Personal Finance - Arla Wallace

Commingling Your Finances – A Newlywed’s Guide

Commingling Your Finances – A Newlywed’s Guide

There is nothing cheap about getting married. In fact, Americans spend more than any other country in the world for this special day. Couples share wedding vows and memories. Post-wedding, they may share last names, living quarters, and even finances. Commingling finances will look different for every marriage, as there is no one best way that works for all. Whether or not this is your first marriage or you have found yourself newly- married again, here are some tips to remember when deciding how to handle finances with your new partner.

Separate Property or Marital Property

Separate property belongs to an individual before a marriage. In states that follow common law practices, marital property and individual spousal property are considered two separate categories. Only earnings, along with property and debt acquired by the parties during the marriage, are subject to equal division should the marriage dissolve. In community property states, spouses automatically become joint owners of all combined assets when bought with community funds. While gifts or inheritances are generally excludable, it is possible these assets could be commingled with community property and not easily separated upon dissolution of a marriage.

Separate or Joint Bank Accounts

Separate, joint, or a combination of the two? Multiple bank accounts may be necessary to meet financial goals in marriage. Joint accounts can simplify bill paying and expense management. In this scenario, each partner has access to money at any time, and spending can be viewed by both parties. What’s more, managing money together can help build trust. On the other hand, separate bank accounts allow each partner to retain financial independence. This avenue provides more autonomy and can lead to harmony if partners do not have to explain spending habits. A combination of separate and joint accounts may prove to be the best solution for your marriage. Regardless of your decision, open communication about financial goals and how to handle daily expenses will serve your marriage well.

Higher or Lower Salary

Blending finances may present a challenge when incomes earned by individual spouses are not equal. Under the proportional method, spouses each contribute to cover household expenses at a rate that is proportional to their respective incomes. In this scenario, the higher income earner would contribute more to cover household expenses. This method is best suited for couples with stable incomes. The raw contribution method requires each spouse to contribute the same amount of funds to cover expenses regardless of income. This method avoids punishing the higher-income earner but can strain the relationship if the lower-income earner does not enjoy the same spending flexibility as their spouse. The complete combine method involves both spouses depositing all income into and paying all expenses from a joint account regardless of income. This method can be problematic if one spouse is a spender while their partner is more frugal with money.

Approaching your marriage and your finances together as a team is paramount for marital success. Open communication about your financial picture can not only build trust but also ward off marital conflicts.

Read other personal finance by Arla Wallace