The ultimate guide to merging finances with your partner

Joining finances with your significant other doesn’t have to be complicated. Taking careful steps can ensure the transition from “my money” to “our money” is successful and doesn’t cause unnecessary tension.

Use the ultimate guide below to merging finances with your partner; whether you’re engaged, just tied the knot or are moving in together.

Step 1: Get clear on your current financial standing

Before you or your partner can think about merging your finances, it’s essential to know where each of you stands individually. This will help you make an informed decision when you come together.

Take a look at all of your accounts. What are the balances, monthly payments, interest rates and fees associated with them?

Some places to look are:

  • Checking and savings accounts both online and at brick-and-mortar locations
  • Retirement accounts such as a 401(k) or Roth IRA
  • Student loan accounts for federal and private loans
  • Credit card accounts for travel credit cards, low-interest credit cards, secured credit cards and others
  • Personal loans
  • Car loans
  • Other debts

Writing everything down on paper is enough for this step, though data nerds might enjoy putting everything on a spreadsheet for a crystal clear financial picture. Regardless, be sure also to write down how much you take home annually from your day job and any other sources of income, such as side jobs or child support.

You might be surprised at how much debt you’re carrying and how disproportionate it is to your income, but you wouldn’t be alone. According to the Pew Research Center, the median net worth of households headed by millennials is nearly 40% less than that of Boomers the same age in 1983.  

Step 2: Consider your household expenses

To best figure out how to divide your finances, determine the expenses you both owe every month. Monthly budget planning sheets are useful to make sure nothing important is left out. Some items to include are:

  • Rent or Mortgage
  • Other housing expenses such as maintenance or housekeeping
  • Utilities
  • Charitable donations and other giving
  • Savings and retirement contributions
  • Groceries
  • Transportation
  • Insurance (health, car, etc.)
  • Entertainment (dining out, attending events, etc.)
  • Pet supplies
  • Child care
  • Other monthly expenses (subscriptions, pocket money, personal care, clothing, medications, etc.)
  • Debt payments (cars, student loans, credit cards, etc.)

According to data from the U.S Bureau of Labor Statistics (BLS), the average household spends over $61,000 annually to cover its expenses. The highest cost is the mortgage or rent, which averages $11,747 per year, closely followed by transportation and food at $9,761 and $7,923, respectively. Depending on your region, household size and spending priorities, your overall numbers may be greater or smaller. 

Once you have the full picture, it’s time to have an honest and open-minded conversation about any concerns that merging finances bring. It’s especially important to discuss if you’re both comfortable with each other’s financial standing and with continuing the process. If not, you can always revisit the topic at a later date, or after you or your partner pay down a certain amount of debt.

Step 3: Align your spending habits

Contrary to popular belief, it’s not a lack of money that’s one of the most common causes of divorce, but rather differences in how couples handle money. Unaddressed mismatched spending styles cause more frustration, anger and resentment than almost any other difference in a relationship.

Part of the reason is when you get to call all the shots with your money, it doesn’t matter if you tend to spend or save. But when you join finances and have to answer to someone other than yourself, your money-managment style can rub the other person the wrong way. These points of contention can affect every other area of the relationship.

To navigate this thorny issue, use the questions below to jump-start your discussion. But ultimately, your finances should be an ongoing conversation that addresses the evolving dynamics of your money situation as you grow together as a couple.

  1. Is one of us a natural saver or spender?
  2. What financial goals do we want to work toward?
  3. What sacrifices are we willing to make to bring those goals to life?
  4. Based on the data from steps one and two, which expenses are in line with our goals? Which ones are hindering them?
  5. Which categories should we cut back or increase funds to reach our goal?

Working toward a common goal provides intrinsic motivation to set aside differences and work toward a greater vision.

Step 4: Decide how to split the bills

Using the information you both gathered about each other’s financial standing in step one, decide how you’d like to proceed in divvying up the household expenses you identified in step two. Go through each item on the list and mark how each of you will be responsible for it. Some possibilities include:

  • Splitting expenses 50/50
  • Splitting expenses based on income proportions
  • Having each person responsible for specific expenses

When handling existing debts like student loans, you may decide to tackle them together, so both you and your partner contribute payments, or keep them separate, so each one of you is responsible for paying the debts you incurred.

