In every serious relationship, you reach the point where you need to talk about money. This is one of the pivotal discussions you will have with a potential partner.
Part of this money talk involves discussing whether or not you will combine finances. This is a tough decision and one you have to decide on for yourself, based on how you and your partner feel about money.
There are advantages.
When you combine your finances, you truly form a partnership. Everything goes into a big pot. All your money. All your partner’s money. You pay your bills from the big pot. You set up joint savings and investment accounts. When you combine finances, it can have a big impact emotionally. You truly feel like one entity. It’s practically impossible to feel detached when you are sharing your finances.
Combining your finances can also simplify matters. You don’t have to worry about who’s putting what into the joint account for household expenses, and you don’t have to divvy up the bills or worry about whether or not your partner is actually paying his or her “fair” share. With combined finances, it all goes to the same place, and you only have to worry about paying from one account.
Finally, with combined finances, it’s all on the table. You can both see what’s happening with the money, and you both have equal access to it. A lot has been written about financial infidelity. (Go ahead, search it on Google. I’ll wait. Checked it out? Seen that it’s a real problem for some people? Awesome.) While combining finances can’t totally eliminate the problem, the reality is that it’s much harder for someone to hide his or her money issues when the S.O. has just as much access to everything.
For many couples, this is the way to go. In fact, during my marriage, we had combined finances. We had a big pot, what’s-mine-is-yours-and-what’s-yours-is-mine, approach. It made things simple during the marriage, but a bit of a PITA during the divorce.
But there are downsides, too.
One of the biggest issues with combining your finances is that you lose some of your autonomy. You don’t have complete control over your money; you need to consult with someone else before you make certain decisions. If you still like to have that measure of control over what you spend, and how you use your money, combining finances can be scary as hell.
When you separate your finances, you can also create a formula for deciding who pays for what. There are many ways to do this. In some cases, the person who makes the most might cover the biggest expenses, while the other person takes care of the smaller household costs. If you make close to the same amount of money, it can make sense to split everything down the middle.
Another way to separate determine your bills is by using a percentage. If one of you makes 70% of the money, you pay 70% of the shared expenses, while the other pays 30% of the household costs. Once those shared costs are covered, each of you gets to keep what’s left to use how you want. However, when you have separate finances, you each pay from your own account.
Keeping things separate can also provide protection. What happens if you aren’t sure about how your bae handles money? You can better protect your own financial situation by avoiding combining accounts. Your partner can’t raid your account if it isn’t shared. If you think your partner spends too much and you want to keep him or her from draining your resources, separate finances can make sense. Keeping things apart protects you.
Finally, separate finances are easier to manage in the event of a de-coupling. My ex and I had to go through our shared accounts and assets and divvy them up at the end of the marriage. On top of that, as I looked back on some of the purchases he made with our joint money, I was a little bitter.
While we are on good terms, and I care deeply for my ex, the reality is that combining finances and the aftermath left a sour taste in my mouth. Things are fine now, but they were a bit unwieldy for a while. Keeping things separate would have made things easier. In a world where many of these romantic relationships, whether or not they are marriages, come to an end, combined finances may not be the best choice.
How about making a compromise?
It’s possible to create a hybrid model. I know many successful couples who employ this method. Rather than keep things completely separate, they have some joint accounts. For shared expenses, like housing costs and paying for kids’ activities, you can open a joint account. Each of you contributes a pre-determined amount of money. You pay your shared expenses from the shared account.
Everything else, however, is separate. You have the feeling of working toward a common goal, but you also keep some things separate. This method can work for shared goals like saving up for a down payment on a home, going on vacation, or making a major purchase together.
When you use this plan, you maintain separate accounts. You can buy gifts for each other and make them true surprises. You also obtain limited protection. While there is no way to keep your honey out of the joint account, the bulk of your money is safe from pillaging in your own accounts. A friend of mine was fortunate that he used the hybrid model when his wife drained the joint account and then asked for a divorce. She couldn’t access his account and take that money, too, ahead of time.
How you manage your money is up to you. Have a talk about it, figure out what you’re comfortable with, and make a plan from there.
What do you think about combining finances? Is this something you are comfortable with?