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Britt Erica Tunick is an award winning financial journalist who has spent the past 17 years writing about virtually every aspect of finance.

Things to Consider before Combining Finances with a Significant Other

Things to Consider before Combining Finances with a Significant Other

By Britt Erica Tunick

Getting married or living with a significant other means sharing your life, for better or for worse. It may not, however, necessarily mean sharing your finances in a 50/50 split. With many people waiting to get married or move in with someone much longer than in previous generations, often individuals have amassed significant savings and investments —or significant debt—by the time they enter into serious, long-term relationships. How you will approach your finances as a couple is something to give serious consideration to before making such a big life change, particularly since finances are one of the biggest reasons many couples wind up getting divorced or splitting up.

While the majority of couples still comingle finances, a growing number are choosing to draw a strict line between their individual holdings. According to a recent survey conducted by NerdWallet, although 77% of couples at least partially merge their finances, that percentage drops with younger couples, who are increasingly choosing to keep at least part of their finances separate. Take Generation Z, for example, where 48% of those in serious relationships keep their finances separate. That number drops significantly as couples age, with only 23% of millennials keeping their finances separate, and 20% of Generation X and Baby Boomer couples.

When it comes to how to handle your finances with a significant other or spouse, there are benefits and drawbacks to both combining finances and keeping them separate. Choosing the best option for you is something that ultimately comes down to what you and your partner want and means you need to sit down and discuss your financial situation frankly. Discussing finances in advance is also a good way to make sure there are no issues your partner may be keeping from you, such as significant debt they may be carrying on their credit cards or a bad credit rating.

On the plus side of combining your finances is the feeling that everything is shared and there is complete visibility with your financial standing. Combining finances can also help to diminish the mine vs. your mentality that can exist when one person makes less money than the other, or resentment over the fact that they are paying in a larger percentage of their income for shared expenses. Joint accounts can also help a couple build a stronger credit rating, so long as both individual credit scores are good. In the case of married couples, filing joint tax returns will result in a lower tax liability than filing individual returns. Just keep in mind that any assets put into a joint account opens those assets up to being split equally should that partnership ultimately wind up in divorce.

For older couples, maintaining separate finances and contributing into a joint account for shared expenses may be more appealing. The advantages of this approach mean that neither individual needs to worry about justifying purchases they make that may seem a little excessive to the other. Also, if one individual has a less than stellar credit rating, it will not hurt the rating of the other. And, should the partnership end badly, splitting up assets is easier if finances have never been combined –particularly if those assets are part of a trust or an inheritance. As with other assets, if an inheritance is put into a joint account it essentially becomes common property, to be divided equally if a relationship ends.

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