pairing? How do you know when it’s time to combine your money
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Money may not be your top priority if you’re in love, but it does deserve some serious attention if you want a lasting relationship.
A partnership that pools resources and shares expenses can be very good for the relationship and for each other’s financial well-being. However, different spending and saving habits can also be a constant source of conflict between spouses.
From a family finance management point of view, sharing a joint bank account can make things a lot easier.
Money is putting pressure on people,” said Douglas Bonbarth, certified financial planner and president of Bone Fide Wealth in New York. “In general, the less moving parts, the better.
“If you’re paying bills and depositing checks to and from one account, it’s easy to see what’s going on and what’s coming out.”
This in turn forms a good basis for formulating a joint budget and setting financial goals together. It also gives both partners a good look at each other’s spending and saving patterns, and can highlight issues that need to be resolved.
Boneparth suggests that it is better to know a partner’s spending habits, debt obligations, and general financial position earlier rather than later.
“Ideally, you want to flesh everything out before tying the knot,” he said. “These things can create cracks in relationships.
“It’s about trust and honesty,” Bonbarth added. “You need to address issues, find solutions, and support each other on these things.”
What to keep separate and when
A joint bank account is one thing, but confusing investment assets with sharing ownership of real estate and other property is another. While people can and should designate beneficiaries for investment accounts and other assets, pooling assets and accounts with a partner may not always make sense.
In fact, there can be a wide variety of personal, financial, and tax-related reasons why either mixing assets or keeping them separate is the best approach for a married couple.
“No one solution is right for all,” said Bonbarth; “it is a matter of individual preference.” “There may be good reasons to keep some accounts separate and to divide assets and liabilities in different ways.”
For example, someone may have business interests, property or inheritance that they want to separate from the relationship. In some cases, this can be to ensure that the spouse is not exposed to the potential liability of the other partner as a business owner or professional. In other cases, it may simply be the personal choice of one or both partners to manage their finances separately.
It is often considered in the context of merging or keeping separate assets under the guise of a prenuptial agreement prior to legal marriage. Parents of one spouse, for example, may be concerned about protecting the assets they plan to pass on to their fiancée child.
This process can, of course, be a source of friction and pain between spouses, but it is necessary to address these issues in advance and resolve any emotional issues.
The only way to make sure that spending, saving, earning and inheriting money does not become a conflict issue in the relationship is to put everything on the table and discuss it.
“The universal solvent for a lot of these issues is simply powerful communication,” said Bonbarth, who is married. “That’s what makes a good relationship in general and a good financial partnership in particular.”