Managing finances efficiently can be a tough job for most couples. In fact, it can often be the cause of fights between most couples. But handling money shouldn’t be as challenging if done the right way.
There is no doubt that money is one of the most important topics of discussion for couples. Various surveys and studies show that money is one of the reasons that lead to separation.
Understanding how to combine finances as a couple is one of the key secrets to a happy relationship. In fact, recent research by Cornell University found that combining finances can lead to higher satisfaction and happiness in relationships.
Why should you combine finances as a couple?
When couples combine finances, they are more likely to build stronger and happier relationships. But that’s not all.
There is various financial significance to this step as well.
When you combine finances with your partner, you can do better financial planning.
Pay off credit card debts effectively
When you are aware of each other’s financial situations and join forces, you can make better financial choices.
For instance, you may consolidate your credit card debt to tackle debts. It can help you save on interest in the long run and pay off your credit card debts.
Better budgeting
Again, when you and your partner are aware of the money that is coming in and going out for each other, you can make better budgeting decisions. You can easily track each other’s budget and decide where you may be going overboard. It ensures you are saving for the future and not living beyond your means as a couple.
Monthly payments can be more manageable
Combining finances can make joint payments like rent or utilities much more effortless and manageable.
How to combine finances as a couple
While combining finances can be an effective way to make better financial decisions, it is an important step that must be taken correctly. Here are the steps to effectively combine your finances as a couple.
Collect information about your finances
The first step to combining your finances as a couple is to find out where your finances stand. This includes gathering information about both your and your partner’s paychecks (including regular income and side hustles, if any), debts, assets, and investments.
Check all financial institutions you have accounts with, for example, your retirement accounts, checking and savings accounts, credit cards, car loans, etc.
Get a clear picture of your expenses
When deciding to combine your finances, getting a clearer picture of your income, debts, and expenses is necessary. It is important to know where your money goes.
You may have expenses like rent, utilities, cables, transportation costs, food expenses, retirement contributions, debt payments, etc.
Sit down to talk
Once you have a clear and thorough understanding of your finances, sit down with your partner for a calm and serious discussion about money. Devote an hour or so to discuss your finances.
It is advisable to choose a time when you are not stressed or otherwise busy with some work. This can help to have a meaningful and fruitful conversation.
Discuss the important aspects of your finances
Discuss important financial aspects like your views on handling money, financial goals for the future, a path to reach those goals, etc.
Choose the right strategy to combine your finances
Combining your finances as a couple can be done in more than one particular way. In reality, no one strategy fits all couples when it comes to joining financial forces.
So it can be helpful to go through your finances and the various strategies to decide the right one for you and your finances. For example, you may decide to combine your finances entirely or choose to keep some of your obligations separate.
You can choose to consolidate your credit card debt to reduce the overall sum you have to repay. It can be an effective way to manage your finances and pay lesser amounts on your credit card debts in the long run.
On the other hand, if you or your partner has a large amount of credit debt, you may decide to deal with it single-handedly while the other person focuses on other financial goals, like building an emergency fund.
Decide the course of action with your accounts
Once you have decided on the right strategy to combine your finances, it’s time to determine what should be done with your accounts. For example, you can add names to your accounts, open joint savings accounts, etc.
Keep checking back occasionally
The finances and situations of individuals may keep changing with time. One strategy that fits a particular situation may not remain effective when your situation or financial standings change. This is why it is necessary to review your financial standing occasionally to make changes as and when required.
You may check on a monthly basis to ensure you are on the right track to reach your financial goals and make the necessary changes if required down the road.
Ways for couples to combine finances
There are three main strategies or ways for couples to combine finances. Understanding these approaches can be helpful when deciding the right strategy for you.
Combine everything
The first way of combining your finances is pretty straightforward. You simply combine all your finances, including income and debts, and split them equally. This can be an ideal way to combine finances if you and your partner have near about the same amount of debt and income.
Combine Partially
The second way to combine your finances is to merge only a portion of your finances and keep a portion separate. This can be particularly effective when you or your partner have a large portion of the obligation.
For example, if either of you has a large amount in debt, repaying, which can take a while, it may make more sense to keep it separate and combine the rest of the expenses like rent, transportation, utilities, food, etc.
Consider only one’s income
The third way of combining finances is to survive on only either of your income. It can be specifically a helpful approach when either of your income is significantly larger or more reliable than the others. It is an excellent way to ensure you’re on track with your savings requirements.
The idea of this strategy is to live on one person’s income. In contrast, the other person’s income is devoted towards different financial goals like getting debt free, saving for a down payment, building an emergency fund, etc.
Is combining your finances always a good idea?
Combining your finances is beneficial to help you manage your finances more efficiently and be on track with your future financial goals when done in the right way. But combining your finances as a couple might not always be a good idea.
You may go through your finances and review your expenses. However, suppose you lack trust in your relationship or anticipate any financial problems in the future. In that case, it may be best to avoid combining your finances for the time being and deal with them separately.
Closing thoughts
Joining forces and combining your finances as a couple can be an effective way to manage your finances better. It leads to making better and more informed financial decisions which can be beneficial in the long run. It can also help build trust and enhance happiness and satisfaction in your relationship.
But it is vital that couples trust each other and are completely honest with each other regarding their finances and responsibilities before combining their finances.
About The Author: Lyle Solomon has extensive legal experience as well as in-depth knowledge and experience in consumer finance and writing. He has been a member of the California State Bar since 2003. He graduated from the University of the Pacific’s McGeorge School of Law in Sacramento, California, in 1998, and currently works for the Oak View Law Group in California as a Principal Attorney.
