Marriage, as we all know, involves a great deal of decision-making, with the majority of those decisions involving money. Every couple may wonder whether they should merge their finances after they marry since combining finances might be difficult, especially if they are used to managing their finance on their own.
Knowing the foundations of combining finances can help you understand the risks and benefits of doing so.
This article will explain more about combining finances after marriage and will discuss the benefits and disadvantages of combining finances to help you decide if combining finances after marriage is worth it.
When it comes to combining finance, there are multiple options that a couple could choose. After they married, couples may choose to merge their bank accounts, credit cards, investment accounts, and co-signing on loans.
Others may merge their bank accounts and leave their other assets separate. In terms of how to combine your finance after marriage, it is up to you to decide what is best for your relationship.
Combining your finances is an excellent opportunity to work as a team to achieve financial accomplishment.
Given how important finance is in a marriage, it's important to understand the benefits of combining your finances after marriage:
When finances are combined, all efforts to work together as a team toward financial goals are streamlined. This will help you stay on the same page most of the time, cooperate, communicate, and allow you to make smart decisions about your short and long-term financial goals as a married couple.
Here are some examples of financial goals that a newlywed couple could pursue:
Marriage is all about helping each other out when things go wrong or when things change unexpectedly. One of you may experience a medical emergency, decide to go grad school, or find yourself in need of a new car.
When unexpected things happen that are not part of your financial goals as a couple, both of you can adapt to the changes quickly because you're both aware of your financial situation. Both of you have access, and there are no financial secrets, allowing you to make more open and smart decisions.
A sense of security, as well as balance and fairness, is created when finances are shared. You both have a combined income that pays for your shared property and a large part of your lifestyle.
If both spouses work, your wages don't have to be the same, but combining finances creates a new shared foundation for you and your spouse. Each of you will view the money as a shared resource for the two of you, rather than as an individual asset.
Couples can open a joint checking account specifically for living expenses. You'll be able to pay your mortgage or rent, as well as other essentials like utilities and food, in one transaction.
This enables you to be open and honest with one another, collaborate on solutions, and avoid unpleasant personal financial surprises. It's a lot easier to keep track of your shared budget and see where you might be going over budget in some areas.
There are numerous ways to think about your budget, but you must have a standard one to ensure that you and your partner are not living over your means.
Combining finances and filing a combined tax return can save some couples a lot of money.
This is especially true if one spouse has a higher salary than the other. Because combined tax brackets are exactly double those for married couples filing separately, a higher-earning spouse's income would be taxed at a lower rate.
Now that you've learned about some of the benefits of combining finance, let's look at some of the downsides. It is always beneficial to be aware of the disadvantages so that you can make smart decisions as a couple:
If you believe the disadvantages of combining finances after marriage do not outweigh the benefits, and you decide to go forward with it, here are some tips to assist you in correctly combining your finances:
A great way to start talking about the future as a married couple is to talk about the past. Before you combine your finances, have an open and honest talk about your financial situation before you met.
If there are still things that aren't disclosed or even hidden, especially in finance, they shouldn't be kept and should be discussed as a married couple. Tackle areas such as:
Always bring up the subject of money and finances. When it comes to money, try your best to be encouraging and nonjudgmental. As you combine your finances, there will be a learning curve, so be gentle with each other.
Always keep in mind that talking about money is just you and your partner working out your financial plans. Make sure to pay attention to their ideas and suggestions.
Make it a habit to sit down together and set a monthly budget that you can both stick to as your finances combine.
Make a list of your overall income as well as all of your necessary costs. Non-essential expenses such as dates, travels, stuff you want, and more should also be included in your budgeting.
That way, you'll learn how to speak appropriately about finances and have a healthy discussion about what should and shouldn't be on the list.
Discuss your financial goals, not just for each other, but for both of you. Determine what is your shared financial goal.
As a married couple, talk about your long-term and short-term financial goals. That way, you'll both be focusing on what's best for your marriage while on the same page.
Also, discuss your goals. Even if you are married, you may still have goals you wish to accomplish as an induvial. Be upfront and honest about your goals and work together as a couple and plan on how to achieve them together.
After you've determined your financial goals, you should work together to achieve them and should each have a fair share. Here are some examples of common goals for married couples that should be worked on regularly:
While discussing purchases with your partner may be seen as a disadvantage by some, it is important to do so before purchasing something that would have a significant impact on your combined budget.
This will prevent surprises and arguments as a couple. It will also help with properly discussing if it is possible to purchase the item, or if not, whether you can both plan to get it in the future.
Now that you're married, you'll want to make sure your partner is taken care of in the event you pass away and your income is no longer accessible. If you have kids, this means buying life insurance to replace your salary, pay off your mortgage, or start a college fund. Both of you should be insured if both of you work or if you have children.
Have a system in place to keep track of where your money is and what it is doing. Always keep track of your finances, what was spent over the month, and what is left to use or save, whether you use an app or do it manually.
Because the money is being tracked, you will both be more conscious of how you spend it. It also aids in the development of excellent spending habits.
After marriage, combining finances requires serious conversation and planning. If you have decided to combine your finances, here’s a short checklist that might help you as a pair before you make your final decision:
The goal is to work together and communicate effectively with your partner.
It always depends on the couple and their financial condition to determine whether combining finances after marriage is a good option for them.
The discussion of the advantages of combining finance and the tips for properly managing combined finance in the article is a wonderful help for couples to understand how to take advantage of the benefits of combined finance.
The disadvantages highlighted may also help them in understanding not only the risk but also how to prevent and work on it. The majority of disadvantages occur mainly during the initial stages when couples are adjusting to their new financial situation.
If you've already checked all of the items on our checklist, 121 Financial Credit Union should be able to help you with all of your combining financial needs.
We can help you open bank accounts, credit cards, loans, and much more. Contact 121 Financial Credit Union today.