily be able to reach this goal. It will take about $700/mo at this point to surpass the goal.

Original Goal #4: Save $5,000 to contribute to my Roth IRA
I kept up with this goal on my own and had $2,500 of the $5,000 saved as of July 31st. However, my fiance hasn’t saved anything for her contribution this year, so we now need to ramp this one up a lot. We need to save $10k by the end of the year. In August I saved $1,500 for this, so we now have $6,000 more to save in four months, so we need to save $1,500 each month for this goal.

Original Goal #5: Save at least $10,000 toward a house
When I made this goal I knew it was going to be a big stretch. However, I hoped to have more than the $0 saved that I currently do. I’d like to see us save $2,000 for a house by the end of the year just so that we have something started. This ends up being $500 per month.

Once you add in the $200/mo that I need to save to buy a new computer next year, we’re looking to save about $3,500/mo over the next four months to reach these updated goals. I’ve updated the goals in the sidebar to reflect these adjustments. It will definitely be a big adjustment to manage the finances for two people and save for these adjusted goals, but hopefully it’s not too rough.

What do you think about our choice? Would you ever consider combining finances before marriage? Or do you think it’s best to wait until legally married?

(Image: Andrew)

6 Responses to “Combining Our Finances Before Marriage”

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  1. The College Investor says:

    My wife and I did the same thing before we got married. We were just getting everything settled, and it made sense to combine our accounts and direct deposits together. Never really worried about it too much!

  2. Rebecca says:

    My husband and I combined our finances before marriage as well. We knew we were getting married, so we felt why wait? It worked out well for us – made everything easier when shelling out money for the wedding and things like that.

    • Will says:

      I’m glad it seems to have worked well for everyone that did it. I would have been getting nervous if five people came and commented about how poorly it worked out, haha.

  3. I disagree with your argument. Your point 1 regarding living together (the conventional wisdom) has been consistently found to be incorrect in the literature. Living together before marriage (particularly before engagement) has been found to result (statistically) in worse marital outcomes, even when controlling for many demographic factors. The hypothesis is that people who live together premaritally tend to “slide” into marriage – that is, even if they should break up, there are more barriers to the breakup created by sharing a residence, so instead of making a clear-headed decision that they should marry, they end up making a marriage out of a relationship that was only solid enough to move in together, not solid enough to last a lifetime within the institution of marriage.

    I believe the same idea can be applied to combining finances premaritally – it just creates another barrier to breaking up in couples that should possibly break up.

    I agree with you that breaking off your engagement would be a bigger catastrophe than losing a bit of money in splitting your assets. But IF there were to be an unforeseen revelation or problem from either one of you that should result in your breakup before marriage, wouldn’t it be better to be able to go through with that breakup cleanly than to possibly not break up due to your cohabitation and financial co-mingling? As confident that you are that you will get married, you simply cannot predict the future.

    In my opinion, you’re not married until you’re (legally) married. Unmarried people combining finances are not protected in the same way that married people are should the relationship dissolve. I think it’s just pragmatic to look out for yourself until you have fully committed to your partner – and whatever people say about “we’re just as committed – it’s just a piece of paper” the fact that they haven’t gone through with the marriage yet DOES indicate that the piece of paper means something.

    • Will says:

      Thanks for the post Emily! I love every comment I get, but I have a special place for those who decide to disagree with me. It’s easy to agree with someone; it’s much more difficult to voice disagreement. However, I think it makes for better discourse and provides learning to everyone, considering they’re open to learn.

      I think a lot of people would agree with you. It’s been the commonly held belief for a long time. The CDC (gov) conducted a huge survey of 22,000 people and found that those who cohabitate before marriage are no less likely to stay happily together than those who do not cohabitate if they cohabilitate with the intention of getting married. Either way, the divorce rate is almost 50% within 20 years. In the 1960s, only 10% of couples lived together before marriage. Today, the figure is about 60%.

      In the past, the numbers of “successful” marriages were skewed simply by the type of person choosing not to cohabitate. Often times, people didn’t do so due religious preferences. Many of these same people also didn’t believe in divorce. So this boosted up the success rate of those who “waited” because the measuring stick of a “successful marriage” was simply staying married, which really isn’t that great of a measurement (but it’s the most concrete thing we have to measure). But I think times have changed. Obviously divorce is more common, even amongst those who are devoutly religious. People aren’t as content simply “sticking it out”.

      Personally, the money issues aren’t really that sticky of a situation to get out of. I mean, if I thought the marriage wasn’t going to work, I’d rather cut loose than stay in a relationship because it was going to be tricky. Unwinding our lives would be about 38 times more difficult than unwinding our bank account. Life is way too short to hate it, so I never consider myself to be trapped in any situation. I think this is more of a mental state of mind than a physical state of being. But I understand that that is just my feeling based on my beliefs and personality. I do believe that there are people who would build these barriers and then decide they’re too much to overcome and just continue on with the wedding.

      I’m an extremely pragmatic person and I had toyed with the idea of becoming legally married now, particularly to save approx. $2k in taxes. However, we were worried about other people’s opinions when they come to our wedding next summer. It would feel weird to be legally married for nearly a year and then have a wedding for everyone to participate in. It’s not because we feel that the paper increases our commitment beyond each other to some level that is beyond where we are.

      However, I acknowledge that combining finances is definitely not for everyone. Considering how much I talk about money and focus on it, I actually have a pretty lax mindset when it comes to losing money or major events that decrease my money. I don’t really know why I have this mindset, but if the marriage were to not go through and I lost every dollar in my checking account, I really wouldn’t be that worried about it. Money isn’t a finite resource and more can always be found.

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