Couples and Money – Combining Your Accounts

On the off chance you haven’t heard, this month is the first one I am able to live with my wife as, well, husband and wife. It’s a wonderful feeling, being able to fall asleep next to her every night, wake up next to her every day, and know that I won’t have to go back to an apartment or dorm room when the weekend or holiday is over. I have very few complaints about the emotional end of things.

The financial aspect of things, though, that is going to take some effort. I love this woman and want to be with her for the rest of our lives, but that doesn’t eliminate the numerous issues that arise when trying to get our finances in order. The difficulty of keeping your finances in order as an individual increases exponentially when handling two separate sets of accounts, to say nothing of the trouble of merging them into one set of financial accounts. But that’s what we’re looking at today:

Merging Accounts As a Couple

It’s one of those issues that you’ll definitely need to handle with your spouse: determining how to start handling your money as one unit, rather than as two individuals. One of the first things you’ll need to do together is figure out how to merge your accounts together into one set of finances. It’s not an easy task, but here are some sets of advice for how to do so:

1. Start By Consolidating Your Individual Accounts: Before you start trying to get all of your accounts meshed together, make sure that neither person is bringing three dozen accounts to the table. Having many accounts will make it harder to add your spouse to all of them, to say nothing of simply trying to keep track of where your money is currently located. There’s not many advantages to having a great number of accounts, at least if your holdings are far from the limits of what is covered by the FDIC (or the equivalent in foreign companies).

If this looks like the paperwork you get from your brokerages every year, you might want to consolidate a bit.

Instead, each member of the couple should try to bring only a few accounts to the table, for example: Banking accounts at two or three organizations (one at a brick and mortar bank, the other(s) online), one or two investment organizations (with a traditional IRA, a Roth IRA, and potentially a non-retirement mutual fund account), a 401(k) (from the current employer), and two or three non-traditional investment accounts (like Lending Club). That’s still a half dozen accounts (or more), but it’s much more manageable than trying to organize accounts at two dozen organizations.

2. Try To Combine as Much as Possible…: Alright, now that you don’t have an insane number of accounts yourself, it’s time for you and your partner to start combining those accounts. Most financial companies make it fairly easy to combine your accounts (or add your partner to your existing account); usually just some simple paperwork will do the trick. It’s hard to generalize about what you will need to do, as each company, and each type of account, will be different. One thing to be careful about, though: you will need to make sure that you don’t take any money out of retirement accounts, as you’ll need to meet some strict rules to avoid being penalized and paying taxes on the withdrawn money. Instead, make sure that you fill out the needed paperwork so the money is transferred from one financial institution to the other; if you don’t ever have the money in your possession, you won’t be penalized.

3. … But Keep a Few Accounts For Yourself: Alright, let’s be honest; not every marriage lasts, and when marriages do end, not every one ends with the former spouses on the best of terms. For this reason, you should keep at least a few of your accounts separate. It’s hard to give a single answer about which accounts to keep separate that fits everyone; that depends on you, your partner, and just how your relationship will be when your break up (and if you could foresee that, I’m sure you’d do what you could to prevent it and save yourself the trouble).

At the bare minimum, I would suggest having a checking account at a nearby brick and mortar bank that is yours, and yours alone, which has some money available for you to access (preferably something like the three to six months of expenses that most advisers recommend for an emergency fund). This will help you if there are some disputes over who really owns the money in joint accounts should there be a divorce or other separation. (It will also be helpful if, God forbid, there is some form of abuse that you need to escape.)  Having money you can withdraw without your spouse being able to stop you is a very important part of your financial independence.

4. Take the Opportunity to Discuss Your Future Financial Plans: As you are putting your finances together, why not figure out what you want to do together with your money? There’s a lot that can be done when you have your accounts combined with your spouse, and it’s good to start to discussing what you hope to achieve together. There’s a lot that you’ll need to discuss, from how to save to build up an emergency fund to how to invest your retirement money. You don’t necessarily need to agree completely on how to handle your finances; it’s certainly possible to split your investment money to invest in more than one way, for instance. But you should come to some agreement about where your money go.

There’s a lot involved with getting your money together, and we will be covering more the next few weeks. Do you have advice on how to merge your accounts with your spouse? Are there any other accounts you’d suggest putting together (or keeping apart)? How much should you combine with your spouse?

Picture from IsaacMao

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