Today, I’d like to CONTINUE our video series on the important topic of “Should You Merge Finances After Marriage?“
And let’s start with discussing…
When to keep money separate: It may be helpful to first start with the reasons to not fully merge your finances. The situations that may warrant having separate pools of money from your spouse are:
1) A Second marriage: If you are marrying for a second time, you presumably already have financial obligations, commitments, and goals associated with your first marriage that your new spouse may not share for example, supporting your son in kollel or paying alimony). Financial commitments that stem from a previous marriage should be segmented from your current relationship. The commingling of funds when they pertain to these other expenses may lead to arguments, which can easily be avoided.
2) Marriage later in life: Similar to the previous point, if you are getting married in your 50s or 60s, you presumably have spent most of your career making smart, or not smart, financial decisions. Your new spouse shouldn’t necessarily be a partner in what you spent decades accumulating. It doesn’t make sense to immediately make the new spouse co-owner of all their spouse’s accumulated assets and liabilities.
3) Entering marriage with significant assets or debt: If one spouse comes into a relationship with millions of dollars saved or saddled with tons of debt, merging assets all together is ill-advised. The correct approach to handling this should be discussed BEFORE the marriage, as well as a strategy on how it should be managed in the future. This may be a video series for another time, but it is understandable if the wealthier spouse does not want to merge funds at the commencement of a marriage.
4) Large inheritance: Understanding the boundaries on money that is inherited from a loved one is important. Even though both spouses are on the same team and function as one unit, it’s important that the party who received the inheritance take the lead on how this inflow of capital is handled. The other spouse demanding that those funds be used for specific goals is not the right approach.
All these suggestions are general guidelines. As previously mentioned, a candid conversation needs to be had, well before tying the knot, to figure out how each party envisions the finances of the relationship working out. If one party has unrealistic expectations for how the money will be handled, it can lead to a turbulent road ahead. The key is being frank and upfront about these issues from the onset.
Next, let’s discuss When to merge finances: Merging finances should be the default for all newly married couples where the aforementioned exceptions do not apply. The questioner here, married young, so assuming they had a similar level of assets (or lack thereof), means they should have merged most of their finances immediately.
Keep in mind that a young married couple should always view themselves as being on the same team. This is true in all aspects of life. When one spouse is struggling, you are both struggling. When one spouse has a major success, you should both be celebrating. This is also true with money. Your income is OUR income. Your expenses are now OUR expenses. When you get married in your 20s, you build your life together and therefore all money should be considered “our money.” You worried about losing autonomy, but this is no different than all other aspects of your life once you are married. If you’ve aligned your goals and best practices and trust each partner to act in accordance with that framework, then you won’t necessarily need to consult your spouse on every single spending decision. Out of respect for your partner, a courtesy heads up or quick discussion may be prudent if it’s a large purchase outside of normal spending patterns.
In my next video, I will discuss several practical implementation matters, as it relates to a couple merging their finances.