How to talk about merging finances?

December 17, 2015 10:36 AM

My relationship with my partner has become 'real' enough that I want to start the conversation about merging finances. However, I don't want us to just hack together a plan- is there a guide of any sort for how a young couple should start this process?

Extra details if it helps- we are two men, 32 and 34. We have a relatively high income disparity (one makes 4x as much), but both have excellent credit, additional financial support from our families, and about 100k each of down payment to contribute to our future home. We are the type who are interested in more security rather than a bigger lifestyle, but obviously we aren't in any kind of austerity situation.

I'm interested in educating myself financially, but also need advice about how to talk about these questions and how to work out what our goals are/should be. Books, websites, etc. are appreciated!

posted by tumbleweedjack to Work & Money (11 answers total)

My wife and I combined our finances the day we were married, which gave us an easy cut-off point—then we bought a house together and merged all our insurance/cell phone/etc. plans, and that was that. Of course, we had both always anticipated we would do that, so it was easy; just a matter of one of us confirming it with the other once we were engaged.

One thing that's been extremely helpful is keeping a close budget, which neither of us did when we were alone. It's really easy, once you've pushed your bank accounts together, to fall into the trap of spending "my" money on something—i.e. I know you don't want a dog, but don't worry about it, I won't spend any of your money on it. Now that it's all "our" money, except for an amount both of us get to do whatever we'd like, purchases and decisions become "our" purchases and decisions (and dogs), and we talk about them when we're setting up the budget for each month.

And I guess that's my advice for dealing with this—it's easy for my wife and I since our incomes are pretty similar, but if you decide you want to combine your finances make sure they are as combined as possible in your brain. Every dollar goes into the same pile and every decision about those dollars is made with equal deliberation from both parties.

Having done it, I can see why it doesn't work for some people, but I love it—it helps us both to feel like we're primarily a unit, part of a household, in a way that we weren't before. And as someone who hates talking about money, talking about it once a month on the way in is much easier than talking about it every time on the way out—splitting the tab, buying gifts, debating our individual usage of common goods, etc.
posted by Polycarp at 10:57 AM on December 17, 2015 [2 favorites]

The Practical Wedding website has had a lot of posts about this, maybe start here; it's part of a series. If you're interested in general financial info, also go poking through old askmes - you'll find a lot of great info.
posted by ldthomps at 11:01 AM on December 17, 2015 [1 favorite]

One thing you're going to have to decide (and you might have differences of opinions on this) is whether you're going to go 50/50 or proportionally (which sounds like a 20/80 in your case).
posted by radioamy at 11:41 AM on December 17, 2015 [1 favorite]

We kept our accounts separate but split bills. We discussed how much on a pay period basis I would transfer into her account. If there are unusual expenses we split them. It's nice having a personal account where you can surprise your partner with special things without them seeing the transaction in the account ahead of the surprise. Also, we have friends who have a household account and then their own accounts. I've seen much less conflict in these arrangements than having everyone's total income going into a single pot.
posted by white_devil at 12:46 PM on December 17, 2015 [5 favorites]

Check out His & Her Money and especially their youtube channel. Lot of no-nonsense and sometimes brilliant advice on how to handle finances as a couple.
posted by ainsley at 1:19 PM on December 17, 2015 [1 favorite]

My husband and I have separate personal bank account and one joint account. Each time we get paid, we put what our portion of the bills would be into the joint account and pay out of it. This way, we each still have "our money" that we spend on whatever we need, separately.

I know this doesn't work for everyone, but we NEVER fight about money. This also works for us because we make about the same amount of money, which isn't the case for you. But maybe try a slow merge of a joint account and keeping your separate ones first?
posted by Sara_NOT_Sarah at 2:43 PM on December 17, 2015 [2 favorites]

when we started pooling money we did similar to what other people are saying here, with effectively four accounts: one shared for bills, one each for spending, and one for saving.

big expenses like rent or furniture or joint holidays come from the joint accounts, so the two "personal spending" accounts were quite small (for books, music, coffee, etc).

that meant that even with a very skewed income, the lower earner still earned enough to pay for "their" account plus a contribution to the joint accounts. the other person, who earned much more, paid for their own spending money, and the majority of the rest (bills and savings).

maybe it's not clear why that worked so well. the important point was that even the low earner (1) had their "own" money to spend (that they had earned) and (2) contributed something to the "joint" accounts. in that way they felt included, and that the entire process was "fair".

we also tracked quite closely what we spent for a few years.

this was all over twenty years ago. these days we're used to each other, with more trust and experience, and we have a much more relaxed arrangement (and a pile more income, which helps). but what i described above got us off to a good start.

(to more directly answer your question - we just dreamt this up ourselves. i don't think we used any external resource. and i think it was important that we were both happy with how it worked - it was very much a consensus approach. the close tracking / budgeting helped discussion on priorities, too.)
posted by andrewcooke at 4:51 PM on December 17, 2015 [1 favorite]

We met with a financial planner who helped us. The first step was her interviewing us about our money and aspirations. Then we gave her all of our account statement and other documents. A few weeks later we met and she gave us advice about our retirement funds, insurance, spending, etc. She helped us make a plan for our future.

What she really did was give us a shared language for talking about money. I highly recommend having someone neutral help you understand where you are and where you're going. It was completely worth what we paid her.
posted by 26.2 at 12:28 AM on December 18, 2015 [2 favorites]

A couple of years ago Slate ran a series of articles asking people how they managed their finances after they married. It makes for interesting reading, and can certainly jump-start a conversation.
http://www.slate.com/articles/life/home_economics/2011/01/our_newlywed_money_dilemma.html
posted by eglenner at 5:40 AM on December 18, 2015

My now wife and I started splitting costs early on in our relationship, but we didn't actually merge our finances until we got married. We faced a similar dilemma of income disparity. The method below worked for us, and allowed us to add expenses when they became joint expenses, vs individual expenses. For example, when we first got together, we still owned separate houses but we spent all of our time together. So joint expenses were groceries, restaurants, and entertainment. When we moved in together we added household expenses to the mix, but still kept personal expenses out (like clothes, grooming, student loans, etc). Now that we are married, everything is together in one pot and we make financial decisions together. You may get there earlier than us, but this allowed two independently minded women ease into combined finances. I think it also made the ultimate merge easier, because we had many low stake conversations about money (like what should your entertainment budget be) before ultimately having big conversations about money (like how to pay off debt and how to save for retirement). Through this process we also realized where we had different opinions on money management.

First we opened a joint account, but kept our individual accounts. Then we add up our joint monthly expenses, and calculated our combined monthly income. Then you calculate the percentage your joint monthly expenses represents of your combined income. Then each individual contributes the appropriate percentage of income to the joint account.

If that isn't clear, here is an example with math. Couple has $400 in combined expenses. Partner A makes $1000 a month, Partner B makes $300 a month. $400 is approximately 31% of their combined monthly income of $1300. So Partner A contributes 31% of his or her income ($307) to joint account, Partner B contributes 31% of his or her income ($93) to joint account. The amount of the contribution is very different, but the percentage is the same.

In our minds this let each partner contribute proportionately to the combined expenses, even though our income was very different. For us, we started throwing more things into the combined expenses pot as time went on. We also adjusted the contributions when one of us had a change in income.
posted by donovangirl at 7:04 AM on December 18, 2015 [1 favorite]

You may want to take a look at http://ask.metafilter.com/286615/Approaches-for-financial-imbalances-in-a-committed-relationship
posted by miasma at 2:39 PM on December 18, 2015