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How to Combine Finances After Marriage Exactly

How to Combine Finances After Marriage Exactly

Marriage represents more than a mere contractual formality. It signifies a lifelong dedication to your relationship, your partner, and the shared journey of life. However, this shared path can lead to the intertwining of bank accounts and finances, a matter that can become a source of significant complications if not approached with care. In fact, money ranks as the second leading cause of divorce.

Nevertheless, this statistic should not deter you, as understanding how to communicate, manage, share, and trust one another with finances can significantly reduce the risk of divorce. So, let’s delve into the process of merging finances after marriage.

Combining Finances After Marriage

While it was once considered ominous not to combine finances in the ’70s and ’80s, an increasing number of contemporary couples are choosing to keep their financial accounts separate. According to Bankrate, merely 43% of cohabiting couples and 37% of married millennials, along with half of Gen Z couples, maintain individual bank accounts.

These statistics are not entirely surprising, given the evolving societal norms challenging traditional gender roles. However, there are compelling reasons for couples to consider merging their finances. Notably, a study at Cornell University revealed that married couples who combine their finances tend to experience greater happiness and marital longevity compared to those who keep their finances separate, underscoring the advantages of financial unity.

Should You Combine Finances After Marriage?

Increased Accountability:

Shared financial accounts eliminate the possibility of concealing your spending habits from your spouse, as every transaction becomes transparent. This added accountability encourages sound money management practices, curbing impulse purchases and improving budgeting skills. Furthermore, it fosters a collaborative effort, helping both partners stay on financial course.

Sharing finances also deters financial dishonesty, a problem that approximately 1 in 4 Americans grapple with. By merging accounts, you normalize financial discussions, facilitating conversations about monetary matters.

Enhanced Credit Scores:

While marriage directly impacts individual credit scores, co-signing loans with your spouse can influence your joint financial future. If one partner has a robust credit history and the other is working to improve their credit score, co-signing as an “authorized user” on the partner’s credit card can bolster the weaker score.

Promotion of Equality and Teamwork:

Couples often do not earn identical incomes, but merging financial accounts can help both partners perceive the shared finances as “our” money, regardless of its source. This fosters an equitable sense of contribution, ensuring that the partner with a lower income does not feel they are not pulling their weight. It underscores the fundamental partnership that is marriage, encouraging teamwork in all aspects.

How to Combine Finances After Marriage

Normalize Money Discussions:

If you choose to combine finances, start by normalizing discussions about money. Finances can be a sensitive and emotionally charged subject, but conversing openly with your partner is pivotal. Begin by sharing your personal financial experiences and reflecting on how those experiences shape your views on money and spending. Remember that financial conversations are crucial in building a healthy marriage, demanding openness, honesty, and empathy.

Discuss Current Financial Status:

It is essential to have candid conversations about your current financial positions. Make a comprehensive list of your combined income, expenses, and any joint debts you may have, such as wedding expenses. Discuss any individual outstanding debts, even if they won’t become joint responsibilities, to gain a better understanding of your overall financial landscape.

Define Financial Goals:

Collaboratively define your financial aspirations for the future, whether it involves having children, purchasing a house, traveling, living debt-free, or other objectives. Break down these objectives into short-term, medium-term, and long-term categories. Short-term goals typically span one to two years, including creating an emergency fund and eliminating credit card debt. Medium-term goals, with a ten-year horizon, may encompass saving for a home down payment and settling student loans. Long-term goals relate to retirement planning, typically extending over 40 years or more. To facilitate goal setting, adhere to the S.M.A.R.T acronym (Specific, Measurable, Achievable, Realistic, Time-based).

Craft a Budget Together:

Analyze the money surplus after covering expenses. Utilize the 50/30/20 rule—assign 50% to expenses, 30% for discretionary spending, and 20% for savings and debt payments—as a foundation. Adjust these percentages based on your shared financial goals, whether you seek to save more or pay off debt aggressively. Tracking expenses is vital; consider employing budgeting templates or apps for this purpose. Regular budget check-ins provide opportunities to discuss your financial plan, evaluate any necessary modifications, and monitor progress.

Establish Joint Accounts and Financial Responsibilities:

Couples can choose to merge all finances into shared checking and savings accounts or maintain separate checking accounts for individual expenses while having joint accounts for shared bills. Furthermore, you can open joint retirement accounts. The approach you take depends on what makes sense for your specific situation. If maintaining both joint and individual accounts, discuss each partner’s contribution proportionately based on their financial capacity. Determine who will handle bill management and payment of shared expenses. If merging finances proves challenging, consider seeking guidance from a financial therapist or advisor to navigate the process and alleviate financial stress within your marriage. Remember, financial issues should not cast a shadow on your marital harmony.

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