A Step-by-Step Guide on How to Combine Finances

Dear Me to We,

First off, thank you for sharing. We’ve found navigating combining finances is especially tricky for  the educated and often dual-career couples we focus on serving at Steward. Long gone are the days of “Step 1. Get married. Step 2. Combine everything and assume a husband both controls and is solely on the hook for your joint financial fate.” Partners often come in with different savings and investments, different money backgrounds, or both. 

But the good news is…there is a structured 5-step glide path to combine finances. It’s built to optimize your finances and your relationship. I’ll break down each of the five steps, who it’s good for, why to do it, common mistakes we’ve seen other ambitious mid-career couples make, and how to avoid them. Let’s dive in. 

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Step 1: Understand Root Causes

“Give me six hours to chop down a tree, and I will spend the first four sharpening the axe.” - Abraham Lincoln

What it is:

‍A guided conversation (we’ll give you prompts below) to figure out the root causes driving how you each treat money. It’s tempting to nosedive into the numbers, tactical to-dos to change account names, or even “should have, could have, would have”’s on investing strategies. But far more important is understanding what’s under the tip of the iceberg on how your partner approaches money.

When to do this:

It’s never too early or too late for this step. Whether you’re dating, thinking about moving in together, getting engaged, getting married, or having kids. You’ll likely learn something new about your partner, and maybe even yourself, each time you take another bite at the apple here.

Why do it:

‍Building a strong foundation of understanding that will make it way easier to combine finances and tackle future money issues together. Study after study has shown that money is the #1 thing couples end up fighting about. And longitudinal studies have shown that these fights make money a leading cause of divorce down the line. This helps you develop the muscle to talk about money without going into “fight or flight” mode. 

How to do it:

Use these 9 questions as a conversation-starter guide. 

• Money Memories: What are some of your memories around money from growing up?  What did you observe about your parents and money? 
• Money Type: How did those memories impact you? What’s your money type: a  money-avoidant ostrich, a money-worshiping lion, a money-hoarding beaver, or a money-gaming hare? If you could wave a magic wand, what would you be doing differently with your money?  
• Money Dreams: What’s important to you in life that money could make possible (lifestyle preferences, vacations, supporting family, starting a business, going back to school)? If money were no object, what would you do? Who would you be spending time with?  

Common Mistakes and how to avoid them: 

- Skipping this step: My husband and I only did this years into marriage. Boy did it explain so many of our “tension topics” and previously baffling behaviors to one another. Learn from our mistake and put this on the calendar. 

- Judging: You and your partner were raised differently and have different jobs, incomes, and personalities. You’re going to have different takes on money. “Different” does not mean wrong. 

- Not Listening: Repeat back what you heard. Ask clarifying questions (“that’s interesting, why is that?”). Look out for the “door knob” conversations. Marriage therapists often talk about how people share the most important stuff when they literally have their hand on the door and are about to leave the room.

For a deeper dive on getting started, check out this article by the New York Times about making your marriage "financially equal". There's some great ideas, conversation starters, and tips on ensuring there's not just one "financial spouse" who handles everything.

If even the thought of this feels hard/awkward/embarrassing—you’re in good company. You could consider bringing in a third-party to help guide you through this! Sign up for a no-cost, no-obligation consultation at Steward or with a certified financial therapist. 

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Stage 2: Splitting expenses

 What it is:

Keep your individual accounts separate (no joint accounts), and start reimbursing each other for joint major expenses.

Why do it:

‍You get to be exquisitely clear and confident that you’re sharing joint expenses in a way that feels fair. You don’t need to feel any weirdness about how much you spend on personal things.

When to do this:

If you’re in a long-term dating relationship, but not yet living together. 

How to do it:

Use a tool like Splitwise, a note-taking app, or a spreadsheet to keep track of your expenses, who paid, and reimbursements.  Figure out how you’ll split (50/50? By bill? By income?). We’ve included options on how to split in our FAQs.

