When you’re in a long-term relationship, a discussion around merging finances is a really good idea. Most often, cohabitation is the the right time to have the money conversation. Before then, it might make your partner uncomfortable. Moving in together means sharing costs, so it makes sense to start then, though it’s ultimately up to you to decide the best time.
Since money touches almost every one of our day-to-day decisions, merging finances can bring more clarity and efficiency to your life. When my colleagues and I work with clients, our goal is to get them to shift their individualistic mindset and take on more of a team approach.
We’ve seen couples who have been married for years still Venmo'ing each other for rent. Let us tell you: There’s definitely a better way!
The Team Mentality
As you can imagine, most couples come into a relationship with different financial situations. One person might be earning more, have credit card debt or student loans, better healthcare benefits at work, or a higher 401(k) match, etc. If you start thinking as a team, deciding which levers to pull and how to approach saving and debt decisions becomes more straightforward because you’re looking at things from a big-picture perspective. While some people feel their S.O.'s student debt is not their responsibility, we remind them that over the course of their relationship, they will benefit from the higher income that their S.O. may obtain because of that debt. (By virtue of being more marketable.) So, if one person can help their S.O. pay down that debt even faster, both can start working toward other, more fun goals much more quickly. We totally understand that this is a huge mindset shift and will not happen overnight — or, in some cases, at all. But, starting a conversation about money is an important step.
Illustrations by Janet Sung
Combining In Stages
Sometimes couples can work to merge their assets in stages. Pre-debt, post-debt, pre-marriage, post-marriage, etc. But overall, I encourage clients to move away from thinking of their assets and liabilities as mine or theirs, and instead to think of them as our assets and liabilities. When one person comes enters a relationship with a child from a previous relationship, most of us would agree that it’s best to think of the child as "our child." Similarly, over the course of your life together, you will tackle many challenges together and your finances are no different. For married people who are exceptionally concerned with having their "own" money, it makes sense to discuss a prenup or post-nup, as the law would override individual assets, making the state of your savings — individual or joint — irrelevant.
How To Talk About Finances Early In A Relationship
Some financial professionals say to wait on these conversations, but I think the earlier the better. Financial habits are a good indicator of priorities; if you and your partner don't share priorities, that may be a sign other issues will arise down the road.
The important thing is to start small, don't jump into heavy-duty conversations. Start with simple questions, and try your best not to interject with immediate commentary or judgment. You want these conversations to be constructive and productive.
An app I've recommended to clients who are in relatively new relationships and aren’t ready to graduate to a joint account system is called
. It's simple to set up and easy to use. Also, it's flexible in terms of giving you full autonomy over how much information you want to share; the rest you can keep private.
How To Combine Finances When You Live Together
For couples who do want to combine their finances, here’s a step-by-step guide to how to do so: Joint Emergency Fund Once you’re living together, it’s a good idea to have an emergency fund with cash savings equal to three months worth of your joint fixed expenses (rent, utilities, groceries, transportation costs, etc.). Calculate what that number is, multiply it by three, and slowly work toward saving that amount together. You can automate a monthly savings amount directly from your joint checking account. Joint Credit Card Once you know how much of your paycheck is going to rent, other monthly expenses, as well as student loans and other savings, the rest is yours to enjoy. Figure out what that number is and then use a joint credit card for all those costs, from SoulCycle to happy hours and dinners out to get as many rewards points as you can. (Shout out, points junkies!) Every few days, log in to your credit card app to keep an eye on how much you and your partner have racked up so you don't go over the amount you can feasibly pay off each month. You never want to put more on your credit card than you can afford to pay off in any given month. If you can't pay off the item you’re purchasing, you cannot afford it yet — period. (There are exceptions, but this is the rule.) Consider opening up a savings account and stashing money away for a few months until you can afford that item, and then feel free to put it on your credit card, confident in the knowledge you will be able to pay the bill off in full when it comes due.
Illustrations by Janet Sung
How To Combine Finances When You're Married In addition to everything in the last slide, married couples should consider having joint accounts: Joint Checking Account Having a single account where paychecks get deposited keeps everyone on the same page about what’s going in and what’s coming out. If this doesn’t feel right, we recommend having a “side stash” — a little money on the side that’s a judgement-free zone your partner can’t comment on. Your main paycheck should go into the joint checking account, but you pick a number or percentage together (no more than a few hundred dollars) that goes into your side stash. Many couples find this to be a helpful tactic to cap “fun” money, while avoiding arguments. Joint Savings Account When you’re planning for goals together, it’s a good idea to segregate that money from the rest of your financial life in a completely separate account. We like using an online bank, which has the added benefit of keeping your savings out of sight, out of mind. You can then set up a monthly or biweekly automatic transfer from your checking into that savings account; and when you hit your goal, spend that money guilt-free. Take that trip, or buy the couch!