There’s no wrong answer to the question; should you combine finances after marriage? Your decision is a matter of both of you knowing all of the consequences of combining or not combining finances and being comfortable with doing one or the other.
This article explores the potential consequences of combining or not combining finances after marriage and comes from the office of busy Abington bankruptcy attorney David Offen.
Have You Been Candid With Each Other About Your Financial Situation?
This is the first order of business. If you have not sat down together and disclosed all debt, expenses, and income, now is the time to do so. 40% of divorced people report misunderstandings about money were a primary reason for divorce. Don’t be a statistic. Have that conversation now.
It’s not as hard as you think. Over a nice dinner, broach the subject and make a date to sit down, go through your finances, and craft a budget for joint expenses and an emergency savings plan.
Making a date avoids putting your spouse on the defensive. It gives everyone time to collect information and prepare for the talk.
When the day of the talk arrives, sit down with all of your paperwork and eye each other nervously. The first thing you should do is promise each other you won’t get angry or defensive.
These are just numbers. First, disclose income (the good news, hopefully!) and write that down in two columns, one for you, one for your spouse.
Then discuss and record each of your personal expenses, including any debt such as spousal or child support, student loans, and credit card debt. Subtract individual expenses from income. There’s what you have to pay for your joint expenses.
Do You Want to Pay Joint Bills Equally or Equitably?
If one of you earns significantly more than the other, it is logical for the bills to be paid equitably rather than equally. For example, if one of you makes $80,000 a year and the other $40,000 a year, but you work the same amount of hours, isn’t it fairer if the higher-earning spouse pays for 2/3 of joint expenses and the other 1/3?
Of course, this situation might be different if the higher-earning spouse has expenses such as a large student loan to pay off or child support, bringing income down to the other spouse’s level. These are things you must discuss and decide together what is fair.
If you and your spouse earn roughly the same, then, by all means, pay joint expenses equally. What are your joint expenses? They might be:
- Rent or mortgage payments;
- Renters or homeowners insurance;
- Upkeep on house or apartment;
- Jointly-owned car payments;
- Joint car insurance;
- Household expenses such as groceries and supplies;
- Household utilities such as internet, electricity, water, gas;
- Pet expenses;
- Child expenses;
- Family cell phone plan;
- Family health insurance;
- Holiday gifts for relatives and friends;
- Tithing to your religious institution.
Would a Joint Account Suit Everyone’s Needs?
Both spouses must have a stake in supporting the household and also have a measure of freedom with discretionary income. Discretionary income is anything more than what is needed to pay your personal bills and your share of the joint bills.
Once you decide what your budget is and who pays what amount, it’s a simple matter to open a joint account and deposit an established amount each month to support the household. You each can then pay your individual bills from your personal accounts.
If you do not want to open a joint account, consider assigning certain bills to each of you. For instance, one person pays the mortgage payment, and the other pays all utilities, etc.
What You Decide Does Not Matter in a Community Property State
There’re reasonable explanations for not choosing to combine finances. For example, if either of you has been previously married and has children and has family money that should go to those children, you may want to keep that money entirely separate from your current marriage.
If either of you is adamant about not combining finances for this or any other reason, know that it might not make a difference in a community property state if you divorce. Community property states include:
- Louisiana
- Arizona
- California
- Texas
- Washington
- Idaho
- Nevada
- New Mexico
- Wisconsin
Marital property can include bank accounts, investment accounts, pensions, life insurance, real property, and personal property. In community property states, the court treats all money earned, and property acquired during the marriage as jointly-owned and divides it equally upon divorce.
If either of you needs to protect assets from divorce, you should consult with a family law attorney about crafting and executing a binding post-nuptial agreement that complies with the law in your state.
Marriage and finances go hand in hand. You and your spouse will be sharing all financial obligations and decisions and so should split finances.
