In the name of love, couples make all sorts of arrangements, from which side of the bed each partner sleeps on to who does the food shopping and laundry. But, according to Ramit Sethi, author of Money for Couples, couples talk far less often about their finances. “I’ll tell you that most couples do not have substantive conversations about money ever,” Sethi says. And when they do, it’s usually after something has gone wrong, like when a bill goes unpaid or a secret purchase is made.
One pivotal financial decision that awaits many couples in long-term relationships is whether or not they will merge finances. Most consider the maneuver ahead of milestones like moving in together, marriage, or having kids, but the conversation can also be prompted if one partner has lost a job or is taking time off work to go back to school. Every pair will have their own reasons for or against combining bank accounts and there are a variety of ways to go about it.
The decision may be one that triggers emotions like anxiety or shame, experts say, so it shouldn’t be made lightly. “This is one of the most significant financial transitions or changes that we experience in our lives,” says financial therapist Amanda Clayman, “going from a financial me to a financial we.”
Do you have a clear financial picture?
Long before ever considering combining finances, you should have a pretty good idea of your partner’s financial situation and vice versa. You should be transparent about each person’s income, saving habits, and debt, including how they’re planning to pay it off or if they might accumulate more, says financial planner Natasha Knox.
Clayman describes the financial arrangements most couples use as a one pot, two pot, or three pot system. “One pot is obviously everything goes into one pot,” she says. “Two pots is we keep everything separate, and three pots is we have a joint pot, and then we each maintain our individual kind of autonomy.” Of course, you can always open multiple joint accounts for various expenses, like a vacation fund or home renovation savings. Think about the pros and cons for each system.
Some scenarios where couples might want to keep their money separate, according to experts
- If you’re established in your financial routines
- If you or your partner have been divorced and your post-separation finances are complicated
- If you or your partner has experienced financial infidelity or financial abuse (when a person has control over their partner’s finances)
- If your partner has a serious addiction that puts you and your family at risk
However, Sethi recommends that each of you should keep an account that’s totally private to use for whatever reason you want. “Only you have access to it, your partner does not,” he says. “But it’s never secret.”
If you are weighing whether to open a joint account, you should have a candid discussion about what fairness looks like. Will both parties be expected to contribute equally or will the higher earner commit to a larger amount? What happens if one person suffers a financial setback or their circumstances change? For example, if one of you loses your job or receives a large medical bill? Is that person expected to support themselves from their individual savings or can they draw from the joint account?
“This is one of the most significant financial transitions or changes that we experience in our lives.”
“It is really important for people to understand their full financial household picture,” Knox says, “and if they don’t understand that, they can’t really make reasonable decisions together.”
A part of this financial picture is each of your “money baggage.” Discuss how your past financial experiences shaped your relationship with money today, suggests Megan Ford, a clinical assistant professor and director of the Love and Money Center at the University of Georgia. For example, try to understand the context in which your partner might have accumulated debt or the reasons you’re anxious about making big purchases.
Finally, look toward the future. What do you want to spend money on? What purchases make you happy? What are your short- and long-term money goals? This can range from a robust retirement savings to a lavish vacation.
Would combining finances benefit you or create headaches?
Another early consideration, according to Ford, is to discuss the upsides of combining finances. Be sure to also address potential downsides and any negative emotions that arise, too.
For instance, it may be simpler to open a joint checking account from which utility payments can be automatically drawn each month. There could also be emotional upsides, like feeling more secure in your relationship if you merged finances in any capacity.
Don’t ignore your feelings as you think through these decisions. If you’re unsure you’ll be together long-term, it may not make sense to open a joint account even if it might make your life easier in the interim. Whenever emotions arise, ask yourself why, Clayman suggests, instead of assuming trepidation means you’re making a bad decision.
Are you anxious because you’re uncomfortable relinquishing some control over your money? Perhaps you agree to create a system where you and your partner only contribute a specific amount to a joint account and keep the rest of your finances separate. “Money is going to surface feelings,” Clayman says. “What we need to develop is a way to meet that with self-compassion and some inquiry to find out more.”
How much financial privacy are you comfortable with?
With completely disentangled finances, the buck literally stops with you. But if another person is relying on you to pay bills, the mortgage, and contribute to the vacation fund, you need to be prepared for transparency. Whatever system you use to divide or combine your money, Sethi believes both partners should know about every account each person has.
Problems can arise when couples aren’t totally honest with each other. Financial infidelity — when couples lie about their purchases or hide debt — can stem from feeling ashamed of the amount of money you spent on a jacket or deeper issues like a gambling addiction.
To avoid these financial secrets, it’s important for couples not to judge each other for purchases they may deem frivolous or unnecessary, says Megan McCoy, an assistant professor at Kansas State University. Instead, understand why these purchases are so important to your partner. This may be a situation where you may opt for private accounts for personal discretionary spending. For more serious financial issues, you may want to devise a plan for discussing the problem with your partner in a direct, but non-accusatory tone and seeking the help of a mental health professional.
Maintaining trust and transparency with your money doesn’t mean demanding perfection from your partner, Clayman says. When people are expected to adhere to rigid, nearly impossible standards, they may hide purchases they think their partner won’t like. “Then we get a lot of secrecy in relationships,” Clayman says. “The best case is when [you admit] I am an imperfect financial person, because we all are, and I am looking for a person with whom my complexity and their complexity can at least be compatible.”
Do you have a plan?
If you feel confident that you want to combine finances in some capacity, you’ll want to outline exactly how you’ll do it and when. To what extent will you merge money? Will you open up a new account at one of your established banks or will you explore another bank? How many joint accounts will you open and how much will each person contribute and when? For what purposes will those accounts serve?
Give yourself a timeline for which you’ll take next steps, Clayman says. Set deadlines for yourself: By next month, we’ll have had more conversations about money. The following month, we’ll discuss how exactly we’ll combine our money. The month after that, we’ll open the account. “You could practice looking at your numbers together for a while,” Clayman says, “before you jump into open[ing] up a bank account and move everything over there.” This gives you space to work through any lingering emotions and for potential nerves to wear off.
During this on-ramp, set a date for when you’ll check in to review if this structure works for you. At this point, you can address any points of conflict.
There are no right or wrong paths here, experts stress. Instead it’s about finding a way to manage the financial decisions in your unit that are efficient and comfortable for all parties involved.
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