I’m a Financial Advisor: Why I Advise Newly Married Clients To Merge Finances

TheBusinessMan / Getty Images/iStockphoto
TheBusinessMan / Getty Images/iStockphoto

If you’re planning a spring wedding, you probably have a lot on your mind: managing the guest list, choosing flowers, cake, and entertainment. While “DJ or band” may seem to be a significant question, couples also face even more important decisions, like whether or not they should merge finances, when they tie the knot.

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GOBankingRates recently spoke with certified financial planner Mindy Oglesby of Oglesby Wealth Strategies to discuss the pros and cons of merging finances as a married couple.

“When there is a joint account, the money is pooled together, allowing both parties to see what money comes in and out of it,” Oglesby said. “This makes it easier for couples to work together on a budget for everyday expenses and plan for major financial decisions such as purchasing a home, tackling home renovations, buying a car, or planning a vacation to a dream destination.”

Oglesby pointed out that she’s a big advocate of merging finances. Recent research out of the Indiana University Kelley School of Business backs up Oglesby’s expert advice.

“When we surveyed people of varying relationship lengths, those who had merged accounts reported higher levels of commonality within their marriage compared to people with separate accounts, or even those who partially merged their finances,” Jenny Olson, assistant professor of marketing at Kelley, wrote in an article on the Indiana University website. “They frequently told us they felt more like they were ‘in this together.'”

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Even so, recent research from Zeta, an online bank, found that 39% of couples opt not to combine finances in any way. Another 39% merged finances completely, while 22% chose to pay for shared expenses through a joint account while maintaining individual accounts for other spending.

Apart from a sense of financial unity, what are some of the other advantages of merging finances?

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Increased Communication

One of the main reasons couples divorce is due to money issues, being open and transparent can reduce the risk since merging finances requires open communication.

“One advantage of merging finances is that it can create an openness with income and expenses. It forces couples to be transparent with one another and in turn, creates financial alignment,” Oglesby said. “If you can keep open dialogue between you both this will help alleviate some of the stressors money can create.”

Better Budgeting

In situations where one couple is a spender and one likes to save money, which is fairly common according to Oglesby, shared finances can help you find common ground and live within your means.

Her advice: “Develop a budget system together. This gives you both a voice in the finances.”

Achieving Shared Goals

Whether your goal is paying off debt, saving for retirement or becoming a millionaire, working with your spouse can help you achieve it, studies show. Financial expert Dave Ramsey revealed that more than 85% of millionaires said they work with their spouses in a shared approach to life and finances, GOBankingRates previously reported.

“I encourage you to find what is both you and your partner’s priorities with money and work towards being on the same page,” Oglesby said. “When you are working together you see yourselves as one and on the same team.”

Drawbacks to Merging Finances

Of course, it’s important to take note of the dangers of merging finances, especially if your relationship isn’t strong or based on trust to begin with.

Being Liable for Your Partner’s Debt

“When you share a joint account, it may leave you financially vulnerable as one partner could be left to the other partner’s creditors and be stuck on the hook for the debt,” Oglesby said. “The ‘what’s yours is ours’ approach isn’t always a plus.”

No Safety Net

Similarly, merging finances could leave one partner or the other without a backup or safety net in case of divorce.

“The worst-case scenario–divorce–may be the biggest con to merging finances,” Oglesby said.

If a partner has a history of addictive behaviors, overspending or the relationship is abusive, you would also want to steer clear of merging finances.

How To Have a Constructive Money Conversation as a Couple

In most healthy relationships, merging finances will provide more benefits than drawbacks. But how do you broach the topic early in the relationship?

Oglesby had some words of advice: “It is easier to talk about difficult things, such as finances, during nonconfrontational times. Plan to have a nice, uninterrupted dinner together to discuss how each of you views money and its true purpose for you.”

Merging finances doesn’t have to be an all-or-nothing approach, however, as long as there is trust and open communication.

“I think that merging most of your finances in a joint checking account, and working toward a structured budget is important,” Oglesby said. “I also think that having some money set aside for each person for ‘play’ money, whether it’s to treat yourself to something or surprise your partner with a gift is acceptable.”

She noted that problems arise when one partner, or even both people, are being sneaky about money.

“You both can set limits that allow freedom for each other and encourage open communication.”

This article originally appeared on GOBankingRates.com: I’m a Financial Advisor: Why I Advise Newly Married Clients To Merge Finances

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