Common Mistakes and how to avoid them:

• Not agreeing on how to split expenses—particularly for couples with unequal incomes or different cultural backgrounds, make sure each partner is okay with where you land on splitting. Check back again in 6 months to make sure that still feels fair. 
• Quibbling over $—Focus on splitting only the big expenses (e.g., anything north of $100). Allow anything under that to “balance itself out in the wash”.
• Staying in this stage too long—If you’re engaged or married, I’d suggest graduating from this step quickly. The IOU tracking is effortful, a romance buzz-kill, and risks your not feeling on the same page on finances.

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Stage 3: Joint Checking + Joint Budget

What it is:

The “yours, mine, ours” stage. Keep your separate credit cards, checking accounts, savings and investment accounts, but add a joint checking account. This will cover joint expenses (e.g., home, utilities, food). Build your first joint “cash-flow statement”, or in plain-English an eagles-eye view of the money you have coming in minus the money you have going out.

Why do it: 

The joint checking adds the convenience of not having to reimburse one another. It also limits your “liability” for your partner’s behavior to the money in the checking account…training wheels to help you build trust that the other person is going to use the money the way it was intended.  The “cash flow” helps you figure out how much to contribute to the joint account, and to start to understand each other's financial situation better.

Who it’s good for:‍

Couples who are living together.

How to do it:

1.  Building your joint budget: This is your income - each of your taxes - your shared expenses - your personal expenses = savings. You’re shooting for savings that are 20% of your pre-tax income. You can bucket your personal expenses into a single line item (e.g., Ami’s monthly credit card bill). You’re aiming to (a) get an eagles-eye view vs. debate how much each partner is spending on shoes (b) calculate your shared expenses so you can agree on a set amount to fund your joint checking account each month. Steward can help here! 

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2.  Apply for a joint checking account online, and fund it with your agreed-upon amounts each month to cover your expenses. You can either do this through direct deposit from your paycheck or by setting up automatic transfers from your separate accounts.
3. Set up a recurring calendar invite to talk about how you’re doing in relation to your budget and course-correct. Pick your poison on cadence - weekly, monthly, quarterly, or annually.  A recent study run by TD Bank, found that couples that talk about money once a week were the most likely to describe their relationship as “extremely happy”.  A couple we serve even set up “Finance Fridays” to talk budgeting and also to knock out finance-related items they wouldn’t otherwise get around to. My husband and I do this once a year over the holidays, as we’re reflecting on our personal and professional lives over the last year. It ends up being a great precursor to our new year’s resolutions.

Common mistakes to avoid:

• Not agreeing on how to split contributions—see more options in the FAQs
• Not communicating—Skipping step 1 (root causes) before you set up your joint account, or not setting up recurring times to talk so you can course-correct.

Stage 4: Joint investing account + Joint net worth tracking

What it is:

Add on a new joint investing account - where you’ll start saving for future goals vs. solely today’s expenses. Keep your separate credit cards, checking accounts, prior savings and investment accounts, and new joint checking account. Build your first joint “balance sheet” (plain-English: what you own minus what you owe) to continue to better understand your partners’ finances. This is also a good time to set a “financial fidelity’ number. For example, my husband and I have an agreement that if we’re spending anything above $200 we’ll consult the other partner, but for anything below that dollar limit we trust each other to spend “worry-free”.  

Who it’s good for:

Couples who are engaged or married—particularly in preparation for filing taxes jointly, buying your first home, or having kids. This is the stage my husband and I are still in, even after 12 years of dating and 7 years of marriage. No rush to move past this step unless it’s becoming really inconvenient to manage lots of accounts.

Why do it:

‍Now you’ve graduated to dealing with questions not of “enough for today” (e.g., a budget) but “enough for tomorrow” (e.g., retirement, kids, homes etc.). You can much more easily create new joint accounts and seed them with new money. As you look to make your major joint investments together (a home, college savings accounts for kids) you want to get clearer on your comprehensive investment picture. Your financial fidelity # is a good training wheel before the next step when you set up a joint credit card and merge many more of your accounts. At this stage, nothing is hidden from view, but you still have some time to get comfortable with joint access.

