Hey Noah –
I got married in 2015 and my husband and I filed our first joint tax return this year. It was the first time that either of us could actually put a real number on how much each of us earns and what our combined income amounts to. When we sat down to talk about our tax returns, things got weird and we all of a sudden got shy about making financial decisions together. Although we should have expected this- it was a big theme in the premartial course we took.
We both earn similar salaries and are mid-level career professionals. We have a mortgage, student loan debt, some credit card debt and your everyday household bills. For the last few years, we have basically divided up the bills and paid them respectively along with maintaining our own personal liabilities like student loans, car payments, and our wine habits. I think we should be taking a more holistic approach to our financial well-being and merging our income because we can have a much greater impact together compared to how we are currently operating separately.
I also would like us to start saving at least 10% of our total income, for emergencies, future investments, savings, and retirement. My husband is more impulsive but has less liability (i.e., no student loan debt or car payment) and thinks that we are doing ok when it comes to our finances. I am more of a planner and cautious but I also have more liabilities (i.e., student loans and a small car loan).
Do you think merging our finances is a good idea? How should I bring this conversation up and avoid the inevitable awkwardness of trying to fix a system that isn’t necessarily broken? How can we approach this and still maintain a fairness in burden sharing?
These are great questions, and not uncommon friction points with newlyweds, gay or straight. Societal norms have shifted from men as the primary breadwinner, and women as the homemaker, raising new questions around the fairest approach to earning, saving and spending.
There is an additional wrinkle of ambiguity for gay couples as there is no historical precedent to build upon (or move away from).
We promote an egalitarian yet realistic approach to money. When we marry our partners, our lives become intertwined in so many ways. Living under the same roof, sleeping together (we hope), joint tax returns, sharing the bathroom vanity.
While we believe each partner should contribute their fair share to the melting pot that makes up our married lives, we don’t believe a fair share is necessarily the same as equal monetary value. The reality is, very few of us enter married life with the same salary, debt obligations and core values around money.
Marriage cannot always be a 1:1 – that’s part of why we get hitched in the first place. We want to be with someone who offsets our weaknesses, makes us a better person, and supports us in all areas of life.
Ours versus yours
Quite often, trouble can brew around “ownership” of assets and obligations. My car, your car. Your cell phone bill, my student loan bills. My salary, your tax refund. When we date someone, this is standard stuff – not many of us are rushing to open a joint investment account after a few months, or even a few years, of dating.
Once you tie the knot, that needs to change. It’s time to shake up old ideas around 50/50, yours versus mine. You pay this, I’ll pay that. If you plan to spend the rest of your life with this person, your best bet is to merge most of your financial lives, with a few exceptions we’ll touch on in a minute.
Car titles? Checking account? Power bill? Mortgage? Put them in both your names. Credit card debt, student loans? At this point, any debt obligation is holding back future savings and investment opportunities for both of you. Pay them off together, regardless of where the debt originally came from.
Common goals and compromises
Merging bank accounts AND debt may sound radical and unfair to the partner who may have much less debt. In order to make this work, you’ll need to rally around, and commit to, a common set of financial goals and compromises.
If one partner is diligently taking out money each month and stashing it away in a Roth IRA and the other has zero in retirement savings, it’s time for a reality check. Sit down with your husband and start writing out a list of common goals – short term and long term.
Do you want to pay off all debt by 2020? Take a vacation once a year? Buy a new car with cash in two years? Retire by age 55? You will likely find some major differences. As I mentioned earlier, our values around how, why and when we save and spend are shaped by so many variables.
Identify your common goals, commit to a plan of attack, and move on to the compromises – often the hardest part of this exercise. Which habits need to be broken in order to achieve your goals? Does your husband need to start a retirement account? Do you need to avoid the daily Dunkin Donuts trip to help pay down credit card debt? Find the gaps that are preventing you both from reaching these goals and commit, as a partnership, to the compromises.
And one last thing – if you think there’s any chance you will not be with this person for the rest of your life, avoid everything I just said. These pointers are for those who expect to be together for the foreseeable future.
Staying on track with financial goals is a challenge, particularly with longer term or ambitious plans. Fortunately, there are a ton of platforms available online and on your phone to help track your progress every step of the way.
You can use Mint to keep track of spending, savings and current debt obligations. Mint will remind you when you’ve veered off track from your goals, and congratulate you for staying on budget or paying down credit cards. Both you and your husband can login and track from your own devices.
Open a joint investment account with Betterment and start saving toward a new car or next year’s vacation. Set up an automatic withdrawal from the joint checking account where both of your paychecks are deposited.
When mine is okay
One important exception I’ll call out is around savings. While it’s important to have shared retirement and cash savings accounts, you may want to maintain two separate buckets for splurges and “just for me” spending. At some point in your life, you’ve overspent at the mall shopping for new clothes, or bought a plane ticket on a whim to visit an old friend.
These splurges can push your monthly plan off track. They are also the perfect opportunities to reach into your personal savings account to cover this expense. Doing so will help minimize any animosity around the splurge. Finding and committing to common goals doesn’t necessarily mean aligning with every single purchasing decision. That’s what your personal stash is for.
Easier said than done
The reality is that tying the knot doesn’t necessarily mean our values around money magically align. It doesn’t matter who makes more money, or who has less debt. There will be bumps in the road and friction points early on in your shared financial life.
These normal bumps will be minimal compared to the inevitable blowouts that will happen if you and your husband continue to live separate financial lives and ostensibly try to contribute 1:1.
Always keep the lines of communication open.
Still uncomfortable with the idea of combining your financial lives? Talk to a lawyer who can help protect you in the event of something unexpected or tragic.