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)

Combining Finances After Marriage

Combining Finances After Marriage - Rings + MoneyWith my wedding less than a year away, it’s becoming time to start thinking about how our finances will be structured leading up to and after the big day. I’ve been paying more attention to how friends structure their finances over the last few years, and it’s surprised me how many people decide not to combine their finances. Some will avoid any combining of finances, while others will have joint accounts and separate accounts.

Reasons to Keep Finances Separate After Marriage

While people will inevitably make a number of excuses why finances should be separate after marriage, I can only think of a few that are worthy reasons.

  1. You have spending habits that your significant other doesn’t agree with. If this is the case, then I think it’s time to shape-up. You aren’t going to have a happy marriage if your significant other doesn’t accept you for who you are. If you love working on classic cars and it tends to be a bit of a money sink, your significant other needs to be accepting of this and allow you to pursue it.
  2. You are likely to get a divorce. If you think, for some reason, that there’s a greater than 25% chance that you will get a divorce at some point, then it makes sense to keep your finances separate. This will cut down on the eventual mess. Although, I’m really not sure why you’d get married if you believe this.
  3. You have a significantly grater amount of wealth than your partner. If you have less than $10M net worth, this isn’t a problem for you. But if you’re worth $100M or something else extremely high, then it’s just smart to protect your assets because there are people out there who will get married for the money. This also goes back to #2, because you believe that there is some likelihood that your partner is in it for the money.

I think that if you have these issues, you not only have financial problems, but you have marriage problems that you need to work out. All of the reasons for not combining finances relate to not trusting your significant other, or not sharing or accepting their values. There are a lot of other excuses that I’ve read, but I don’t consider most of them to be valid reasons to not combine finances after marriage.

My Take on Combining Finances After Marriage

I think the benefits of combining your finances are pretty clear, but it’s not going to be an easy task. Combining finances with your spouse requires a significant level of communication. If one of you has a spending problem, you’re going to want to set a spending threshold beyond which approval from the other partner is required.

Steps to Combining Finances

The first step to combining your finances after you become married is to lay everything on the table. You need to be completely transparent. This includes your assets, as well as your liabilities. This step should be completed well before marriage and probably before engagement, or at least shortly after. It’s shocking how many people get married before doing this. “Oh, you have $75k in student loans? Cool, glad we waiting to discuss this after we were married. Anything else you’d like to tell me?” That doesn’t seem cool at all. This part will be easy for me and my future wife because we are both already very transparent. She knows how much money I have (easy to check my blog, right?) and I know what she has. I helped her set up her Roth IRA and choose her investments. She knows how much I have saved. After I paid off my student loans, neither of us has any debt. So that’s easy, we basically have step one covered.

Once everything is laid out, you need to start combining accounts. Right now we have a joint account that we opened to pay out shared expenses out of. We use this account for utilities, groceries, and restaurants. It’s not always “even”, and that hasn’t seemed to bother either of us. However, right now we are simply depositing equal amounts of money into the account. After marriage is when the full combination occurs. At this point we will probably close our existing accounts and open a shared join account. This makes a nice clean break. We would dump all of our checking account money into one account. We would probably keep my Ally accounts, and I will add her and they will become our joint savings accounts. We will then combine our credit card accounts to simplify things and we will each be authorized on the accounts.

Combining finances, in my opinion, is the only way to truly combine your lives and become lifelong partners. You can definitely have a successful marriage without combining finances, but you’re never going to have the same level of trust and openness. My future wife and I are in this together for the long-haul. I don’t care if I have a $1M salary and she racks up $1M in debt, we will work through anything that comes our way together. By becoming married we are forming the ultimate alliance (think Batman + Catwoman) against whatever life brings us.

What Others Think About Combining Finances After Marriage

BibleMoneyMatters discusses the reasons why someone might feel one way or the other. Some keep their finances separate because they believe each spouse should be self-sufficient, while others might do so because it largely “keeps things the same” as from when they were single. There’s also some great advice on how to talk about the issue with your spouse.

MoneyUnder30 has documented her experience with combining finances well. Amber said that after having independent finances for 27 years, it was a bit of a shock to her system. However, she points out that combining finances is all about being a team, and I agree with her. In the end I think it brings you closer together. Nothing like conquering a situation together to bring you closer (as long as it doesn’t tear you apart).

Melissa over at SupernovaBride said back in February that she would be combining her finances with her new spouse. She explained their currently split finances set-up and laid out some great reasons why they plan on combining finances even though their current system is working out well.

What do you think? Is my assessment correct? Or does combining finances lead to more marital issues? How do you structure your married finances?

(Photo: Robo Android)