5 Things To Consider When Merging Finances With A Partner

Despite sharing a bed, a closet, and even — begrudgingly — a remote control, you and your significant other have yet to marry one key component of your lives: your finances.

If just hearing the f-word makes you break out in a sweat, we get it: Talking about money is hard, and combining financial forces is a big decision. After all, many relationship problems can be traced back to money issues, whether it’s a difference of opinion over how to spend it or a lack of funds entirely. (One recent Experian survey, for example, found that 59 percent of divorced people reported that money played a major role in their decision to end their marriage.)

But good news: It doesn’t have to come to all of that! With thoughtful communication and strategic planning, you and your partner can merge your finances as easily as your condiment collection. (Who needs three jars of Dijon mustard anyway!?) We partnered with Charles Schwab and leading personal financial guru Carrie Schwab-Pomerantz, CFP® to learn how to do it, and make sure to visit Schwab-Pomerantz's column, Ask Carrie, for this and other vital money questions that you and your family may have.

1. Get Real About Your Money Mindset

Just as you may have been raised with differing values or religious beliefs, so too may your thoughts and feelings towards finances diverge from your partner’s. The key here, according to Carrie, is how you handle these differences. “Maybe one of you is a saver and the other a spender. Or maybe you have different levels of interest or financial know-how. That's okay,” she says. “Figure out how you can complement each other. It's fine to designate different financial roles and responsibilities that play to your individual strengths as long as you both understand the big picture and participate in major decisions.”

Also key in this process: Being fully transparent about your financial past and present. Do you have a bunch of credit card debt? Are you still paying off student loans? Have you ever declared bankruptcy? You and your partner need to be candid with one another, as these factors can greatly impact both of your financial futures — and exactly how much you decide to co-mingle your money (more on that in a bit).

2. Work Toward Goals Together

An important part of your shared financial future will be agreeing on your priorities — as individuals and as a couple. Because if you want to sock away for a dream house but your S.O. is eager to blow your savings on a safari vacation, you’re going to run into trouble. Aligning early will help make sure you are on the same page. “You're bound to have individual as well as mutual financial goals,” says Carrie. “Be realistic about the best way to achieve them, separately and together. Perhaps you can each contribute to your own as well as to your mutual goals. Or maybe you'll have to prioritize one over the other. Just make sure you agree on what you'll do first so neither of you feels less important than the other.”

3. Set Yourselves Up for Success

Once you’ve agreed on a game plan, you’ll need to decide how to execute it. Will you both deposit your money into a single joint bank account? Maintain separate bank accounts? Or do a combination of the two?

“My personal preference is to create a ‘yours, mine, ours’ system of three checking accounts that will allow you each to have a separate (but equal) account for personal expenses and a joint account for shared expenses,” says Carrie. “That way you can both have some autonomy, but also work together for common goals and expenses.”

And don’t forget to talk about your assets too.

“When it comes to your savings and investments, there's a bit more to consider,” says Carrie. “For instance, if you already have assets, you could decide to keep those assets separate to maintain some financial independence. If you'd rather pool some or all your resources, talk about it now so there will be no surprises or hurt feelings later on.”

4. Understand How Your Relationship Status Affects Your Finances

Taking your relationship from long-term to lawfully wedded has its pluses and minuses when it comes to money matters — everything from income taxes to inheritance may be affected — so make sure you’ve done your homework on the legal and tax effects of each. For example, says Carrie, filing income taxes jointly may or may not benefit you, depending on your unique situation.

“Filing jointly could bump you into a higher tax bracket — especially if you both earn a substantial and similar amount of money,” she explains. “On the other hand, one-earner families may fall into a lower tax bracket.

“And while the standard deduction is higher for a couple, combining your income could impact some of your deductions if you itemize,” she continues. “Filing separately, however, can lower or eliminate certain credits like the child tax and earned income credits and may cut deductions for IRA contributions. As you can see, it's a bit of a balancing act.”

You and your partner may ultimately want to talk to a tax professional to figure out what’s right for you.

5. Keep Working On It

Unfortunately, finances aren’t like a rotisserie chicken — you can’t set it and forget it. As time goes by, your life circumstances (hello, kids and a mortgage!) will likely change, and so too will your finances in order to adapt, says Carrie. All of which means you and your partner need to continue to communicate about your goals and priorities.

“You won't solve all your money differences in one discussion. And no matter how successful you are at handling today's issues, future misunderstandings are bound to happen,” she says. “It's often hard to talk about money, especially at first. But the more you do, the better you'll get at it—and the better your relationship will be.”

This article is sponsored by Charles Schwab. Make sure to visit Ask Carrie for any and all money advice you might need. The information provided here is for general informational purposes only and is not intended to be a substitute for specific individualized tax, legal or investment planning advice. Where specific advice is necessary or appropriate, consult with a qualified tax advisor, CPA, financial planner or investment manager.