5 Things to Consider When Combining Finances

Author: Michael Hohlt, Portfolio Manager, Private Bank 05/26/2022

Everyone manages money differently. But if you plan to combine finances with a significant other or soon-to-be spouse, getting on the same page will help prevent future headaches and issues. Here are few key decisions you should consider making as you enter this new phase of financial responsibility.

Be Completely Transparent About Your Finances

Before you take the plunge together, you should both be completely honest about where you stand financially. This is a key point in order to start working on combining your finances. Lay it all out on the table. Start by discussing any debt—credit cards, student loans, car payments. Do you make these payments on time? Do you have one credit card or several? Revealing these outstanding debts will allow you as a couple to know how you’re going to pay your debt and how you can spend money. It will also show each of your spending habits.

Income should be included in this conversation, too. If you’re already living together, you likely know how much money you’re both making. If you’re still living separately, this may be a new conversation to tackle. In addition to debt and income, think about any memberships or subscriptions you’re signed up for. These are fixed expenses that will need to be factored into your budget as a couple.

Discuss Which Accounts You Will Combine

There are several ways you and your partner can choose to combine finances. Whether you share one bank account or choose to share one and have additional separate accounts for other personal expenses, it’s important to make the decision together.

Consider at least having a combined account to pay fixed expenses each month. This could include your mortgage or rent, child’s education, and other expenses that you both have together. Then, you might decide to each have a separate account to use for your own spending on more personal hobbies—sports equipment, hair appointments, clothing. This hybrid approach still gives a couple a sense of independence while funneling most of their income into a joint back account.

Establish a Budget

With your debt out in the open and your bank accounts set up, a budget is next on the list. Create this together and stick to it for about three months to see how that budget works for you. You may also want to consider streamlining your long-term savings goals at that time. Writing down everything you spend will give you an honest look at your habits to determine where you can spend more or cut back.

Start an Emergency Fund

It’s always a good idea to have a backup fund, in case of emergencies. Building an emergency fund, together, will prepare you for unexpected health issues, job loss, etc. Work to save six to nine months of living expenses into an account that you don’t plan on touching unless there’s an emergency.

Discuss Long-Term Goals as a Couple

Planning for today, tomorrow, or next month is important, but you should also consider your future long-term goals together as a couple. Are you saving for a house? Planning for children? It may be smart to have a separate account to save specifically for these milestones. That way, once you get to the point of reaching these goals, you’ll have the money set aside.

This process of combining finances can seem daunting, but if you approach it as a team, you’ll be able to achieve your goals more reliably. And don’t forget to revisit these topics and key factors often. As jobs change, lifestyles shift, and new additions join your family, your goals will change, too. PlainsCapital Bank is here to help you along the way. Visit the Financial Journey page to learn how to manage your money at all stages of life.

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