Recently, another blogger was asking on Twitter for our opinions regarding his fiancée’s suggestion that they combine their finances. Since the wedding was not for another year, my answer was emphatically no, even if they were living together. If they were getting married in a month, I’d probably still have said no, but agreed that they should look into how they were going to combine their finances if they planned to do so after they married.
Since I hear of so many couples keeping their finances separate even after marriage, I kept thinking about his question and my biggest reasons for saying no. Many small reasons occurred to me, these two big reasons apply to any couple and are something every couple (especially those without the legal protections of marriage) should consider before combining finances:
1. One of You Might Die
It happens. I lost a friend who had just graduated from college and was on the verge of getting married. Car accident on her way home from work. Even if you’re young and healthy and in a stable and happy relationship–all of which she was–that can be taken away in the blink of an eye. Another woman I know came down with acute leukemia a couple months before her wedding, though she was still able to get married in a small ceremony and is undergoing treatment. We all hope for the best.
Death is something married couples should take seriously too–with wills and legal protections for their spouses. Unmarried couples run a greater risk, however, especially if they don’t have wills leaving everything to each other.
Suppose that you and your fiancé(e) happily live together and contribute your paychecks to shared accounts. You’re sharing the daily finances as well as saving for the future. Without legal protection, you could lose half of that money (even if you contributed more than half).
2. You Might Decide to Break Up
Couples break up. It’s unfortunate and often sad, but it happens. A married couple has the divorce process to help them split up their assets and decide what’s fair for who to get what. It provides a third party to assess their situation and enforce action.
An unmarried couple with merged finances will have to figure it out on their own. There’s also no one to enforce the agreement. And even if it’s a harmonious breakup, separating the finances will leave both parties with a headache and possibly a sense of resentment if one person feels s/he didn’t get enough money back. In fact, it may make the breakup as painful as a divorce.
Moreover, combined finances may be a reason to keep one person or both in an unhappy relationship because it’s going to be too hard and complicated to break up.
One Safe Way Fiancés Can Combine Finances
So should people who aren’t yet married but plan on being so never combine finances? I can think of one reason and one way that combining some finances might work out for a couple.
For fiancés who are living together in anticipation of getting married, it may be easier to share the household expenses if you both contribute a predetermined amount of money each month into a shared checking account to be budgeted for household necessities.
The other alternative is to split up responsibilities between the two of you. But I think there’s a good argument for each being able to pay all the bills, trade off doing the shopping, etc. This way, all you stand to lose is one month’s expenses.
If you want to save for a shared goal, such as a house, I suggest parallel saving accounts and sharing your numbers rather than combining your savings.
What about LGBTQ Couples?
One reason this topic stuck with me is that I spent the weekend visiting friends and attending the commitment ceremony of a couple friends of ours. They’ve been together for 14 years and show no signs of breaking up any time soon. Yet their state and the federal government would not recognize their marriage or civil union or allow them to either marry or get a civil union.
Should they combine finances?
Even gay couples in civil unions and marriages don’t have marriage equality on a federal level, meaning that they won’t be free of estate taxes the way other couples would and cannot use spousal Roth IRAs they way that straight couples can. This means that a couple deciding to combine finances should very carefully set up wills, powers of attorney, etc, beforehand in case their spouse becomes to ill and unable to function financially or dies.
With all these in place, it may still be advisable for LGBTQ couples (as with straight couples) to keep some money in reserve in case their accounts are frozen while a will is being executed. And until there is marriage equality, there won’t be the same divorce procedure to straighten out finances, so it may be in their best interests to keep their long-term savings separate even if they don’t plan to separate.