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Money may not be your top priority when you’re in love, but it deserves serious consideration if you want a lasting relationship.
A partnership that pools resources and shares costs can be very good for a relationship and for each other’s financial well-being. However, different spending and saving habits can also be a lasting source of conflict for couples.
From the point of view of managing household finances, sharing a joint bank account can make things a lot easier.
“Money puts pressure on people,” said Douglas Boneparth, a certified financial planner and president of Bone Fide Wealth in New York. “In general, the fewer moving parts, the better.
“If you’re paying bills and depositing checks to and from one account, it’s easy to see what’s going in and out.”
This in turn forms a good basis for jointly drawing up a common budget and setting financial targets. It also gives both partners a good idea of each other’s spending and saving patterns and can potentially reveal bottlenecks that need to be worked out.
Boneparth suggests it’s better to find out about a partner’s spending habits, their debt obligations, and general financial position sooner rather than later.
“Ideally, you want to work it all out before you tie the knot,” he said. “These things can cause rifts in relationships.
“It’s about trust and honesty,” Boneparth added. “You have to tackle problems, find solutions and support each other in this.”
What to keep separate and when?
A joint bank account is one thing, but combining investment assets, sharing titles to real estate and other real estate is another. While people can and should designate beneficiaries for investment accounts and other assets, it doesn’t always make sense to pool assets and accounts with a partner.
Indeed, there can be a wide variety of personal, financial, and tax-related reasons why merging assets or keeping a couple separate is the best approach for a couple.
“There isn’t one solution that works for everyone; it’s a matter of individual preference,” Boneparth says. “There may be good reasons for keeping some accounts separate and dividing assets and liabilities in different ways.”
For example, a person may have business interests, property, or an inheritance that he wants to keep separate from a relationship. In some cases, it may be to ensure that one spouse is not exposed to possible liability that the other partner bears as a business owner or professional. In other cases, it may simply be the personal choice of one or both partners to manage their finances separately.
The context of merging or separating assets is often considered under the guise of a prenuptial agreement before legal marriage. For example, a spouse’s parents may be concerned about protecting the assets they intend to pass on to their betrothed child.
This process can, of course, be a source of friction and pain between a couple, but it is essential to address these issues ahead of time and resolve any emotional issues.
The only way to ensure that spending, saving, earning and inheriting money doesn’t become a point of conflict in a relationship is to put everything on the table and talk about it.
“The universal solvent for many of these problems is just solid communication,” said Boneparth, who is herself married. “That’s what makes for a good relationship in general and a good financial partnership in particular.”