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The do’s and don’ts of combining finances with your partner

Not looking forward to the “money talk” with your partner? There are no set rules, but here are some tips to make the transition easier.

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The percentage of adults cohabitating with their partners is on the rise.

Maintaining a healthy relationship with your partner can be tough. Throw money into the mix and it can make or break your financial life.

There is no set formula for how you should combine finances with your partner. However, we have some do’s and don’ts from relationship and financial experts on how to navigate shared finances in a relationship. Plus, we offer some scenarios for merging finances that have worked for couples just like you.

In this article:

The “do’s” of combining finances

DO: Address your concerns upfront. Write down your concerns & be honest with your partner.

Being open and transparent plays a huge role in any difficult conversation. Especially this one. Be honest with your partner about your concerns. Write them down and encourage your significant other to do the same. Then, have an open discussion about each of your concerns and consider potential solutions.

Don’t be afraid to ask the hard questions. How much do they make? What if you break up? Does he or she have money management techniques that are questionable? Addressing your concerns is not a way to bash your partner. Try to find solutions to make it work for both of you.

Do: Discuss which accounts you will be combining. Some couples preserve separate accounts but also maintain a shared account.

Are separate bank accounts or combined accounts better for you? This answer varies from couple to couple and will depend on where you are in your relationship and financial lives. The short answer — you have to do what’s best for you.

For some couples, that means preserving separate finances, but also maintaining a shared account that each can contribute to. Joint accounts like these should be used for shared expenses such as rent, mortgage, utilities, and groceries.

If you do decide to combine finances, both you and your partner will have access to the funds, such as a joint checking account. Meaning both of you can legally take out the money and spend it on anything you want. You both are also responsible for any debt that incurs on the account and there’s potential to affect each other’s credit score.

Do: Create a debt repayment plan. Start by eliminating smaller debt like credit cards.

Stress around debt can cause serious problems in a relationship, so you want to try and eliminate it where possible.

Start by having an open and honest conversation about your debt and come up with a financial plan. Ask questions like how much debt do you have? What are the monthly payments? How high are interest rates? You may not be able to pay off all of your debt at once, such as student loans, but you can start by eliminating smaller debts like credit cards.

What if it’s your partner who is carrying the majority of the debt? Again, this answer will be subjective to you as a couple. You may want to do everything you can to help your partner financially. However, it’s essential to be realistic about the support you can offer. Communication is critical. Brainstorm ideas on how you can help the other person get back on track and provide emotional support where you can.

Do: Establish a budget. Use this budget for the first couple of months & adjust as you go.

How much is “too much” when it comes to your spending habits? Establish a budget to guide you and your partner. This will give you an idea of what merging your finances will look like. Gabriel Kaplan, a CFP® and CPA in New York City, told Money Management International that he and his wife “agreed on a savings rate, deducted from our living expenses and then allocated what was left over to ourselves … Things have worked out because we stick to our budget and we both trust the other person who is responsible.”

Create a budget for the first two to three months. Include groceries, rent, household expenses, and date nights. Figure out how much you might typically spend in a given month or week. This will give you a realistic snapshot of where the majority of your money is going and how much you should save. Set a budget and use it for the first couple of months then adjust as you go. Don’t feel restricted by your budget, instead use it as a guideline for spending.

A budgeting app can help you save money and track your spending as a couple.

Do: Start an emergency fund. use a high-yield savings account & aim to save 6-9 months of living expenses.

Building an emergency fund should be one of your first financial goals together. Throughout your relationship, you will most likely encounter unexpected expenses. One of you may lose a job, major home repairs may arise or health problems can surface. An emergency fund is there to help soften that blow.

It’s a safety net of cash that will be used for emergency expenses so you don’t have to incur any debt. A good rule of thumb is to save around 6 to 9 months’ worth of living expenses.

Make sure to put this money in a separate account so you won’t feel tempted to make a withdrawal. Consider a high-yield savings account so that your money can earn interest over time. Try to replenish your money as you spend it and only use it for emergencies.

Do: Save for retirement. Do this through tax advantaged accounts like a 401(k), 403(b), Roth IRA or SEP IRA.

Even if you’re in your early 20’s, people who are in serious relationships should be thinking of retirement. If you’re truly in your relationship for the long-haul, then that means retiring together and combining your finances lets you work toward a plan that will support you both in the future.

You can start saving for retirement through a tax-advantaged retirement account provided by your employers like a 401(k), 403(b) or thrift savings plan. If you’re self-employed, consider a SEP-IRA that allows you to open an account through a brokerage or robo-advisor.

Roth IRAs are another great option. According to Shannon Compton Game, CFP® and host of Millennial Money podcast, “Roth IRAs offer a lot of flexibility and benefits that other retirement savings accounts don’t, such as the ability to withdraw your own contributions without tax or penalties. If you are within the income limitations, you can contribute to your 401(k) through work, and set up a separate Roth IRA on the side to maximize your contributions.”

Do: Discuss long-term savings. Create a separate savings account for long-term goals like buying a home.

When you share finances with your partner, you can work together to streamline long-term savings goals. If you’ve discussed buying a home or planning your dream vacation, you can reach these goals faster if you work together.

Consider seeing a financial planner first. Having a third-party present to ask the tough questions can make figuring out how much you need to save each month easier.

