Financial Integration After Marriage: A Practical Guide

Combining finances comes with its challenges. Here’s how to ease the process. (iStock)

Once you’ve tied the knot, you might consider merging finances with your partner. For one, it can make paying household bills and tracking cash flow easier. It can also help boost your savings account or meet retirement goals you have as a couple and protect you if an emergency occurs or one of you passes away.

But merging finances — and creating a joint account — doesn’t come without drawbacks. It can also create challenges for couples, especially if you’re not fully transparent about your debts, net worth or how you spend and manage your money.

Are you considering merging money with your new spouse? Merging your finances isn’t going to be easy, but if you want to ensure your bills get paid and any extra money goes into your savings account, it might be worth the effort. Just follow these steps to ease the process:

1. Know where you both stand

For couples merging money after marriage, communication is critical. You need to talk candidly about your cash flow, including your earnings, credit score, credit card debt and savings, as well as how you handle your finances and spending in general.

To start, check your credit. Share your report with your spouse and talk through your credit score, your outstanding student loans, and credit card debts (whether you have bad credit) or any other negative marks. Some of these findings may be surprising to your new partner but do your best to be honest. Holding back will only lead to tension and financial stress down the line.

Here’s how David Ragona, director of retirement operations at Human Interest, puts it: “Talking about huge debt burdens, poor credit, a history of maxing out credit cards or unequal earnings can make people feel really vulnerable, but it needs to happen to get on the same page financially. Make sure to have that talk, as well as address any financial goals or concerns for the future: Do you hope to own a home? Take annual vacations? Need to care for an aging parent? Give your partner an honest look at your entire financial situation.”

2. Settle on a money management style

Once you’re clear on where you both stand and what your financial goals are, it’s time to decide how you’ll manage your savings account as a couple.

Who will be responsible for the bills? Are you allowed to spend at-will or will you discuss any purchases beforehand? How often will you check on your accounts, investments and savings account? Putting a plan in place for how you’ll manage your money going forward is key.

"Talking about and settling on money philosophies will help answer questions further down the road — whether it’s starting to save for a home or dealing with unexpected expenses,” Ragona said.

3. Tackle goals and debts together

Creating a household budget is your next step, especially if you want to stay on track with your savings account, retirement account and other financial goals, as well as pay off any debts either of you is dealing with.

“Start with how much you’re both earning, and account for must-pay expenses like rent, minimum payments on debt, food and insurance,” Ragona said. “Then, decide how much you want to contribute towards your retirement — 15 to 20 percent is a good benchmark — and other saving goals. Make sure your emergency fund is sufficient. If not, add that to your list of goals. Finally, look at the amount leftover, and see if it’ll support your current lifestyle. If it doesn’t, where can you cut back?”

4. Check-in often

Your finances are ever-evolving, and your approach to them should be, too. Initially, you’ll want to check in at least a few months out to make sure your arrangement is working.

“After you’ve done all the paperwork and successfully merged your finances, you may feel quite differently about money allocation, budgets and goals when they’re no longer theoretical,” Ragona said. “Reevaluate three to six months down the line so that you can make course corrections. Not everything works perfectly on the first try, so expect to probably fine-tune your plans a bit.”

Once you’ve got a system down, you may want to have a quick check-in more often, just to make sure things are still on track. According to TD Bank’s recent Love & Money Survey, a whopping 94 percent of Millennial couples actually discuss their finances at least once a week.

5. Consider keeping one account for yourself

While merging finances can certainly have its benefits, don’t forget to protect yourself. Consider keeping a small savings account just for you, and stow away at least three to six months of living expenses just in case.

As Ragona puts it, “This doesn’t mean you don’t love your partner or that you don’t believe in your relationship, it’s just an acknowledgment that we can’t predict everything that happens to us.”