Talking about money with the person you love can be difficult. It can bring up a bunch of different emotions, and if you don’t see eye to eye on how you want to spend and save, things can get downright stressful. But financial advisors and marriage counselors alike argue that the key to a successful relationship is open communication about your personal finances.
One of the most complicated topics is if and when to combine your finances with your partner. A recent survey from Ally Bank found that more than three quarters (84%) of people in a relationship combine their finances either fully or partially, but more and more couples are choosing to wait before they make such a big commitment. After all, there’s a lot to consider.
CNBC Select spoke with David Wells, a certified family wealth advisor who has worked with countless couples. We got his best advice on what couples should think about before they make any big money moves together.
Here are the three steps Wells encourages couples to make:
1. Survey the landscape
As the first step, you and your partner should sit down and compile a master list of all your different financial accounts, Wells says. You can either separately document these accounts in a simple Excel spreadsheet or write them down.
Each person will list their bank and investment accounts, credit cards and loans, plus any other debt. This helps you personally get an overview of where you stand financially on your own.
“Once each person has made their list, I highly recommend running free annual credit reports for each person in case there are other accounts that you have forgotten about,” Wells says. “[It’s] also a good check for fraud.”
2. Discuss what it means to combine finances
“Each couple answers that uniquely,” Wells says.
When sharing finances with your spouse, it’s important that you’re both on the same page with what exactly that means. Here are some general money management questions to review when combining finances:
- Will you share everything or have separate accounts as well?
- How will you split bills?
- What are the implications or expectations if one of you makes more money than the other?
- If you share all finances in one merged account, how do you handle things that each person may want individually?
“Recognize that you are managing a paradox,” Wells says. By sharing finances, you may be combining two contradictory money styles (such as saver versus spender) or two different financial personalities. For example, maybe one of you is more long-term goal oriented when it comes to your money than the other. Take time to talk about what combining finances will look like now and also later down the road. Do you both want to start saving up for a first-time mortgage, a new car or welcoming a child?
3. Strongly consider joint and separate accounts
How you and your partner choose to combine your money is entirely a personal decision, but Wells does have his own recommendation that involves having joint and separate accounts.
What he has seen work well for clients is sharing a joint checking account where the couple will deposit both their paychecks. This account is used for household expenses, like groceries, rent and bills. Separately, the couple sets up an agreed-upon ‘allowance fund’ for each partner, and a certain amount is automatically transferred from their joint checking to each person’s own bank account.
“Allowance funds can be spent no questions asked,” Wells says. “That is one way to manage the paradox of I/us around spending.”
How to collaborate better when combining finances
There are a number of budgeting apps designed exclusively for couples, which makes it easier than ever to manage your money together. Honeydue, for example, is an app that links to all your joint and separate bank accounts so together you and your partner can coordinate bills and collaborate on shared savings goals. The app also offers a messaging feature so you can communicate through the app, as well as a no-fee joint checking account with free ATM access and a debit card for both partners.
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