Many banks offer the same rate for savings accounts regardless of how low your balance is. So, create another savings account for this money. Using more than one savings account helps you not spend that money on something it wasn’t meant for. It can also give you easy insight into how well you’re progressing toward your financial goals.

Do: Consider buying life insurance. Life insurance can help avoid financial hardship should something happen to either of you in the future.

When building your life with someone else, you may need more protection than you think. That’s where life insurance comes in. The thought of your partner passing away is a difficult scenario to consider, but when combining finances, it’s a conversation that needs to happen. How would you be impacted financially should your partner pass away?

If you have bought a home together, if you have children together, or if you have shared debts, you may need life insurance.  Life insurance can help you and your partner avoid any financial hardship should something happen to either of you in the future.

Term life insurance is an affordable option. This type of life insurance lasts for a fixed period of time (typically 10, 15, 20, 25 or 30 years) and provides a financial payout to your beneficiaries. That means your beneficiaries would typically be paid a lump sum of tax-free money if you were to pass away.

30-year term life insurance rates
20-year term life insurance rates
10-year term life insurance rates
Estimates based on pricing for eligible Haven Term applicants in excellent health. Pricing differences will vary based on ages, health status, coverage amount and term length. These prices do not reflect the rates for applicants in DE, ND, NY and SD.


The “don’ts” of  combining finances

Don't: Combing everything at once. Make a list of the accounts you want to combine & the reason for it.

Even if your end goal is to combine all of your accounts, ease into it first and combine your accounts in stages. Make a list of all the accounts you want to combine and why. To start, leave some of your accounts separate.

Then, try starting a joint account for shared expenses, such as rent, groceries and utilities. Make a list that outlines assets (investments, bank accounts) and debts (student loans, credit cards) and who they belong to and what you’ll split. This may feel like a lot of work, but it will save you a lot of headaches in the long run.

Don't: Forget to do your part. Don't spend joint money on personal expenses.

Once you combine your finances, you may begin to feel comfortable and lose track of you and your partner’s spending habits. This is a slippery slope. If you have been single for a while or if this is your first time splitting finances, you may be used to doing everything on your own terms when it comes to your money.

You can no longer drop $200 on that pair of designer shoes just because you feel like it. You’re a team now and you have to work together to decide what is best for both of you financially. If you feel that one of you is beginning to lose sight of this, set aside time to discuss your finances once a month. Make it an opportunity for you both to get out of the house and chat. Try doing this on a weekend morning when stress is low.

Don't: Micromanage. Avoid criticizing & keeping tabs on your partner's expenses.

Joining finances should not be an excuse to keep tabs on your partner. Peering over their shoulder and criticizing their spending habits will only push them away. Again, you’re a team. And part of building a strong team is trust. You trust that when your partner says they’re going to take the credit card to get groceries, that is really what they’re using it for.

However, if you find that this is not the case, you should address irresponsible or impulsive spending habits immediately. Just like you need to make sure you’re doing your part, they should be doing their part as well.

Don't: Keep secrets. Financial secrets can have a negative effect on physical & emotional security.

You shouldn’t keep secrets in your relationship regardless, and secrets around finances are a recipe for disaster. You may feel tempted to hide things from your partner if you have spending habits you aren’t proud of. Similarly, you may hide the amount of debt you have because you’re embarrassed. Don’t do this.

“Financial secrets take an added toll due to the effect they have on a sense of both physical and emotional security,” according to Carla Manly, a clinical psychologist. For example, if your partner ends up spending all of your emergency fund without you knowing and an accident happens, this affects both your emotional safety (betrayal of trust) and literal safety (financial security).

Different ways to approach combining finances

Every couple’s relationship is different. What works for one relationship may not work for you. So, it’s critical to do what feels right for you and your partner. Below are five approaches to finances that have worked for couples like you.

1.The “Equal” approach

2. The “Equal Percentage of Earnings” approach

3. The “I Got You Next Time” approach

4. The “It’s On Me” approach

5. The “What’s Mine Is Yours” approach

Managing money together can help bring you closer as a couple. However, it can also tear you apart if you don’t approach it correctly. It’s important to be open and honest about any concerns and discuss different approaches that will work for both your relationship and finances.

Whether you decide to go all in and open a joint account or take it slow and start by picking up each other’s bills, create a monthly budget or spreadsheet that lays out what is combined and what is not. Doing this successfully will always come down to communication, your willingness to compromise, and trust. Remember to do what’s best for you as a couple.

Haven Life Insurance Agency does not provide tax, legal, or investment advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or investment advice. You should consult your own tax, legal, and investment advisors before engaging in any transaction.

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About Tom Anderson

Tom Anderson is an award-winning financial journalist whose work has appeared in CNBC.comKiplinger’s Personal FinanceMoneyMonocle and Wired. He was a 2008-09 Knight-Bagehot Fellow in Economics and Business Journalism at Columbia University.

Read more by Tom Anderson

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Haven Life is a customer-centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.

Our editorial policy

Haven Life is a customer centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.

Our content is created for educational purposes only. Haven Life does not endorse the companies, products, services or strategies discussed here, but we hope they can make your life a little less hard if they are a fit for your situation.

Haven Life is not authorized to give tax, legal or investment advice. This material is not intended to provide, and should not be relied on for tax, legal, or investment advice. Individuals are encouraged to seed advice from their own tax or legal counsel.

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