Getting married involves more than its fair share of decision making. One of the biggest of these decisions revolves around how you and your spouse will manage the money you’ve each been investing by yourselves over the years. For many couples, their natural inclination is just to combine their investments since they’re already combining the rest of their lives.
However, there seems to be a range of opinions among financial services professionals. Some encourage the idea of putting investments together and having a bigger portfolio balance to work with. On the other hand, other financial planners recommend that spouses keep their investment accounts separate. In every case, couples need to be open and honest with each other about their finances and their goals before making such an important decision.
Women in the Workforce
Data from the U.S. Bureau of Labor Statistics shows that 961,000 women returned to the workforce between Dec. 2020 and Dec. 2021 compared to 666,000 men. Moreover, women’s share of the workforce has been on a steady increase over the past century from 20% in 1920 to about 47% in 2021, according to the Department of Labor. Now that more women have their own incomes, they’re also weighing in more on the issue of combining savings and retirement accounts with their spouses.
It used to be the case that couples put everything together after the wedding. However, the trend has shifted a bit over the last few years, especially since men are often not the sole providers. Women who are earning money rightly want a say in how their finances are managed.
Pros and Cons of Combining Investments
Clearly, there are pros and cons to this issue that need to be discussed if you’re hoping for a long and fruitful marriage. In fact, a survey of divorce financial analysts cited money issues as one of the top three causes of divorce among their clients.
Strengthening Your Portfolio and Your Marital Bond
Research from the University of Iowa found that couples who lived together and combined their assets usually had stronger relationships than couples who did not. Nevertheless, many couples are still hesitant because of the ever-present risk of divorce. This can be even more of a factor when couples marry later in life and have children they want to designate as beneficiaries.
But some people find that keeping everything separate keeps couples from having the kind of financial intimacy that comes from solving economic challenges together, which can also strengthen a marriage.
The bedrock of any relationship, trust, is often reflected in the way that people deal with money. If you share all your assets, it’s clear that you aren’t keeping another account that enables you to pay for things you wouldn’t want your spouse to know about.
In addition, maintaining separate finances goes against the idea of making a commitment to share your life with someone. In essence, it’s difficult to be fully committed to each other if you’re managing your finances separately.
When Keeping Things Separate Is the Smart Choice
If one partner has outstanding financial obligations like credit card or student loan debt, those bills should still be paid from a separate account after they get married. A new spouse shouldn’t have to incur the existing debt that the other spouse brings to the marriage.
Although managing some expenses separately will entail strong communication between partners, the same couple can switch to a joint approach after their finances become more settled.
Merging Finances Makes It Less Complicated
Paying bills and putting financial investments in one basket makes couples more aware of their financial situation. You don’t have to stress over which account to use for your mortgage or property tax payments when there’s only one place to draw from. And you’re less likely to miss a payment too. It keeps things simpler. Furthermore, it helps couples have a better understanding of their financial well-being and what they need to do to provide for their future.
Speak With a Financial Advisor to Map Out a Plan
One of the smartest things couples can do to get started on the right financial footing is to speak with an experienced financial advisor who can help them figure out their goals and the level of risk with which they are comfortable. A knowledgeable financial planner can guide couples along the right path to consolidating their finances and setting them up for future financial success. In the end, the best strategy is one that suits both partners and enables them to achieve financial stability and a comfortable retirement when the time comes.