Merging Your Money: Oh Yeah, We Should Talk About That...

You’ve talked about what kind of wedding you want to have, where you want to live after you’re married and maybe even how many kids you want to have someday, but have you talked about your financial future?  I think this is probably one of the most difficult conversations for couples to have, which probably causes them to wait too long to have it!

Money is a hard thing to talk about with anyone, especially because you have probably either been on your own for a number of years, with no one to answer to when you just HAVE to have that pair of shoes, or because you’ve had parents who have been the ones to dictate where a good portion of your money (that was actually their money) was supposed to go.

Now, as you start your new life with your husband or wife, it’s time for the two of you to put your money together in some form or fashion… but the first thing to determine is how and where it will be combined.

Start with a budget

The best thing you can start with is your own personal budget.  There are a few ways you can do this.  You can estimate what bills you pay each month and estimate the amount you spend on gas, groceries, entertainment, etc., and use those numbers.  The best thing to do with these numbers is to put them on paper.  Excel has tons of templates for personal budgets, where all you have to do is fill in your categories and numbers.

Photo courtesy of Christian Personal Finance

You can also use online tools such as Mint.com, where the website can actually download information from your credit cards and bank accounts, and you can categorize your various purchases to see where you spend your money.  This can help you to see what areas of your life can be reduced to help you save money to put into other areas, especially since it comes directly off your credit and debit card transactions.

Photo courtesy of Mint.com

So what do we have to talk about?

The first thing to talk about is what money, if any, you want to combine.  There are plenty of couples who don’t change anything about the way they handle their finances once they get married.  They keep their own bank accounts, and they get to make their own decisions about how they spend their money.  One thing to think about with this method is large purchases.  Whose name will be on the mortgage?  Who’s going to pay the taxes on the house?  Who is going to pay when the house needs a new roof?

There are also couples who put all of their money together in one account, every single penny.  This way, there is no question about “whose money” is going to pay for something because it’s all “our” money.  Something to consider when taking this approach is whether or not both of you have to agree on every purchase that is made.  If you need some new shoes or a new outfit, do you have to ask before you buy?  What if you come home and there is a 65” TV in your living room… are you going to be OK with the fact that it was purchased without “permission”?

The last method is somewhere in the middle.  Maybe you can figure from your budget how much money is necessary every month to pay the bills and put that much in a joint account to pull from.  Maybe you plan to put a certain amount in an account each month for large purchases.  Or maybe you each get an “allowance” each month in your individual bank accounts and the rest goes into your shared money accounts, from which you pay the bills, buy things for your home and save for large purchases.

In the end, it really doesn’t matter how you do it; it matters that you have the conversation before you start your new life.  That should be one thing that you don’t have to figure out after the wedding!