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In this episode, we're going to be diving into the question, should you combine your finances with your partner? Now, this is a hot topic, and every single time I talk about this topic, people have differences of opinion. Should you combine your finances? Should you keep them separate, or should you do some sort of hybrid methodology? Well, today we're going to be diving into the reasons why you may want to combine your finances or why you may want to keep your finances separate. Welcome to your next Dollar by Nerd Wallet Wealth Partners, the show where we help you make smarter decisions with the money you already have so you can build the life you actually want. I'm Andrew Giancola. Let's dive in. So when you are thinking about should you combine finances or should you do some other methodology, there are really only three different things that you should consider. One would be you combine your finances. Two is you have completely separate finances. Or three, you do some sort of hybrid methodology. Now, as we dive deeper into this episode today, I'm going to explain a couple of different things. One is I'm going to explain the practical aspects of each each side of this coin. But in addition, I'm also going to talk through the psychology. And psychology is a major part of what we need to consider when we are thinking about combining our finances. And so this is one of those things that is really important to make sure that throughout this process, you are in constant communication with your partner. Why? Because if you don't talk about money, a lot of things are going to come out unsaid and it's going to cause friction and it's going to cause fights. So we need to make sure that we are communicating constantly. Now, if you're the type of person that grew up in a household that really did not communicate about money much, this may feel uncomfortable at first. So let's talk through some of the reasons why you might combine your finances. Well, one of the main reasons why I love combining finances is because you are building one life. So when you're in a relationship, you are working towards one common goal. And if you have this goal as front and center in your relationship and part of the conversations that you have surrounding money, this could be one of the most powerful motivators for. For both of you. So one of the things that I love to do is when my wife and I have money conversations is we start those conversations with the why. We start those conversations with the dream and the reason why we are doing this. Maybe for some of you, it's for financial independence and you are trying to Achieve financial independence in your 40s or your 50s, or you're trying to just retire early. Maybe you just want to go and buy that vacation house. Maybe you want to take a sabbatical. And your entire reason for thinking through this and your entire reason for trying to build wealth is so that you can stay, spend more time doing what you love. Or maybe one of you just wants to stay home with the kids so you can spend more time with the kids. It doesn't matter what your reason is. What you need to do is make sure that you are putting that front and center so that you can focus on the ultimate goal. Now, what I don't want you to do is make the mistake I did. When my wife and I first got married. Guess what I did? I pulled out the old spreadsheet and I started to say, hey, here's some of the things we need to be doing. No, instead, the better way to do this is to lead with. With the end in mind. Because when you lead with the end in mind, you both are aligned at exactly why you are doing this. Now, one of the other reasons that I love combining finances is it forces these conversations about money. Because if you have completely separate finances, a lot of times you can do certain things and your other partner does not know that you're doing things with your money. But this is gonna force you to have conversations about money. Now, number three is goals are actually going to be aligned. So when we think through combining our finances, sure, you can have aligned goals in some of these other methodologies, but when you're planning a future together, this is one of those areas where it is much easier to align these goals because your finances are in one location. Now, number four is it removes the scoreboard in many situations. So the scoreboard is one of those silent things in a relationship that can cause a lot of friction. And if you feel as though you are trying to keep score on who's spending money on what, or who is spending money on the groceries, or who is making sure they cover the mortgage payment, or who is making sure they cover the electrical bill. Combining finances helps remove this scoreboard. I have talked to couples in the past who have had conversations about money, and this was the big friction for them. This was the silent thing that they never really talked about was internally, they had a scoreboard. And so I want you to ask yourself, is this something that I do? Do I keep score on who is paying for what? If your finances are separate? If so, consider having this conversation about combining finances. Number five is this helps Protect the lower earner. So if one spouse stays home, or they have a part time job, or they just earn less, keeping your finances separate can create some sort of power imbalance. And so if you see this happening in your relationship, it can help protect the lower earner when you combine finances because both partners have equal access to the funds and they have equal access to where these dollars are going. Number six is it's a safety net in worst case scenarios. So it is a lot easier to handle some of these catastrophic scenarios, like if you have a disability or if there's a death in the family, or if there is something else that happens, like divorce or job loss or anything else like that. This can be much easier to handle if you have your finances combined. And so I want you to think through, okay, well, worst case scenario, if you are going to keep your finances separate, how are you going to handle some of these situations to make sure it is seamless for, for both parties? If your finances are combined, it is much easier. And one of the things I like to do is keep what I call a dead box. Now, a dead box is something where it just has all the passwords and all the information for all our different accounts so that if anything were to ever happen to me, my wife has access to this so that she can go find all the information that she needs. Now, again, for most of you out there, you may be saying to yourself, okay, I'm already considering combining my finances, or you may be ingrained that you want to separate your finances or do some other methodology. And so we're going to dive deeper into some of the things that