When you are in a serious relationship, you may wonder about merging your finances with your partner. There are many steps or stages in the relationship – whether it’s living together, getting engaged, getting married, or having a child – where people might consider merging their finances. There are laws in place to protect you once you are married, so it is usually best to wait until you are married to fully merge your finances. Otherwise, you could find yourself in a difficult situation and end up financially hurt.
What should I do if we move in together?
If you are living together, it makes sense to combine household expenses and cover them together. The best way to do this is to create a household budget. This budget will cover things like rent, utilities, food, and other expenses that you share. Other items such as car loans, insurance, and retirement should remain separate. Additionally, the money spent on clothing and personal entertainment should also remain separate. This allows you to protect your credit and retirement and work on the personal goals you have.
Since it is rare for both partners to earn the same amount, it is best to allocate shared expenses based on the percentage of income each contributes to the relationship, rather than equal amounts.
What if you are engaged?
Engagement is a big step and represents your commitment to each other. However, it does not provide any additional legal protection. If you become engaged, it is best to wait until you are married to fully merge your finances. However, if you are living together, you can merge household expenses just as in the previous example. This is also a good time to merge some additional expenses, such as signing a new lease in preparation for marriage.
What if you have children together?
The best way to handle this is to include all child-related expenses in the household budget. This includes health insurance, childcare, and clothing for the child. Then determine how much each of you needs to contribute to cover household expenses. If you separate, you can still receive help in covering expenses through child support. You will need to speak with a lawyer to arrange this. Some states also provide assistance through child welfare or family services agencies.
If one of you is taking care of the children at home, you should discuss merging everything. Without the protections offered by marriage, the partner caring for the children will have no rights to retirement benefits. You will also need to include retirement savings for the partner who cares for the children in the budget. It may be wise to consider marriage at this point.
What if you want to buy a house together?
This can be very complicated. It is possible to buy a house together before marriage, but it must be done in a fair manner for both of you. You will need to create a contract that divides the house’s value between you. If one of you provides a down payment, it may make sense for that person to hold a slightly larger percentage than 50%. You should visit a lawyer to arrange this properly so that neither of you finds yourselves in a worse financial position if you decide to separate.
What if your partner is not ready to merge finances?
If your partner is not ready to merge finances at all, you may be in a difficult position. If you are living together, you will need to at least merge household expenses. You can open a separate checking account where each of you contributes money and work from there. If your partner is not ready to do this, it may be best not to live together.
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It’s important to recognize that your partner may have legitimate reasons for being hesitant to merge finances. These may include financial issues in past relationships or concerns about your spending habits. However, shared expenses should be joint. If your partner is not willing to combine finances, it could be a major warning sign of financial issues in your relationship. You may need to see a marriage counselor to work on resolving these issues together.
Source: https://www.thebalancemoney.com/when-should-i-combine-finances-with-my-significant-other-2385592
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