How you divide the costs is a personal decision based on what works best for the relationship and where you’re willing to compromise. Any scenario can work if you both agree. And keep in mind what you decide today isn’t set in stone and can always be revisited in the future.

Step 5: Choose the smartest credit card to use as a couple

Once you’ve decided who will be paying what expenses, you may want to consider the smartest way to pay them. Saving cash by paying expenses with a cash back credit card, or funding romantic getaways with a travel card can be a wise financial choice for a couple.  For example, the Capital One Venture Rewards credit card can earn your family budget two miles for every dollar you spend.

As another option, the Discover it® Cash Back card is one of the best cash back credit cards available. Earn 5% cash back in bonus rotating categories like Amazon.com or grocery stores.

Many card companies even allow you to pool points with your spouse or someone living at the same address. But while using reward card offers earns you points faster, they’re generally only worth it if neither of you carries a balance from month-to-month. That’s because interest rates on even the best rewards credit card tend to be higher than traditional cards. If you plan on keeping a balance, low-interest credit cards like the Chase Freedom Unlimited credit card may be a better value.

Other cards, such as the Discover it® Balance Transfer credit card, have the added advantage of 0% intro APR on purchases and balance transfers, and then 14.24% to 25.24% APR after 14 months. So, if in dividing up expenses and debts your partner agrees to tackle your existing credit card bill, you can transfer credit card balances from one card to another. This is true even though the account holders are different.

Step 6: Choose what to do with your deposit and credit card accounts

Will incoming funds be “our” money or “your” and “my” money? How you answer that question helps decide if joint accounts, separate accounts, or a mixture of both make sense. If you pool your incomes, opening joint bank accounts makes it easier to pay bills.

It also makes it easier to fund emergency savings accounts. The unexpected always happens. And now that you’ve brought someone else into the financial picture, you have to account for their unexpected circumstances too.

Emergency funds should have three to six months’ worth of expenses. If layoffs, career changes, unexpected illnesses, car breakdowns or other unfortunate events happen, it’s much less stressful if the money is waiting in the account, and your relationship will be all the better for it.

A word of caution: unmarried couples don’t have more of a legal right to funds in bank accounts than the other person. If your partner, or vindictive ex (in the event of a breakup), decides at any time to clean out a joint account, you’ll have no legal recourse to get that money back, even if it was you who put most or all of the money there. That’s something neither you nor your partner should take lightly.

And whether you’re joining a bank account or adding an authorized user to your credit card, their actions can negatively impact your credit score if they always bounce checks, for instance, or use too much of your credit card’s limit. Closing bank or credit card accounts to consolidate your finances can also negatively impact the account holder’s score.

If one or both of you don’t feel comfortable with these risks, you can still merge your finances while keeping your bank accounts and credit cards separate. There’s no rule saying combining accounts is a must. Do what works best in your relationship.

Step 7: Routinely touch base about expenses, accounts and credit cards

The plethora of budgeting apps and tools available today make it almost effortless to maintain a budget, stay transparent about spending and track your household financial health. Two popular, personal budgeting programs include Mint and YNAB.

At least once a month, make it a point to review last month’s spending and plan next month’s budget, to ensure you’re both still working toward the same mutual goals, and that your household spending is reflective of your shared objectives.

Also, take the time to review your account standing and how you can better take advantage of your credit card rewards. You may decide that a credit card’s perk is no longer worth the annual fee or that other reward card offers are more useful for both of you.

Merging finances with your partner isn’t a one-time event

According to a study by Ramsey Solutions, couples in healthy marriages are twice as likely to discuss their money dreams together, and those who see themselves as having a great marriage are twice as likely to talk about finances daily or weekly with their spouse.

As trust blossoms in your relationship, or as financial circumstances change, you may decide to reevaluate and adjust your initial financial plans. Keep using teamwork to refine your budget, bring about greater financial peace and deepen your relationship.

Lorraine Roberte

Personal finance writer

Lorraine is a South Florida based personal finance and digital marketing freelance writer who drafts content for businesses and startups.