Learn how to have the right conversations about your money and merge your finances successfully.
Managing your money is challenging enough on your own, but when you bring another person with their own perspectives into the mix, it can get exponentially harder. If you’re starting a life with someone, you need to get on the same financial page. You need to make sure that your financial habits, goals and perspectives on money need to work together. Otherwise, you can end up having fights over money that can ruin your relationship.
These questions can help you start to have the right conversations about money as you work to merge your financial lives. The earlier you have these conversations, the better. Ideally, you want to have these discussions before your relationship gets serious – certainly before you move in together or get married.
Question 1: Joint accounts or separate?
The first question that couples need to answer is whether they want to maintain separate finances or merge everything into joints accounts. Joint finance means that you have the same bank accounts, file taxes jointly and apply for credit and loans together. Or you have the option to maintain separate bank accounts, keep separate credit cards and even file taxes as “married filing separately.”
There’s no right answer to this question. Joint accounts can make it easier because you don’t need to divide bills. But keeping accounts separate allows both people the freedom of spending money without the potential for their partner questioning or second guessing every transaction. The important thing is to talk about it and decide what will work best for you as a couple.
Question 2: Rent or buy?
Another big question is whether you both have a goal to become homeowners or if you’re happy renting. Buying a home is a huge financial undertaking. You’ll need to save a significant amount of money for your down payment and it will at least somewhat lock you into the location where you buy the home. Renting gives you the flexibility to decide to move without the hassle of selling your home.
Even if you just want to rent now, you need to talk about whether buying a home is an eventual goal that both of you have. If it is, then you can start planning together to achieve this major milestone.
Question 3: Kids or no kids?
This may not sound like a financial question, but it is. Studies show that raising one child to age 18 costs a quarter of a million dollars. And that’s before the kid even gets to college! So, you need to talk about whether or not both of you want kids. If you do, how soon? This will help you make a plan to start saving, so you can be financially prepared before you have a child.
By contrast, if you don’t plan on having children, then you need to put all that moving your saving so you can both retire and enjoy your golden years together. You’ll need to make sure you can both be secure and cover things like medical costs, because there won’t be anybody around to take care of you.
Question 4: Marriage or partnership?
Getting married means more financially than simply being able to file your income taxes jointly. These days, you can have significant financial concerns before you head down the aisle. For example, one or both parties may want a prenup. There’s also concerns like inheritance and estate planning that change once you have someone else in the picture.
Then there’s the cost of the ceremony itself. Marriage can get expensive and if one party wants a dream wedding, the cost can put a huge financial burden on your relationship. You need to talk about what kind of ceremony both of you want and how it will be paid for. You don’t want to start your married life together burdened by a lot of credit card debt from an over-the-top ceremony.
As a couple, you may decide to put off a ceremony and simply domestically cohabitate. This is easier if you don’t plan on having kids. But putting off the wedding can have implications. You can’t be on each other’s health insurance and you’ll need to grant your partner power of financial attorney, so they can manage the household if you become incapacitated.
Other financial questions you need to discuss
Beyond those big questions, there are dozens of smaller day-to-day financial matters that you need to be on the same page about:
- How do you both like to pay bills – online, money orders, through an app, by check?
- How soon after you receive a bill do you like to pay it?
- What’s your philosophy for saving money?
- What bank accounts do you have?
- What are your feelings on credit cards?
- Do you prefer cash, credit or debit?
- Do you like to keep a budget?
- Are you into couponing or do you avoid it like the plague?
- Do you shop with a list or prefer to just play it by ear?
- How much risk are you comfortable with when it comes to investing?
- When you want to retire?
- What are your current savings goals?
- Do you like to lease cars or buy them?
These are just some of the things that you’ll need to get on the same page about as you merge your finance.
