Merging finances for better, not worse
By Kathy Chu
By Kathy Chu
Merging households isn't just about having another warm body to help out with the dishes and laundry. It's about learning to build co-existing financial lives in ways that satisfy both of you.
For some couples, it means keeping all their money (except the household change bowl) separate. For others, it means joint everything — joint bank accounts, joint credit cards, joint investments.
Most married couples, even if they start with all separate accounts, will end up sharing at least a joint checking account as their finances become more intertwined.
Here are some questions to consider when deciding whether, and how, to merge money with your mate:
"There's no cookie-cutter way to combine your financial lives," says Carrie Schwab Pomerantz, chief strategist for consumer education at Charles Schwab & Co.
Pomerantz co-wrote the book "It Pays to Talk" with her father, Charles Schwab. In the book, she notes that in the early years of their marriage, she and her husband, Gary, maintained separate bank accounts. They paid bills out of his paycheck and invested the money she made. Eventually, though, they concluded it made more sense to combine their checking accounts. Today, they share most other accounts, including a primary brokerage account.
This approach might not work for everyone. Some married couples, for instance, may be more comfortable with separate accounts so they don't have to answer to their spouse about every lunch out.
And if you're living with someone but not sure the relationship will last forever, keep his or her name off your own accounts.
Even unmarried couples who feel they're together for the long run should avoid merging money until they've spelled out in writing how assets will be divided if they split up. That's because unmarried couples don't have the same legal rights to claim assets that married couples do.
Bad debt is another reason to keep your assets separate, and away from the grasp of your spouse's creditors.
"You marry the person; you don't marry the obligations," says Howard Dvorkin, founder of Consolidated Credit Counseling Services, a debt-counseling group in Fort Lauderdale. "There's no reason why the financially responsible person should assume another person's liabilities."
Before you combine any of your assets with another person's, compare credit reports. You're entitled to one free report a year from each of the three bureaus: Experian, Trans-Union and Equifax. Consider asking for a three-in-one report because each bureau has slightly different information.
If you're married, here's one reason to put both spouses' names on a bank account, even if one person doesn't plan to touch it: When one spouse dies, the account will go directly to the other person and need not pass through probate. (Probate is the sometimes prolonged process by which assets are divvied up according to your will — or, if you don't have one, by your state's laws.)
Some couples find that having a joint credit card is a convenient way to pay for large household expenses, such as furniture. Just remember, though: With a joint card, you'll both be liable for charges — even if you later decide to part ways.