One of the more consequential decisions a newly married couple will make at the start of their marriage is whether to combine their financial lives or keep their finances separate. There is no one right answer since it depends upon a couple’s financial circumstances and preferences.

The Benefits of Combining Finances

One of the most compelling reasons to merge a couple’s finances is the recognition that if life goals are to become joint goals, then the finances to achieve them should be combined. There are a number of advantages to combining finances in marriage:

• Budgeting and paying bills are easier and more organized.
• There is greater spending transparency, allowing couples to reduce and prioritize spending more easily.
• Combined finances may save money. For example, placing both cars on a single auto insurance policy is cheaper.
• Retirement saving can be optimized by comparing where retirement funds are contributed. For instance, it may be more efficient for the higher earning spouse to limit 401(k) contributions to the employer match limit so that a lower earning spouse, who may not have the income to fund their retirement, can make 401(k) contributions to benefit from their employer’s match.
• Combined finances can lead to a stronger overall relationship since it fosters a “we’re in it together” mindset.
• Accessing money is easier should one spouse die prematurely.

The Disadvantages of Combining Finances

While there are advantages, there are also several drawbacks to consider:

• There may be a loss of autonomy in spending and managing money.
• Combined finances require spending compromises that can lead to dissatisfaction and conflict.
• A merged financial life can get complicated if the marriage fails.
• A financially responsible spouse may be dragged down or harmed by a financially irresponsible spouse.

The In-Between Approach

Some couples may find an in-between solution works for them. For instance, they may set up a joint account for paying shared bills—like the mortgage, utilities, etc.—to which each contributes on a 50/50 basis or proportional to income earned.

Under this approach, couples will have to decide what to exclude from such shared expenses (e.g., student debt, clothes, individual entertainment, etc.).

Rules for Combining Finances

If a couple decides to combine finances, there are some important guidelines to follow. The first of these is to be honest about your money feelings and priorities. Subsuming individual needs only leads to future resentment. Discuss the financial goals that both spouses wish to pursue.

Devise a budget to guide spending and include “allowances” that provide for some spending independence.

Finally, be sure to regularly discuss finances and, above all, always place the relationship first.

Please reference disclosures at: https://blog.americanportfolios.com/disclosures/