you can do. Now, one big question that I do get, how do we handle that or how do we think through guilt free spending? Well, guilt free spending is a big conversation when it comes to relationships because in some scenarios, you may feel guilty for overspending in some areas. So instead, what we want to make sure that we do is have a plan in place for this. So if you do combine your finances, one thing my wife and I like to do is what I call the blow fund. Now, the blow fund is just a term that I use where we just throw, throw money into different categories. Either in the budget, you can do this in a high yield savings account, you can do this in a checking account, but this allows you to be able to spend money guilt free on whatever you want. Now, when we first started doing this and we were trying to get our money right, when I was early on, in my early 20s, I would give my wife more money in the blow fund than me because I was just more frugal than she was. And now this is a point in time we just have this automated system working where it is a really cool way where she, she can spend money on whatever she wants. If she wants to go out and buy a purse, or if she wants to go out and spend money on something expensive, she can absolutely do that, no questions asked. And if I want to go buy myself a brand new golf driver that I'm going to hit into the water once again, then I can go out and do that. And this is just a guilt free way to be able to spend money with no questions asked. Now let's talk through some of the reasons why you may want to keep your money separate. Number one is some people just like having their money separate. They like the autonomy and the autonomy matters most to them. If that is really important to you and deep down you just want to keep your finances separate because, hey, I earn my money, my husband or wife earns their money, then this may be one of those scenarios where you want to keep your dollar separate. If you feel as though combining your finances could create friction in your relationship, that is one of those things that you need to talk through. Let me tell you right now, money is not worth the friction in your relationship. And so having these conversations about how you feel about money is very, very important. Number two, and this is a big one for high earners and something I didn't have to deal with when I combine my finances upfront is if you have significant premarriage assets, this can complicate things. Let's say, for example, you have a business or you have a very large portfolio, or you have a bunch of real estate assets, or you're even coming to the relationship with a bunch of debt. These may be reasons that you want to keep your finances separate so that you can handle some of these situations or not make it so complicated to have to combine your finances. If one person in the relationship comes in with $5 million in their portfolio and the other person in the relationship comes in with $30,000 worth of debt, that could be a reason why you keep your finances separate. Now, number three is income disparity can create resentment. So if you feel as though the income gap is causing some sort of friction and you think, okay, well, I am paying more for the mortgage, I am paying more for housing, and I'm paying more for all these different things and you have that feeling inside, you have that resentment inside. A you should consider working on why you, because if you are in a relationship, you're trying to work as a team. But B, if that is the case, and if separating finances makes this easier, that could be another consideration moving forward. Number four, and this is one I think a lot of relationships do struggle with. If you have different money personalities. So your money personality is how you handle your dollars, how you think about your dollars, and what your relationship is to money. Some people are frugal and they like to save money. All of my fire movement people out there who are listening to this podcast right now, you know who you are. If you are frugal, you don't like spending money, then you may be in that camp. And some people are spenders. They like to spend money, they like to enjoy life, they like to have this balance of being able to spend while also saving for their financial future. We would love for you to have the balance of both building wealth for your future, but in addition also spending more on the things that you love. That's what this podcast is all about, is teaching you how to, how to do that. And so when we think through these two different money personalities, a lot of times they get married or they're in a relationship and these personalities clash hard. And so we need to figure out a way to make this work out. This is why I created the Blow Fund and a reason why it makes it a lot easier for you to have this guilt free spending because the last thing you want to be doing is having checks and balances back and forth or having arguments, why did you spend so much on Amazon? Or why did you buy so much, you know, on this specific thing? Instead, we want to make sure that we have a system in place. If your money personalities clash hard, coming up with a plan and communicating about this is one of the biggest keys. Number five. Now, this is one that is a great reason to separate your finances, but it's protection in unhealthy situations. So let me give you a couple of examples of this, of what I have seen in the past and conversations that I have had in the past. For example, there was one couple that I talked to where the husband continued to rack up debt. And at one point in time, he racked up about $500,000 worth of debt on purchases that were just frivolous purchases. Things like RVs and ATVs, trucks and different things like that. The wife had no idea that he was racking up this debt on all these different purchases. And so in this situation, they worked really hard to go and pay off all this debt and had the ability over the course of the next decade to pay off this debt. Two years later, he had racked up another $200,000 worth of debt and did not tell her. Well, this is a situation where keeping your finances separate may be the better move for you. Because if this is happening and there are unhealthy situations going on, we may just want to keep it separate. Or if there's gambling problems or addictions, things like that are going to be really, really important to think through. Should you combine them or should you separate them? In my opinion, that would be one where you would separate it. Number six is if you do have separate finances, divorce is easier to navigate. Now, this is the hard part of the conversation. If you do get married, then you don't really ever want to start thinking about divorce. But the reality is there is a high percentage of folks who get divorced, and a lot of it is based on money. And