The financial side of an upcoming marriage isn’t romantic or swoon-worthy. But it’s something that must be considered and discussed in order to help ensure a smooth union for years to come. It’s not too hard; the practicalities of whether or not to mingle money after marriage can be taken care of swiftly so that the other, “fun” details of the pending nuptials can be focused on. The following pros and cons will serve as a helpful guide so that you and your intended can make an informed decision based on all the factors.
Pros of Merging Finances
First, let’s review the tremendous benefits that come from mingling money after marriage.
1. Simplified Money Management
Managing household finances can be complicated enough without the added challenges of keeping track of who spent what. Combining finances can streamline the entire process, so there is one unified account that both parties are working with. This is hands down the easiest way to track spending, track savings, budget and manage bills. If you and/or your beau don’t necessarily enjoy sitting down each week and sorting out money matters, merging finances will definitely be a welcome way of doing things.
2. Easier to Make Money Decisions
When both parties in the marriage are “in it together” in terms of finances, they may find that the process is easier when it comes to making major money decisions, large purchases and so on. If opportunities for investment come up, or the need for major repairs, it’s much easier to make the choice to go ahead or hold back when you only have to consider shared accounts and not multiple, individual accounts.
3. Strengthening Trust and Unity
There’s also a school of thought that says that mingling money builds a stronger bond between two people in a marriage. There’s an inherent trust that can build when both people have full account access, shared passwords, and so forth. It can feel more like you’re building a stronger financial future together, rather than embarking on a parallel journey where one person might come ahead.
Cons of Merging Finances
The drawbacks of merging finances after marriage can’t be ignored, either. Depending upon the situation for each party in the union, mingling money might not be in one or both people's interests.
1. Resentment Can Build
If one person came into the marriage with a lot more money than the other, it may take some getting used to sharing the wealth. In fact, over time, resentment may build up; particularly if the other person is perceived as not pulling their weight. Instead of bringing the happy couple closer, joint accounts may actually pull them apart.
2. Loss of Financial Autonomy
For individuals who are accustomed to managing their own finances, merging accounts can represent a significant shift. It often requires adjustments in spending habits and financial decision-making. Some individuals may feel a loss of independence as they now have to consider their partner's views and preferences in financial matters. This can lead to an unwelcome feeling of constraint, particularly for those who highly value financial independence.
3. Potential For Confusion
With two people using one joint checking account, there’s more potential for confusion as far as tracking spending. This becomes more dangerous if there isn’t a lot of padding in the account to cover forgotten transactions that could lead to costly overdraft fees. Both people have to be diligent about tracking spending. Otherwise, both parties’ credit can suffer, making it more challenging to attain future life goals, such as buying a home.
4. Unbalanced Responsibility
Another, related issue has to do with the responsibility of managing the finances. If one person just spends as they please, with nary a thought to how much is in the account, or if they have no interest in balancing the checkbook, it falls to the other person to take up the reins. If the other person is happy with that arrangement, that’s fine. But if they’re feeling the extra burden of shouldering all that extra responsibility, it may lead to another form of resentment.
5. Complexity in Estate Planning
Joint finances can add complexity to estate planning, particularly in blended families or when there are significant assets involved. It requires careful consideration and often legal advice to ensure that assets are distributed according to the couple's wishes. This complexity can be exacerbated in situations where there are children from previous relationships or specific intentions for the distribution of assets.
Other Considerations
There are other things to consider that should factor into whether or not you decide to mingle money after marriage.
Investments
Just because you decide to mingle your checking account and/or savings account, doesn’t automatically mean you have to share your investment portfolios. For instance, if you’ve got a stock portfolio, you may not want to add your spouse to the account. Doing so could hinder your stock trading decisions, if it’s a self-managed account. It can also complicate things as far as managing investments that you started long before you ever met your future spouse.
Debt
If you go into the marriage willing to share your money, then you and your spouse will also be sharing each other’s debt. Hopefully, you’ll be marrying someone who’s been responsible with debt management, but that’s not always the case. There’s the possibility of making an agreement that each party pays off their own debt separately, with fixed monthly amounts, and then the rest goes into the joint account. There are other viable solutions, too.
This conversation about mingling money after marriage isn’t enjoyable. But it can be satisfying to put everything on the table so that everyone’s on the same page. And you should know that talking about money matters isn’t something you should do only once. It needs to be a regular discussion topic as you each go forward in life. For help deciding whether to mix finances, and how to do so, contact your CPA.
by Kate Supino