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At some point in most serious relationships, finances merge. The extent of this and the time it’s done varies. Some couples take out a joint bank account and close their individual accounts as soon as they even consider moving in together. It seems easier to get it out of the way so that all the bills can come out of the same account. Other couples that have been married for 40 years have kids and grandkids, still, have separate bank accounts. They never open a joint account, and the extent of their financial merge is dividing the bills fairly each month, or perhaps having a joint savings account or credit card. They like to be financially independent and never intend on giving up their financial freedom.
Even those couples, however, will merge in some sense. They’ll consider each other’s finances, and have tough conversations about money. They’ll know how much the other earns, and have an agreement in place about who pays for what. If they need to borrow money, they’ll discuss their options together, and research secured joint loans before making a decision. It won’t be undertaken alone. At least it shouldn’t be.
If you and your partner are considering merging your finances, perhaps before taking the next big step in your relationship, here are some of the things that you need to think about first.
How Far Do You Want to Go?
Perhaps the most significant decision that you need to make is how far you want your merge to go. Do you just want one account between two of you? Will all of your credit cards, bank accounts and loans in the future be in both of your names? Or do you want to keep some independence?
If you plan on a complete merge, ask yourself how you’d feel if your partner stopped working, and you were paying for everything? Would you be happy if they went out and bought something for themselves without asking you? Or if they went out for a meal without you? Would you feel as though they were spending your money?
A popular option in today’s world where very few of us merely have one bank account is a partial merge. Many couples take out a joint bank account when they buy a house together. They both pay a set amount (although perhaps not the same amount, depending on earnings) into this account to cover their mortgage, bills and other household expenses. But, they keep individual accounts to buy things for themselves and pay for luxuries. This option can offer you the best of both worlds.
Can You Clear Your Debts First?
Merging your finances can be more complicated if you’ve got existing debts. While you should still be able to open a joint account, as long as you’ve both got good credit scores, you won’t be able to close down any accounts with a standing balance. You’ll also have to decide whether or not you want to start sharing the responsibility for these debts.
It’s also important to remember that merging will affect your credit score. Once you are financially linked, you affect each others score, and even if you break up later on, these financial ties can continue to affect you.
Have You Had the Money Chat?
You shouldn’t even be considering merging your finances if you haven’t had the money chat. It should include talking about your income and expenditure. You should both be fully aware of how much you spend, and how expensive your household bills are.
You should also talk about your attitudes towards money. If one of you is a saver, and the other is more of the “spend it while you’ve got it” attitude things can get difficult. If you have different views, at least try to understand each other, and reach an agreement on what you will do going forward. It’s ok to set ground rules if you need to.
Make a Budget
Making a household budget can make all of this much easier. Use a spreadsheet to input all of your household bills, as well as any personal bills, such as subscriptions or your mobile phone bills. Add your incomes and see what’s left. Then, add anything that you spend on luxuries or non-essentials.
Seeing everything written down like this in black and white can make it all easier to understand. It’ll be easier to decide whether you want to fully merge, or keep some money separate. It can also make it easier to see whether those personal bills should come out of your joint account, and how much you should each be paying in every month.
Change Your Will and Other Documents
If you’ve got a will, it will need to be changed when you merge your finances. You might also want to change the names on some of your contracts to include your partner.
What’s Your Spending Limit?
Whether you are going for a full or partial merge, you’ll want to agree on personal spending. Is your own money, in your own account totally yours to do whatever you want with? Would you be happy if your partner spent all of their personal money on a significant expense that you didn’t agree with?
Many couples choose to agree to a spending limit. Say £50. Anything that costs under £50, they can buy without a conversation. Anything that costs more than this needs to be discussed and agreed upon.
One of the key things to remember when merging your finances is that you will always be equal. Whether one of you earns a lot more than the other, or if your situations change in the future, perhaps if one of you leaves work to raise kids and stops earning, you are still equal. If you are committing to merging money, it’s your money as a couple. Neither individual should have more control or power over the couple’s finances as the other. Make sure that you both agree on this, and all other aspects, before making a financial commitment to each other.