 How to do it:

1. Start by figuring out where you both want to go before you jump into how to get there. What’s the investment money for—the option not to work, a future home, putting each of your kids through college debt-free etc.? And what’s their “use-by” date, or when you’re targeting achieving these goals? 
2. Build a joint “net worth tracker” to help you evaluate whether there are adds/adjustments you’d make on (a) your investments mix (finance-speak: asset allocation), now that you’re looking at them as a collective whole!  (b) your debt (e.g., student loans). Make sure you share outstanding balances, interest rates, and each of your individual credit reports so you can understand where the issues are. You can give each other “view only” access through various online financial tools, like mint.com, personalcapital.com, or Steward
3. Identify and assign financial responsibilities—oversight and management of cash flow, accounts, investments, tax filing.
4. Set up a joint investing account through a wealth advisory firm like Steward, or if you’re DIYing directly through Vanguard or Fidelity or Betterment. Work with a financial advisory firm to quantify  how much  you’d need to contribute to hit your joint goals, or model this out on your own.  

5. Look at potential benefits of consolidating cards (one partner keeping a “Chase Sapphire Reserve” to pay for travel/dining, another partner keeping an “Amazon Visa” to pay for Amazon purchases).
6. Set each other up as the “beneficiary” (or who would get the money in a god forbid scenario) for your individual accounts and life insurance policies.  

Watch out for…

• Differences in investing philosophy. If you are a most passive investor (set it and forget it) while your partner is a more active investor (pick and choose winners) or vice versa, then you may run into some arguments over your joint investing account. A way to tackle this can be giving the partner who wants to make more active choices a small “Vegas” account sandboxed to trade that stays individual.
• Hiding big expenses - A recent study of 1,000+ US couples, showed that 1/3 of people who argued with their spouse about money, had hid a purchase from their spouse. Setting a bright line in advance or “financial fidelity number” can prevent fights in the future.

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Stage 5: Move most assets to joint accounts, but keep some things separate.

The final stage, where most of your accounts are joint. I say “most” intentionally! There are a lot of benefits to having a little bit of money for yourself every month that you don't have to answer to.

What it is:

Redirect your direct deposit income to a pooled joint checking account, and pay all bills from this account. Mush your investing and savings money into a “joint tenants with rights of survivorship” (JTWROS) investment account and savings account. Each of you keeps one “slush fund” or “vice account” for guilt-free splurges (treat yourself!) and surprise gifts for your partner, that gets an agreed upon amount each week, year, or month. Figure out the frequency and amount that makes most sense for your situation .  

This is the first step at which we’d recommend a joint credit card (only good excuse to do this sooner—putting a spouse with a lower credit rating as an authorized user on the higher credit rating spouse’s established card could improve your credit, but that comes with risks to a higher credit rating spouse!) 

Who it’s good for:

Married couples where you’ve had significant time to get comfortable sharing finances with “training wheels” on and where “separateness” has become almost a laughable notion given professional considerations—one partner quitting a full-time-job to work freelance for a while, to go back to school, or to have some babies, or to become a stay-at-home parent. Many of our long-married couple clients (myself included) still have accounts of various sorts in their individual names. 

Why do it:

Convenience is the name of the game here. In this stage, nothing is hidden from view nor access. Either person can pay all the bills, withdraw or deposit money, incur expenses, etc. Keeping at least one individual account at this stage, helps you preserve your sense of freedom! 

How to do it:

Start closing out some of your individual accounts or changing ownership of existing accounts from separate to joint. This is one of the harder steps to undo, which is why we’re sharing it last. Especially when you’re taking money that has been yours and only yours and you decide to own it jointly, that has estate-planning implications. If you’re talking significant (to you) money, you’ll likely want to consult with an estate planning attorney before doing it. 

Watch out for…

Jumping to this stage too fast. Sharing anything with anyone—but especially money—is a huge responsibility.  If your partner ends up being a sociopath and runs off with all the money from your joint account, or runs up a $50k credit card bill, you have no recourse. That credit card liability is yours, and that money from the joint account is just gone. Even if they’re not a sociopath, if they have different money attitudes and behaviors, they can use “your” money in a way you don’t agree with. That’s why the foundation of combining finances is so important: Talk about your finances with your partner. Be honest and open. That’s what leads to the most success when it comes to combining finances.

