eefc15009c0b44cca130e0199ac4868bAre you and your partner planning to combine your finances?

Whether you’re married, moving in together, or making a long-term commitment, combining your finances is both exciting and scary.

Are you ready to take that step? And once you do, how will you make everything work?

The best way to figure out if you’re ready to combine finances, and to come up with a plan for how to do so, is to discuss your finances as thoroughly as possible beforehand. If you’re not sure where to start, or what you need to talk about, we’ve put together a five-step guide to help you start talking.

What Does Money Mean to You Emotionally?

Before you get into any details about how you spend or what you want to save, talk about what money means to you.

Do you find the thought of taking on any debt overwhelming? Is it important to your sense of self to have discretionary spending money? Will you still feel emotionally connected to your partner if some of your accounts are separate? Would you feel betrayed if your partner ever hid a purchase from you?

You may be surprised by how emotionally charged the topic of money can be, especially when it comes to your relationship. That’s why it’s important to unpack all that emotional baggage first, before you tackle anything else. Talk about how your family spent and saved growing up, and where you think your personal habits came from. Once you understand how each of you feels about money, you’ll be in a better position to move on to the practical side of things.

What Does Your Personal Financial History Look Like?

When my husband and I got married, it was easy to be honest about our financial history: we were both pretty broke. In fact, by the time we paid for all our wedding expenses, we had less than $2000 left in the bank. Luckily, though, we were both debt-free, and that proved to be a pretty solid basis for our combined financial life.

If you’re financial history is a little more checkered than ours was, it can be difficult to talk about with your partner. Poor spending habits, student loans, credit card debt… all of these things can seem scary to bring up.

But once you combine finances, they’re going to come out anyway. So take some time to talk about your personal history with money as honestly as possible. Agree beforehand not to judge each other or get angry – that will only make it harder to address any problems that come to light. Instead, focus on how you can deal with any difficulties, and work together to develop a plan for managing things like debt repayment or child support.

Remember, combining your finances means you are agreeing to be partners, and that means you have to work together. This will only be the first of many money talks, so set a good precedent for open communication. It will serve you well in the long run.

What Sort of Money Habits Do You Have?

My husband spends too much money eating out.

I forget to pay bills with irregular due dates.

Everyone has bad habits when it comes to how we spend our money. Whether it’s spending carelessly, forgetting to save, or not being able to keep track of payments, we all have our weaknesses. Luckily, we also all have our strengths.

I’m very careful with how I spend money, so I’m in charge of our budget. I let my husband know what we have in terms of discretionary spending, I decide how much we can put in our savings accounts each month. But I’m not responsible for paying bills, because I forget too easily. Instead, that’s my husband’s job, and he’s more on top of it than I ever was.

When you talk about your finances, admitting bad habits is important. But it’s also crucial to discuss what you’re good at. This will allow you to divide and conquer, making sure that you share responsibility equally, even if you aren’t in charge of the same things.

 What Things Do You Want To Be Able To Spend Money On?

When it comes to managing money, it’s easy to get caught up in big plans and focus exclusively on what you need.

While needs are absolutely important and should be prioritized, it’s important to give yourself room for wants also.

Why? It will keep you honest and happy. For example, as a way to increase our savings, I decided that eating out was off the table except for special occasions. Easy for me to do, since I work at home, but for my husband, who is part of a work culture that includes lunches out, it was much harder.

So we added a little wiggle room into the budget to let him grab lunch with his coworkers occasionally. It definitely fell into the category of “want” rather than “need.” But it made him happier, made work easier, and helped him be more honest about how he spent money.

When you talk about combining your finances, don’t make it all about what you have to give up. Instead, leave some time to talk about the little things that you don’t necessarily need but really want. It will make both of you feel like you’re in a partnership, rather than a dictatorship, and you’ll find yourself able to communicate better in the long run.

 What Are Your Long Term Goals?

It’s all too easy to assume you and your partner are on the same page when it comes to long term goals. But unless you actually sit down and talk about what those goals are, you can find yourselves working at cross purposes.

We made that mistake when we first combined finances, and it took many unhappy months to straighten things out.

Instead of assuming, talk about what you want in the long term. How much do you want to save for retirement? Is buying a house part of your plan? What about having kids? If you do have kids, do you want to set aside money for college funds? Do you have debt? If so, when do you want it paid off?

It may seem like these goals are a long way off. But talking about them before you combine your finances will inform many things: how you divide up your bank accounts, how you budget your money… it may even help you figure out whether you are compatible in the long-term.

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Combining finances with a partner can be both a scary change and a wonderful commitment, and talking about these five things will help the process go smoothly.

If you’ve talked it over and decided that combining finances is the right choice for you, the next step is to decide how to divide things up. Don’t worry, we’ve got a few suggestion about that too!