so when we look at this, divorce is just a lot easier to navigate. It's just the reality of having separate finances. It is one of those things that we think through. And the other thing to consider is having a second marriage is going to change the math on this. It's going to change the way that we think about our dollars, and it's going to change the way that we look at this, because family dynamics could matter. Let's say that you come into a second marriage in that relationship and you have two kids, and then your spouse comes into the relationship and they have two kids. Well, you may want to keep your finances separate because there's a lot of expenses going on. Maybe they have different needs. And so because of that, you may want to separate your finances in that instance. And the last thing we can say on this is this doesn't have to be permanent. So make the decision upfront of what you think will work best and get started in that instance first. So this is not forever. This is not something you have to do long term. Instead, you can start with one strategy and then move on to the next one. Now, one of the things I want to note with hybrid methodology is if you are going to keep your finances separate, I do think the hybrid method is a much better solution. Why? Because we want you to automate your finances. If you don't want to spend a lot of time budgeting, automating your finances is the solution to that. And the hybrid methodology allows you to pay your bills automatically while still being able to keep your finances separate. So if you have a combined checking account, this is going to allow you to pay those bills, pay off the credit cards, those types of things, and have this system put into place. So if you never thought through the hybrid methodology, this is a great option. So you're not venmoing each other back and forth or zelling or whatever else. It just overcomplicates things. So instead consider that hybrid methodology. Now, what do I personally do? I personally combine my finances. My wife and I got married young. I was 25, she was 23. And when we got married, we didn't have a ton of assets on hand. So it was pretty easy for us to combine our finances upfront. Now, a couple of reasons why I do this, I do this because I believe we are one unit, we are one team, and we are working towards our common goals. So we are pursuing financial freedom. Our ultimate goal is to have that financial freedom or to have that flexibility. I'm the type of person, I think I'm going to be working long term, I think I'm going to be working forever. I always have to be doing something. But I want to make sure that our financial goals align with exactly what we want in life. And guess what? Money is a tool that to get what you want in life, that's all it is. We're not building wealth so we can buy the flashy cars or the fancy houses. Sure, we absolutely may want some of those things, but financial freedom and freedom with your time and energy to do what you want with whom you want is my ultimate goal. My wife and I have had multiple conversations about this, and we came up to the conclusion that combined finances would be the best move for us moving forward. And so as we start to progress, it makes things so much easier when it comes to automating our finances. We have everything in one place, one specific account. All of our money flows to that account so that it can flow to the right locations. Whether we are saving for retirement or whether we are saving for their vacation or whether we are paying off the credit card, all of it comes from one account. And it makes it extremely easy. Come tax time, it makes it really easy. We send all of our information in and it really makes a seamless process. So for us, we're on the same page. We are working towards common goals and now we pretty much have the same money personality. In fact, when we first got married, we My wife was more of the spender and I was extremely frugal. Now the script has flipped. I spend more than she does now. So it's an interesting dynamic as time goes on. And one of the things that you're going to notice is if you are working in family dynamics, you're going to see that your financial goals are going to change over time. Maybe you're in your 30s right now and you're listening to this podcast and you just got married. Well, after a couple of years, if you decide that you want to have kids, well, your goals are going to change. The amount of money that you're spending is going to change. The way that you manage your money is going to change. It may be easier to start off separate, then combine. For some of you out there, you may be progressing through life and saying to yourself, maybe I'll just keep it separate. We've been combined for a really long time. There's some unhealthy things that are going on. It doesn't matter what your circumstances are, but you got to figure out what works best for you. For me, I love combining finances just because it makes everything easy. Now I'm going to walk you through the steps, step by step on how to combine your finances. And I'll also talk through the hybrid methodology just to make it easy. So step one is you want to have that alignment talk first. You need to have that conversation. We've been talking about this entire episode. It is so incredibly important that you both are aligned. Then we're going to open joint accounts. If you are going to combine your finances when it comes to things like your brokerage account or your checking account, or your savings account, or your high yield savings account, all of these are really simple to do. Most of you have most likely already done this. Then you just redirect your income to those specific accounts and you start to automate this process. So automating your bills, automatically, automating your savings and investments, automating every single aspect of your finances can be really, really important. And then what I would recommend is for most of you out there, if you do have your finances combined or if they are separate every single month, have that money meeting. Now, the money meeting doesn't have to be this two hour process. It can be 15 to 20 minutes. And after you have the first couple, you're going to realize this doesn't have to take very long. And it starts off with, hey, let's start with our dreams. Let's go through how much we spent, let's go through how much we are saving for retirement and are we on track for our goals. It doesn't take long and it's easy. I like to do this over fun, different activities. Maybe it's an Ice cream date. Maybe it's a walk and talk. Maybe it is over a glass of wine. It doesn't matter the way that you do this, but you just want to make it fun and enjoyable. So it's not this arduous process where you feel like you're just having a meeting. Now, for some of the reasons that we talked about earlier, you