Combining Finances: Essential Questions for Couples

Money is often a sensitive topic for many couples, leading to potential conflicts if not addressed properly. At O1ne Mortgage, we understand the complexities of financial discussions and are here to help you navigate these waters. Before you and your partner decide to combine finances, it’s crucial to have an open and honest conversation about your financial situations and goals. Here are seven essential questions to consider before merging your finances.

How Is Your Current Financial Health?

Before combining finances, it’s important to understand each other’s current financial health. This doesn’t mean you need to disclose every single account balance, but you should have a clear picture of each other’s debt, earnings, and savings. Combining finances with someone who is debt-free and has savings is different from doing so with someone who is still paying off large amounts of debt and lacks an emergency fund. If your partner’s financial health needs improvement, it might be wise to hold off on combining finances until their situation stabilizes.

What Are Your Financial Goals?

Once you understand each other’s financial health, it’s time to discuss your financial goals. Conflicts can arise if one partner prioritizes buying a home while the other prefers spending money on vacations. Some financial goals worth discussing include:

• Primary savings goals for short-term or medium-term objectives, such as a mortgage down payment, new car, or vacation.
• Emergency funds and the need to prioritize building one.
• Plans to buy a house together and the financial implications.
• Retirement plans and savings.
• Savings for other expenses like vacations or holiday gifts, either individually or together.

How Do You Balance Saving and Spending?

Understanding your partner’s approach to saving and spending is crucial. Are they more of a spender or a saver? Do they find it easy to save but struggle to splurge, or do they tend to overspend and not set aside savings? Discuss both saving and spending habits:

• Saving: Discuss how much you’ve already saved for different purposes and how you’ll approach saving as a couple. Will you keep personal savings accounts separate or open new accounts for joint savings goals?
• Spending: Review how you’ve managed spending so far and how you’ll tackle it together. Do either of you use a budget, and will you create a budget as a couple? If so, which budget system will you use?

How’s Your Credit?

Even though you and your partner maintain separate credit scores, their credit score can still impact your life and finances. If you plan to buy a house or a car together, both credit scores will be checked. A low credit score can lead to denial or higher interest rates. Discuss whether it’s better to have only one person on the loan or to hold off until credit scores improve. The same applies to opening a joint credit card or applying for a lease. If your partner’s credit scores are low, consider working together to improve their credit before applying for anything new.

How Will We Handle Windfalls?

Discuss how you’ll handle windfalls, such as work bonuses, birthday gift money, or tax refunds. Will you share or keep them separate? If shared, will you put the money toward debt, savings, or a splurge? Not having a plan for windfalls can cause conflict if either side assumes different outcomes. Agree on a fair approach, whether it’s a rule of thumb or a case-by-case decision.

How Much Should We Combine?

Combining finances doesn’t have to be all-or-nothing. Tailor it to your needs and comfort level. Some couples prefer merging everything, while others might only combine certain aspects of their finances. You can keep personal accounts and open new joint ones for shared bills and goals. You could also choose to combine savings but not have any shared credit cards. Remember, you can always adjust your approach later if something doesn’t work well.

Do We Live in a Community Property State?

If you’re married or plan to marry, check if you live in a community property state, as this has significant legal and financial implications. In these states, most income, debt, and assets obtained after marriage are considered jointly owned, even if only in one person’s name. Be aware that inheritance remains separate property unless commingled in a shared account. Research any potential implications and consider a prenuptial or postnuptial agreement if you want to keep certain things separate.

Learn and Grow Together

At O1ne Mortgage, we believe that open and honest communication about money can reduce relationship conflicts and help you achieve your financial goals together. Feel empowered to get creative, try different strategies, and make adjustments as you learn and grow as a team. If you need any mortgage services or financial advice, don’t hesitate to call us at 213-732-3074. We’re here to help you every step of the way.