Unintended estate planning issues—If you come into the marriage with substantial assets, it is a good idea to keep these separate because in the event of divorce or death these can be treated differently from assets acquired during the marriage, depending on state law. This is particularly important if you live in a community property state (e.g., California, Texas, Washington)!  And keep in mind that if you do live in a community property state, you may choose to maintain separate accounts but state law will often determine the ownership of the assets in the accounts upon death or divorce.

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Closing thoughts:

In summary, take time to see how your relationship evolves before jumping to the next stage and give yourself training wheels and time to do the work of combining finances.

Different approaches are going to be better for different couples and for the same couple at different stages of their relationship—logistically and emotionally.

Resources to go deeper:

• Look into financial therapists at https://financialtherapyassociation.org/find-a-financial-therapist/ . In particular I’d recommend Nate Astle and Ed Coambs, whom we’ve worked with as we built Steward to ensure we’re accounting for the fact that money involves so many feelings! 
• Steward can help you build a joint cash flow, balance sheet, and investment strategy far more easily! We can also help guide you through each step along the way.
• Smart Couples Finish Rich - we like how it focuses on figuring out your values first, then thinking about your budget. 
• How to figure out your money type: https://www.oursteward.com/blog/whats-your-money-type

FAQs

How exactly should I go about splitting expenses with my partner?

 This is a really great question! We told you to start sharing expenses, but what does it really mean to share? Well, there’s a multitude of way of sharing; here we’ll talk about a few:

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The 50/50: This sharing method means splitting expenses right down the middle.  Good for: couples who are at an equal level when it comes to income and debt. This approach is also good for couples who aren’t yet married and/or haven’t discussed marriage.  

The Proportional: Suze Orman popularized this approach which is when each partner contributes a percentage of their income to the shared account/expense versus a set dollar value. Ideally this % should be under 50% of each person’s take-home pay. Good for: couples who have unequal incomes, and the one earning more would like to have a shared lifestyle (dinners out, vacations) that the lower earner couldn’t afford with a 50/50 split.  

The Pick Your Bill: This split is where you and your partner divide up the bills and pick which ones you’re each going to take care of. Sometimes the math works out perfectly; sometimes people feel strongly about certain expenses and think it should be their responsibility. Good For: relationships where you have very different lifestyle preferences.

The One and Done: Well, this one really isn’t a split. This approach is where one person takes on all of the shared expenses. Maybe there’s a large disparity in income or maybe there’s only one source of income in the relationship. Either way, if one person in the relationship is not only comfortable and able-to, but also wants to take on all the shared expenses in the relationship, then by all means, use this approach. Good For: relationships where one person is comfortable, able-to, AND really wants to take it all on.

The Let’s Just Take Turns: My husband and I took this approach. He shouldered a bunch of the expenses here. Good for: When you know you’re about to get engaged quickly and merging finances more fully is on the horizon, and the un-romanticness of splitting expenses outweighs the benefits of fairness for you.

Splitting expenses is a practice where you might have to iterate a couple times. Regardless of what path you take, revisit in 6-12 months to make sure it's still working without resentment building on either side.

When should I start thinking about this? Is there something I should be doing pre-marriage? What if I don’t plan on getting married at all?

 Pre-marriage: Talk about it! While the conversation can be awkward and bring up old wounds, it’s still an important one to have. It can bring you two closer together and help you see how your finances and goals align with each other. If you’re living together pre-marriage, step 2 or 3 can also make sense.

 Engaged: At this stage, transparency is key. You don’t want your partner to find out at the altar that you’re drawing in $200K of student debt. Be open and honest to prevent disasters.

 Not Getting Married: If you know your significant other is a partner for life, but you both have no intention of getting married, you can still follow all of the steps above. You can set up joint checking, savings, and investing accounts even if you’re not married. You can also choose to file taxes jointly if your relationship is recognized as a common law marriage.