may want to move to something like the hybrid system. Now, the hybrid system is going to be different than combining your finances because obviously you're going to have separate accounts, but we also are going to have one simple joint checking account. Now what is that joint checking account for? This is just a pass through account. Money is going to flow from this account. It isn't a place where we have this huge buildup of capital. Instead, we are just sending money to this joint account so that you can pay your bills. And so you got to figure out, okay, one, opening a joint account, does that make sense for your situation? For most people it does. It is really hard to automate your finances if you have separate accounts, unless one of you is covering all of one bill and, and the other person is covering all of another bill. And so we want to make sure that if we are going to split this up evenly or if we're going to split this up with a certain percentage, we have that joint checking account. Two is. Then you want to add up your shared monthly expenses. So if you spend $15,000 every single month, you want to figure out how much of that one person is going to cover versus how much the other person is going to cover. Maybe you want to start at 50, 50 and one person's going to put in 7,500 and the other person's going to put in 7500amonth. Maybe you want to do it 60, 40. Maybe you want to do it 7030. It doesn't matter how you do this, but you've got to come up with a solution for your household. Automating those contributions every single month into that one checking account is going to be a really easy way to set this up and then coordinate the big stuff together. Have conversations about some of the bigger purchases, have conversations about how you're going to spend the dollars on there so that you know exactly what you're doing. And you can add this coordination step in your monthly money meetings when you have these conversations. Because really, when you have separate finances, there is more coordination involved. There's more conversations that need to be had because you have your dollars in separate locations. So you just want to make sure that you are coordinating when it comes to some of those bigger purchases. So these are some of the questions that you should be asking yourself when you are thinking through should you combine finances? Should you keep them separate or should you do some sort of hybrid methodology? Now I want to hear from you. You can send us an email@podcasterdwalletwealthpartners.com or you can leave a comment down below on Spotify, YouTube, or whatever your favorite podcast player is and let us know which methodology you're going to go with. Are you going to combine finances? Are you going to keep them separate? Or do you go with some sort of hybrid methodology? And let me know why. I would love to hear from each and every single one of you. Now we're going to dive into Red Flag Green Flag Relationship Edition. Now this is going to be a part of the show where some of our team here at Nerd Wallet Wealth Partners is going to read me off a couple of different circumstances and we're going to say is this a red flag or green flag?
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In the relationship lives a lifestyle dramatically above their income level.
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This is a red flag. The only way to build wealth is to spend less than you make and invest the difference. And if you are going deeper and deeper into debt every single month, you will never be able to retire. You'll never be able to have that financial freedom. And so that's why this is a red flag.
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Have an emergency fund and know exactly how many months it covers.
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This is a green flag. And knowing how much you need in your emergency fund is very important. We here at your next dollar think at a minimum you should have six months in your emergency fund to cover job loss.
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Obsessed with gambling, day trading, sports betting or get rich quick schemes.
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All of these are red flags. You never get ahead. The house always wins and sports gambling and some of these other things are one of the biggest epidemics in this country right now. A lot of folks are falling prey
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to this can articulate what they're optimizing for financially.
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This is a green flag because knowing your money goals and knowing the reasons why you're doing them is one of the most important things when it comes to your personal finances.
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Dismisses or mocks your financial goals.
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This is a huge red flag. If you are not working on common goals. Sure you may have separate goals, but if you're not working on those common goals together, then that is something that is really going to be a red flag. Long term.
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Disagree with you about money, but they can talk about it calmly.
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This is a great green flag. You're going to have disagreements about money, you're going to have disagreements about how to handle your dollars. But being able to talk about this calmly reduces that friction and allows you to have these open conversations.
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Constantly bails out family or friends with no boundaries.
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This is a red flag and you can help out family, but you need to have those boundaries in place. Otherwise this can get way out of hand.
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Weaponizes a higher income to dominate decisions.
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This is a red flag and I think it's more common than people realize. But having a higher income doesn't mean you get to make all the decisions again. You got to work together as a team and work towards those common goals. That's it for this episode of your Next dollar. Thank you so much for listening to this episode. If you are getting value out of these episodes, make sure you subscribe on your favorite podcast player. And if you have questions questions, Send us a question@podcast nerdwalletwealthpartners.com and your question may get featured on the show. So if you do have questions, make sure you send those in. And don't forget to leave a five star rating and review on your favorite podcast player. I cannot thank you guys enough for listening to this episode of your Next dollar and we will see you on the next episode.