What to think about when combining finances in marriage

Being in love is undeniably a wonderful feeling, and as your relationship develops, you and your partner will probably start to discuss how you can merge your separate lives: moving in with one another, sharing bills, opening a joint bank account, making investments together and maybe eventually getting married.

It’s likely that you’ll both have to make some compromise, but when it comes to combining finances in marriage there is a lot to consider.

Every couple is different, so there is no right or wrong when it comes to your approach… you just need to make sure you are honest and open with your partner, because you don’t want money to be your undoing.

No matter how strong your relationship, it’s still important to know some of these financial facts before you dive into combining your finances.

• Utility bills – if you are the account holder, you are responsible for the payments.
• Joint loans – if you share a loan with your partner and they default on payments, you could end up having to pay the total amount, even if you are no longer together.
• Going guarantor – being a guarantor on a loan is a big responsibility. You should seek advice before making the commitment, because if your partner can’t pay, then it could become your debt.
• Signing contracts – any financial document you sign increases your liabilities. It’s crucial that you read everything carefully before putting your name on the dotted line.

Some couples pool their funds, whereas others like to keep them separate. It will all come down to how you both want to finance your life together. It’s a pivotal conversation you will need to have… especially if you intend on buying a house or another large investment in the coming years.

If you decide to keep your accounts separate, then you might still consider starting a joint account where you can both make deposits. This could be your household account for paying bills, rent or other shared expenses… or even a savings account where you save for something specific – like a holiday, your wedding or another big dollar item.

The Government’s Money Smart website has a guide to relationships and money and touches on the subject of shared finances:

• Joint bank accounts – ‘Having joint access means the other account holders can take the money in the account. Some accounts only need one account holder’s signature to access the account. Other accounts need all to sign. Consider which option works best for you. Are you happy for other account holders to access the money without your signature? Are they happy for you to do the same?’
• Shared credit cards – ‘Having a joint credit card means the card is in both your names, so you’re both responsible for making repayments. You need to trust each other to not overspend. If you can’t keep up with card repayments, it will affect both of your credit scores. You both have to agree if you want to cancel the card.’
• Shared loans – ‘If you need to borrow money, think carefully about getting a loan in both your names. Understand that when you do:
  • You are also both responsible for repaying the debt.
  • You both own the portion that’s been paid off.’

Another aspect you need to consider when combining your finances is your existing assets. Protecting your personal wealth is important… so if you already have your own property, or even your superannuation, it’s worth seeking legal and financial advice about formalising a financial agreement.

While it might seem unromantic to ask your partner to sign a prenup, it could be critical to your financial security should your relationship break down.

When you do start sharing your finances, there are a range of other considerations you should also think about. These include:

• Update your Will – do you want to add your partner as a beneficiary?
• Superannuation – review and update your beneficiary information and also discuss how you can grow your wealth together.
• Personal insurance – do you want to change your health insurance to be a couple’s policy? Also, review your life insurance beneficiary details.
• Centrelink – assess how being in a relationship, whether married or de facto, will impact your support payments.

Joining forces financially can certainly be beneficial if you and your partner have the same outlook on your life together… but if you are uncertain about how it might impact your personal wealth then it’s a good idea to speak to a financial adviser.

Here at First Financial, our team can provide you with uniquely tailored advice that can help you decide what’s best for you. If you’d like to discuss your situation with one of our advisers, please contact us today.

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