How does a prenup factor into all of this?

My financial planning professor used to joke, if your worry is about getting divorced—the answer is not a pre-nup…the answer is not getting married! In all jokes a seed of truth. Pre-nups are agreements on assets accumulated before the marriage,  and what to do logistically if the marriage ends (who moves out of the house? How fast?). Counter to the Hollywood myths, they don’t cover divvying up what’s jointly accumulated during your marriage.

Here’s who a pre-nup makes sense for. Spoiler alert—a small but widening pool of couples, given the growing economic power of women.

(a) you have commitments to children from prior marriages. Why? A pre-nup can help you clarify who will inherit each partners’ assets 

(b) you both already have had significant careers and assets ($1m+). Why? A pre-nup can help establish your financial parameters - how you’ll pay for a shared home, which investments you’ll mingle or keep separate

(b) one of you has a disproportionate amount of assets or liabilities relative to the other.  Why? Prenups can be designed to compensate spouses for assets that are worth about the same on paper but generate different cash flows (e.g., an ownership stake in a business, an inheritance).

The main value of the pre-nup itself is as a forcing function to get transparent with each other on money, more than as a document itself. Pre-nups are typically drafted bespoke by lawyers, but for many couples, you can do that with a lot less bruised feelings and legal fees by instead just working with a financial planner / wealth advisor to develop a joint view of where you are today, where you’re going, and how you want to get there.

Should we combine debt?

 If you have debts to pay down, decide together how much you will dedicate to paying off loans, and how much you will put aside and save for a down payment or other financial goals each month. 

It’s worth keeping the debts themselves separate .. In times of divorce or an untimely death, it would be really unfortunate to have the persistent financial burden of loans which are sometimes forgiven in times of significant disability and definitely if the original borrower expires. So even if you have a joint account and pay most expenses, including your loans from it, on your independent credit reports each of your educational loans are completely separate.

What to do if my partner spends money irresponsibly?

Elevate beyond you and your partner. People hate to be judged—if you make it personal, you'll get nowhere. Food analogy: agree on filling plates with vegetables and proteins first, vs. how much dessert. Setting an automatic savings amount is a great start (“reverse budgeting”), alongside setting a financial fidelity number (a $ limit above which, they’ll discuss purchases with you so you can ensure you’re on the same page for the big stuff but not nickel-and-dime  negotiating every purchase). 

Are there optimal tax strategies I should keep in mind when combining finances with my partner?

There are certain tax strategies that couples can use to optimize savings, even with combined finances. Some married couples choose to file separately, but only in certain cases. Some couples, especially in year one of their marriage, choose to do so for emotional reasons as they still figure out how to combine the rest of their finances. In general, choosing the married-filing-separately status makes the most sense when couples without dependents have large itemized deductions or are separating. It is also important to note that there are some states (like California) where as soon as you get married, everything becomes common property, so keep this in mind before you decide where to settle down. 

What if it’s not “til death do us part”? How do I protect myself?

 Obviously no one wants their marriage to fail, but it’s normal to be scared about the implications sharing finances has on a potential divorce. That’s why we think it’s incredibly important to maintain some degree of separate accounts. This can not only help you protect your assets, but also gives you some autonomy even in a marriage. A prenup is the iron-clad way to protect yourself and your assets. With marriage comes responsibility and trust, so you have to trust in the process and realize that combining finances will be a long-term commitment.

Is the thought of talking to your partner about money making your skin crawl?

 Bring in a third party to make things less awkward! Steward ‘s mission is opening up the 1%’s wealth strategies to America’s up-and-coming families with a combination of 21st century tech and trusted advisors. We help families determine how, where, and when to invest and save on taxes in plain-English, with minimal time and effort. Steward can help determine the best way to combine you and your partner’s finances, or we can at least get the conversation started. Give it a try here.

Do you want someone to guide you and your partner through uncovering your respective relationships to money and identifying the next, best step to take in joining your finances? Reach out to me at ami@oursteward.com or schedule a free 15 min consultation to see if we’re a good mutual fit.

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