Congratulations! You got married. You’re now in the honeymoon phase and it seems like love is the only thing that matters. But your wallet knows the truth: money matters, too.
In fact, now is the time to figure out the best way to forge a successful financial path as a couple. To do this, you’ll first have to be honest and upfront about your debts, income and assets you both bring to the table. By openly discussing your finances, you can then decide whether you’ll merge your money into a joint bank account or keep funds separate in your own individual accounts. As a compromise, perhaps you’ll do both, say the financial experts we interviewed.
To help you decide whether "to merge or not to merge" your funds, we asked three personal finance experts to weigh in and offer their advice. Take a look at what they have to say:
Co-founder and managing director of Sun Group Wealth Partners in Irvine, Ca. and a commentator on CNBC’s Closing Bell and Fox Business News
Sun recommends: Keep your individual accounts as your primary accounts and when you feel ready, open a joint account to slowly merge money.
Planning together for your financial future is key, but so is maintaining your financial independence. In fact, says Sun: "A joint account is secondary. As you’re new to this [marriage] relationship, you have to get to a stage where you are comfortable merging [money]. Why put pressure on yourself to open a joint account right away?"
Sun says she often sees one spouse pushing for collective earnings to be merged into one joint bank account. She instead encourages newlyweds to be comfortable with the concept of separate but equal.
"We need to make it acceptable to have separate accounts," she says.
To this end, when the time is right, you and your spouse can open a joint account to pay household bills as well as save for a vacation, a new car or any other joint purchase, says Sun. A good option is for spouses to keep individual bank accounts while each contributing a designated monthly amount into a joint account. This can be an equal amount per spouse or perhaps one partner will kick in more money than the other. It’s up to you and your spouse to decide on your joint account contributions.
Johanna Fox Turner
CPA, financial planner and partner at Fox & Co. Wealth Management in Mayfield, Kentucky
Fox Turner recommends: Open a joint account right away and keep individual accounts for personal purchases and fun money.
Fox Turner says the biggest reason newlyweds should have a joint bank account right off the bat is for accountability. It also makes paying bills less complicated. If bills are paid out of separate accounts, it’s hard to keep everything equal as it becomes an issue of "you pay this and I’ll pay that," she says.
Instead, Fox Turner says couples should pay household bills out of a joint account so that each spouse feels they are equally contributing. At the same time, individual accounts certainly have their place in the relationship. Fox Turner suggests that you and your spouse decide on an equal budgeted monthly amount to be contributed from the joint account into each of your individual accounts. This becomes your "no questions asked" account and you can spend money on whatever you want, says Fox Turner. Another benefit of this system: It keeps money matters on a level playing field, even if one spouse earns more than the other.
CFA and president of Castlebar Asset Management LLC in Leawood, Kansas
Comstock recommends: Don’t feel the pressure to merge funds into a joint account until you are good and ready. Keep individual accounts for your own spending.
Comstock agrees with Sun – married couples should maintain individual bank accounts and wait to open a joint account until they feel comfortable. This may be right away for some couples and months down the line for others, he says.
"Some people are ready to merge accounts when they get back from their honeymoon. We encourage them to move forward so it does not linger as a ‘to-do’ item." Yet, if you are not eager to merge financial lives right away, it’s ok so long as you openly communicate and make joint decisions.
Once you are ready to open a joint account, you can then decide how much each of you will contribute. This may be an equal amount or perhaps a percentage of your incomes. "A joint account can solve a lot of problems. You and your spouse will know where you stand financially and if certain bills have been paid." At the same time, you can spend money in your individual accounts on things other than bills. "This is what I like to call a splurge account," says Comstock.
Our financial experts agree that merging money can be stressful and lead to conflict. To help avoid this, you and your spouse should sit down monthly or perhaps every few months to discuss the state of your household economy, says Fox-Turner. During these money "dates," Comstock suggests that you discuss finances in a relaxed setting. Perhaps you can "open a bottle of wine, get take out, and go over the budget and bills."
In addition to these money talks, you may want to consider meeting with a financial advisor to help you make financial decisions that work best for your common goals.