One of the most nerve-wracking parts of navigating a serious relationship can be figuring out how to manage money as a couple. Whether you have each been splitting every bill exactly down the middle, one partner has been paying for most of the expenses, or something in between, many couples eventually decide that it is time to fully combine their finances.
Whether it is because you are moving in with a significant other, getting married, or you’re just ready to take a new step in your relationship, combining finances can help simplify monthly bills and set you and your partner up for a strong financial future together.
1. Have a Debt Reality Check
Are you paying off a six-digit graduate school loan or dealing with credit card debt? Conversations about debt might not be your favorite subject, but it’s important to get it out in the open when combining finances. When you combine finances, your total income may have to pay two sets of loans, two credit card bills, and still cover household expenses.
Instead of getting sticker shock when it comes time to pay the bills from a joint account, having an honest conversation about debt in advance of combining finances can help couples set realistic expectations and whether the stress of paying off debt. One other benefit of hashing out individual debt loads is that you also have the opportunity to re-evaluate if either person would benefit from a new loan repayment strategy like refinancing.
2. Evaluate Your Incomes
You probably have at least a general idea how much your partner makes, but combining finances requires more than being able to guess their tax bracket. Before you combine bank accounts and intermingle your finances, couples may want to share their annual income and their take-home pay.
Knowing exactly how much your partner makes, and when they expect to get paid each month is important so that you have a realistic view not only of how much money will be deposited into your shared accounts each month but also when that money will hit. For example, you might find that you and your partner are on different pay schedules and that you can expect a paycheck from one of you to be deposited each week.
Or, you might find that you are both paid bi-monthly and that you will need to be careful about how you manage money between the 15th and 31st of each month. Regardless of how it all shakes out, the important thing is to use this information to create a joint budget, set up joint savings, and make plans for the future.
3. Balance Your Budget
One wrinkle when moving in with a significant other or otherwise combining finances can be confusion or even resentment about how your partner spends money. Whether you can’t live without weekly vegan meal prep deliveries while your partner would rather drive to the discount grocery store, or you can’t agree on whether your new sofa should be $500 or $5,000, all couples sometimes clash about money.
That’s why it is important to lay out your financial priorities in advance of combining finances with your partner. This means that you not only need to make an accurate list of your monthly fixed expenses like rent, bills, and transportation, but you also need to evaluate and budget for the realities of how you actually spend money.
Do you pay child support? Does your partner rely on a fancy gym membership to stay sane at work? Do you have standing Friday night drinks with friends? Does your partner have an incurable book-buying habit? Discussing these financial factors upfront can help avoid resentment and help you plan realistic monthly budgets that don’t leave either person feeling resentful about expenses.
4. Solidify Your Savings Goals
In addition to planning for known expenses and creating a healthy budget, one important part of combining your finances is setting up savings. Whether you both already have healthy savings accounts or are starting from scratch, figuring out exactly how much you plan to save and how you plan to do it is crucial.
The first step should be figuring out exactly what you’re saving for. Are you prioritizing saving for a down payment on a home together, or are you first focused on stashing away an emergency fund?
Sitting down together to come up with some savings goals will not only make sure that you and your partner are on the same page but can be an opportunity to imagine and plan for what your lives together will look like. Whether your dream is to renovate an old farmhouse in wine country in 10 years, or retire early and take a round-the-world trip at 50, your success may depend on whether you start saving now.
In addition to deciding how much to save and what you are saving for, couples should also discuss how you plan to save. Are you planning on sticking dollar bills in a coffee can on top of the fridge, or do you want to open a joint savings account? Some couples choose to keep some cash in an easily-accessible joint savings account and invest the rest.
Products like SoFi Invest® can take the hassle out of online investing and help even newbie investors save for long-term goals like a down payment on a house or retirement. Plus, the SoFi planning team can help couples make smart investing plans to meet their goals.
5. Look Forward to the Future
In addition to planning your savings strategy, it is important for anyone moving in with their significant other to have an honest talk about what they expect the future to hold. Whether you and your partner are planning for no kids or want six, family plans can make a huge difference in your joint financial strategy.
Don’t forget about your parents, either. Do you expect that you will need to provide financial support or housing help to your parents as they age? Are you dedicated to living in a tiny house or do you dream of a five-bedroom overlooking the ocean?
These conversations may not always be easy, and you and your partner may disagree on priorities or future plans. An important part of starting a healthy financial life together is being able to honestly and openly discuss money.
You can always change your saving strategies, your future goals, or even decide that you can give up that meal delivery service after all, but the financial strategies you develop together now can last you a lifetime.
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile.
Advisory services offered through `SoFi Wealth LLC. An SEC registered investment advisor.
SoFi Securities LLC, member FINRA / SIPC .
SOIN18124
