Finding a partner to spend your life with is wonderful and romantic, but it also comes with some decidedly unromantic decisions — like combining finances. We want to think about decorating our first apartment together, choosing the perfect ring, or planning our honeymoon in South America — not how we’re going to pay the joint credit card or whether we’re rolling over our retirement accounts together.
But, these are the topics that come up when you commit to life as a team. What’s good for you needs to be good for you both, and you have to talk realistically about how, when, and why you want to merge your financial lives. You’re in this together, and that means creating a plan for combining, not combining, or selectively combining your finances — and it doesn’t have to be decided on or done all at once!
So, when’s the best time to start a dialogue about combining finances? Typically, moving in together is a good time to begin having realistic conversations about how you’ll handle joint expenses, but it’s beneficial to have open communication about income, spending, and debt while you’re still dating.
Remember, it’s not a bad idea to figure it out early if this is even someone you want to combine finances with. Discussing these topics early on can help avoid more difficult situations later on.
But, assuming these conversations go well, you’ll start making moves towards figuring out logistically if and how you’ll combine finances. Here are the five steps to take before you make that first joint deposit — as well as one to take afterwards.
1. Get Your Plan in Order
The first step to combining finances with a partner is one you’ll take 100 percent on your own. Merging your income with a significant other could boost your bottom line (hey — double income, no kids!), but you don’t want to make a partner the magic key you need to get your shit together.
Before you even think about opening a joint checking account, take a look at your own financial health. Do you have an emergency fund? Are you taking advantage of your employer’s retirement match? Make sure you’re in a place where you feel stable, with or without a partner.
2. Come to the Table with the Full Picture
Once you have your affairs in order, it’s time for you both to sit down with your full financial picture — income, assets, debts, expenses, investments, and yes, even credit score. It’s not romantic, it’s not sexy, but if you’re looking to move in together — whether that’s signing a lease or taking out a mortgage — all of this is going to come up. You want to know the full extent of what you’re involved with, both good and bad.
3. Assess Your Individual Spending Styles
Opposites often attract, so if you’re a saver, your partner may be a spender. Or maybe your significant other is someone who lives by their color-coded budget, while you aren’t quite sure exactly what you spent on Ubers last month.
You’ll want to take a serious look at how both of you spend money and how you want to prioritize money as a couple. Decide whether it’s more important for you two to save for a house, or if you’d prefer to travel while you’re young and relatively free of responsibility. Do you want to cut back on buying lunch at work so that you can splurge on fancy dinners on the weekends? Remember that even if it’s your paycheck, there will now be two people impacted by your spending decisions.
Looking for a budgeting tool? I’ve used Mint.com for years, but I’ve also heard people rave about the You Need a Budget app. Doing some research can help you find the tool for you.
4. Discuss Your Long Term Goals as a Couple
Not only do you need to think about the everyday expenses, but you also need to discuss your long-term goals. Does that involve marriage? Buying a home? Children? Retirement? Travel?
These goals may seem a lifetime away, but they’re expensive and they require planning. They require you two to be in agreement on what you want in the future and what’s important. You don’t want to combine finances with someone who plans on selling all their worldly possessions to live in a tiny house by age 40 if you’re dreaming of a picket fence and a dog in the suburbs.
Tip: This is a place where a financial advisor can help you focus and assess realistic goals to make the most of your assets and investments. Finding the right financial advisor is kind of like looking for a therapist — you want to find someone who you feel “gets” you. Maybe they’re your age, female, and understand the big-picture view of where you are right now.
Also, you may want to look at advisors that work on a flat fee rather than a percentage rate.
And, if you fall into the category that Stash Wealth refers to as H.E.N.R.Y (“High Earners Not Rich Yet”) or future H.E.N.R.Y., then you may consider looking into the convenient (and budget-friendly!) option of a virtual financial planner. Working virtually with a financial planner is as millennial-friendly as it gets — you won’t spend months comparing calendars to find a time to meet in person. Instead, you’ll have the ability to schedule a time to chat over breakfast, from the airport, or in between work meetings.
5. Figure Out the Money Moves You Need to Make
With your financial picture, goals, and spending in place, it’s time to figure out what exactly combining finances – or not combining – will look like for you. It doesn’t necessarily mean throwing everything into one pot.
You may still have independent checking accounts, but you use a joint credit card (anyone else out there trying to rack up those travel points?!). Maybe you deposit half of your paycheck into your account and the other half into a joint account — or maybe you divvy it up according to percentages based on your income levels. Look at the options and consider what will work for you two as a couple and what you feel comfortable with.
6. Revisit!
Guess what! Finances aren’t a static thing. People change jobs, they go back to school, they have babies — there are so many factors that can totally shift the outlook of your combined finances. So, revisit this conversation regularly. Make it an open dialogue that’s always moving and always adjusting to make sure it works successfully for both parties involved.