You and your partner share your entrées, your tiny bathroom, your Netflix account — maybe even your hairbrush. But what about your finances?
It seems like a natural progression in so many relationships — you meet, date, commit, move in together and then open a joint bank account — but is combining finances the right step for every couple? The truest answer is that it depends on the couple, but many financial and relationship experts argue that taking the leap is both logical and healthy.
“Combining finances is a milestone in a relationship,” says Jill Gonzalez, an analyst for Wallethub. “I think each couple wonders whether or not they should do it, when to do it, and how to do it. However, there is no one size fits all rule here, as each relationship is different.” Some couples opt to go all-in while others create a balance of financial space and teamwork.
Different Ways to Combine Your Finances
“There are tons of ways to combine finances. The simplest would be creating a joint budget and account to cover shared expenses. Each partner would contribute a certain percentage of their income to the account, and the rest would be separate,” says Gonzalez. Together you would decide how much each person contributes — some choose to be completely equal while others prefer to do a percentage of their respective incomes.
Another option is to create a separate account — either alone or in addition to the joint bill-paying account — specifically for small or large savings goals. And of course, you could still have your own personal savings accounts in any scenario.
“Each individual would have their own employer-sponsored retirement plan and/or a type of individual retirement account since you cannot put two people’s names on those types of accounts,” explains Wendy Liebowitz, the vice president of Fidelity Investments at the Fort Lauderdale Investor Center. “Many couples also choose to have separate individual bank accounts or brokerage accounts for their own spending, investing or savings goals. This provides flexibility without having to receive permission or collaborate with the other person on every decision.”
For some, it is simply easier to combine all finances, including credit cards, bill-paying, and savings accounts, says Gonzalez. This is more common with married couples, and especially when one of the partners is a stay-at-home parent. She adds that having combined finances and filing joint taxes can also result in tax benefits for some married couples. It also streamlines things in the tragic case of unexpected death.
Whatever route you choose to take, making it a priority to talk through every detail will help reduce bickering and streamline your joint financial goals.
The Benefits of Combining Finances With Your Partner
From a partnership perspective, Anthony Chambers, Ph.D., a psychologist and the chief academic officer for The Family Institute, says that combining finances is monumental and even reflects the depth and commitment to the relationship.
“Marriage is about moving from independence to interdependence. Interdependence is simply embracing the notion that ‘whatever you do impacts me, and whatever I do impacts you, and there is no way to get around that,’” he says. “Couples will frequently try to maintain their independence and avoid financial arguments by trying to separate their finances. However, in a marriage there is no true separation.”
Chambers argues that an important part of a marriage is for couples to co-create a shared vision of their lives together. “There is no vision that doesn’t involve money, and so money becomes the most tangible mechanism for actualizing that vision.”
But aside from that, combining finances with your partner also makes logistical sense.
“For example, paying household expenses is much easier for a couple who lives together if they have a joint account set up for that. It also makes the couple more financially responsible and more organized since they have common goals to save for, like vacations or children’s education,” says Gonzalez.
Potential Drawbacks to Consider
Merging and sharing accounts requires an incredible amount of trust and if the timing is not right, then it does not really make sense.
Many couples will choose to wait until they move in, have lived together for a year or two, or when they get married. When you combine depends on your relationship and doing it prematurely may lead to more issues than it solves.
And David Reiling, the CEO of Sunrise Banks, adds that if each person has a very strong sense of financial independence, then joint accounts simply might not work out.
“The truth is that joint accounts aren’t for everybody, and there’s nothing wrong with that. If a couple thinks sharing an account might lead to acrimony in a relationship, then they shouldn’t do it,” Reiling says. “Having an honest discussion early on is important. Be realistic about what you and your partner want. If you don’t think a joint bank account would work — [either now or ever] — then it’s best not to open one.”
Understanding your partner’s financial standing, their approach to spending and saving and how they manage debt are important conversations to have as you continue taking steps toward a lifetime together. Gonzalez says that combining finances could be a problem if one of the partners has more debt or if they have poor credit. It could also lead to feeling constrained in regard to what each person can spend money on. In such cases, it may be better to work through those setbacks first or to at least devise a plan to improve the situation.