- \ Gerard Gruber
- October 19, 2022
If you’ve recently been remarried, or plan on walking down the aisle soon, things probably look different this time around. That’s because you’re building a blended family together, as well as a blended financial picture. Just because there’s...
If you’ve recently been remarried, or plan on walking down the aisle soon, things probably look different this time around. That’s because you’re building a blended family together, as well as a blended financial picture. Just because there’s some added complexity doesn’t mean you can’t work through it together. In fact, there are a few steps you and your spouse can take right now to build a solid financial future together.
Why Combining Finances Can Be Challenging
When you’re still in the “honeymoon phase” of a new marriage, talking about your financial obligations may not be at the top of your to-do list. But setting your new family up for success starts with addressing the potential challenges that lie ahead.
- Distrust From Previous Marriage
Divorce is never easy—and it’s possible you or your spouse went through an especially tough separation from a previous marriage. After months of battling over properties, joint accounts, and shared assets, it’s understandable that there may be anxiety regarding a new partnership. You or your spouse could even have some underlying distrust due to how finances were handled by a previous partner.
- Different Family Philosophies About Money
When you were little, how did your parents handle money? Were they lavish spenders, or did they tend to be guarded about their finances? Everyone grows up having a different relationship with money. It’s likely you and your spouse have your own biases and views on wealth—especially if you were raised in different economic classes.
Whether you realize it or not, those influences carry over into your spending and saving habits today. Explore your personal philosophy about wealth before combining finances with a new spouse.
- Time Spent as a Single Parent
How much time did you or your spouse spend as single parents before getting remarried? Your mindset about money changes when you go from two incomes to one, and it may take some time to mentally adjust back.
How to Split Finances with Your New Spouse
Once you’ve acknowledged and started to address the financial challenges that come along with getting remarried, here are a few suggestions for combining incomes.
- First, Discuss Cash Flow
A very basic, but crucial, first step is to understand your family’s new cash flow. Write down how much you and your spouse earn from salaries, bonuses, commissions, dividends, rental properties, and any other income source.
Then, identify every recurring expense such as:
- Mortgages
- Car payments
- Personal loans or lines of credit
- Utilities
- Credit card payments
- Insurance
If there are any additional financial obligations from a previous divorce, that should be disclosed upfront as well—even if you plan on paying for alimony or spousal support on your own.
- Make a Plan
Once you have a good idea of what’s coming in and going out each month, it’s time to make a plan of action. There is no right or wrong when it comes to splitting or combining finances, it’s all about what works best for your family.
Maybe each spouse has a separate bank account as well as a joint account. A portion of your paycheck (or financial compensation from a previous marriage) goes into your individual account, and everything else is deposited into the new joint account.
If you’re not comfortable combining your earnings into a joint account, decide who is responsible for paying what expenses out of their individual accounts. This option might make sense if you want to be financially responsible for your own children from a previous marriage.
- Check-in Regularly
Managing financial obligations is more complex for blended families. Make time with your spouse to check in regularly. It’s important to keep tabs on your full financial picture—making sure all the bills are being paid and you’re working together toward your savings goals. Use this time to also air any grievances or feelings of resentment that may pop up during the process of combining two families’ financial lives.
- Avoid Lifestyle Creep
Going from a single-income household to a dual-income household actually puts families at risk of “lifestyle creep.” This refers to the concept that the more you earn, the more you spend. Make sure you’re not overextending your budget by being thoughtful about your spending. Yes, your household income may have increased significantly. But so has your family size, and you need to keep those long-term goals top-of-mind.
And Finally, Work with a Financial Professional
There’s no shame in seeking outside help when it comes to setting your family up for success. If you’re in the process of combining finances with a new spouse, a financial advisor can help you develop new goals together and build a budget that makes sense.
Feel free to reach out and schedule a complimentary call, we’d be more than happy to address your concerns and build a tailored plan that fits your growing family.
This information is for general purposes and is not intended to provide specific investment advice or recommendations. Opinions, estimates, forecasts, and statements of financial market trends are based on current market conditions and are subject to change without notice. Individuals should always consult their own financial or tax advisor regarding their specific situation before acting on any information provided. Harbor West and Geneos Wealth Management, Inc. do not provide tax or legal advice.
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