Blending finances with new spouse / partner

[Caroline]

Greetings to All:

I am new to posting here, though I have been lurking for a while now. I have picked up GREAT advice and encouragement from this site and am grateful to all of you.

I still have questions, however, and one of them is this: how are members sharing finances with their significant others? I have searched the site but if this topic has been discussed in any detail, I have not come across it.


First, my situation:

I am a 48 year old unmarried woman worth approximately $530K. Until recently, I made $150K per year in a company whose initials stand for "I've Been Mauled." I am sick to death of this company and industry, but not ready to retire on $20K per year given skyrocketing health costs and the like.

So I am working half-time and looking for a new career that feeds my soul without starving my bank account. If I could keep working half-time here I would be satisfied, but I could be forced back to full time work at any point.

I got a late start on FI while gradually putting myself through college, grad school, etc. over two decades. But I live well below my means and have been saving furiously for 10 years now.

My significant other (four years now) is 53, is VERY good at saving, but has health issues and has worked in the non-profit world for most of his life. He is worth about $60K and is currently unemployed, again due to health issues.


My question to the combined wisdom of the group is this:

To what extent do you or would you combine your financial lives with your spouses / significant others?

We are committed for the long term and believe in sharing the good and the bad. On the other hand, we have not been married for 20+ years, raised children together, planned together for retirement, and so on. And if $20K per year is not enough for one person, it is not going to be enough for two.


More specifically,

How have you divided responsibility for expenses between partners with disparate incomes? Fifty-fifty, or in some other way?

How are you handling housing costs when one person is responsible for the mortgage and benefits from housing appreciation? Does the other pay "rent" or "buy equity?"

For those who have not been together for decades, how did you combine or not combine finances?

For those have been together for many years, how likely is it that you would have a successful relationship without the commitment to completely share resources?

When it comes to lifestyle choices, does each party have an equal vote, or does the person who is working and paying the bills have a larger share? (I telecommute to work and could save a bundle by leaving the San Francisco Bay Area, but that might make it harder for my partner to find a well-paid job. Who decides, and how?)

Does anyone have a relationship in which traditional male / female financial roles are reversed (the woman making significantly more)? Has that caused issues, or is it a red herring?

Has anyone decided to work additional years to make up for a spouse / significant other with fewer resources?

How do you handle potential inheritance? (I'll have nothing from working-class parents -- he might get quite a bit, potentially.)


As may be obvious, I'm really struggling with my own risk-averse nature vs. attitudes toward fairness, commitment, etc. Any and all feedback would be most welcome, and again, thanks to everyone for making this site so informative and valuable! I look forward to learning and sharing a lot more in the future!

Caroline

 

[cute fuzzy bunny]

I'll read more and give you some better advice a little later, but here's a start...

How do you know you've just married an IBM senior manager?

He spends the entire honeymoon sitting at the bottom of the bed, telling you how great its going to be...

 

[cute fuzzy bunny]

Well it turns out my answers to your questions are surprisingly short and simple.

My wife and I married last year and just had a bouncing baby boy (bouncing in my lap right now, forcing me to type with one hand).

I've been making six figures most of my life. She works in health care making a good but unspectacular salary. I ER'ed as a single four years ago, and my plan and nest egg are good enough for me to live a comfortable middle class lifestyle indefinitely (the good lord greenspan willing).

I paid off my house and other debt, which put a nice dent in the portfolio but in these uncertain times I felt it was a better idea to keep my debt (and needed annual withdrawal) small. With less market exposure, I'm 'making' the mortgage rate on my money...and thats better than the S&P500 for the last 5 years! My tax burden was also zero for 3 years, and nominal this past year due to lower withdrawals.

When we got married we had the financial thing to consider. I decided that despite the warnings to keep the money separate and make all the financial decisions into some complex formula of who gets what vote and who pays for what, that we'd just put it all into the same bucket and work as a team.

Granted that has a huge peril if things "dont work out". I think crafting a scenario for allowing that will happen simply lays the foundation for it happening, albeit more smoothly when it does. We've been together for about 5 years and we get along great, think similarly about a lot of things, and have few big fights.

She closed her bank account and I made mine a joint account. I changed my investment account to a joint account. I pay all of the bills. Her paycheck goes right into our joint checking account. She has an ATM card, checkbook and three credit cards on our joint accounts. She can spend whatever she wants for whatever she wants, within reason. Theres sort of a rough guideline that 'anything over about $500 we should talk about'. Since I make most of the major purchases, thats hardly a problem.

I pay all the bills and make most of the major purchases. She doesnt even want to know about most of it. If we're getting something that affects both of us, we both talk it over and decide what we're going to do.

I think she likes the idea that her paycheck is paying most of the monthly bills. Makes her feel like she's a big contributor. That I've already handled the 'capital' items like the house, cars and major purchases helps us live very, very well on what would otherwise be a middling salary. The infrequent and minimal withdrawals from our portfolio also helps keep IT healthy and happy.

We've found a division of housework and other activities that works fine and is reasonably balanced. Occasionally one of us "does the others job" when we have time. Thanks are always given for the helping hand.

I think the minute you start playing 'mine and yours' or someone has or feels they should have a bigger vote or a larger percentage of the decision making or one partner takes a position as a 'dominant financial source'...your relationship is screwed. Its gotta be equal all the way and each of you should feel like an equal partner, although its great to make exceptions where one partner is fully comfortable with the other 'owning' some task or element of your lives.

As far as stress on the relationship, you may not know its even there until the moment you ask your partner to pass the sugar and what comes out of your mouth is "You jerk! You screwed up my life and I hate you!" A lot of people I know have gone through a divorce or major break-up and they almost always look like deer in the headlights afterwards "what happened?!?". What happened is they were either just not meant for each other or there was some sort of control problem or inequity in the relationship.

All that having been said, your nest egg is a little bit on the small side. You could pull it off with some regular income. There may be a really bad time coming up in the financial markets that may either be a big drop or a long sideways period (my opinion). That plus a small port could spell a big problem for marginal ER's.

If you're willing to live well below your means if necessary, the relationship is strong, and you're willing to go back to work if a huge shortfall hits...you might make it work.

Try reading "how to retire on less than a million dollars" by gillette edmunds. Not the best book, but an easy long evening read that should help get your mindset started. Then read "the four pillars of investing" by william bernstein, which is both interesting and a great way to put yourself to sleep at night.

Ok, not so short and simple, and a lot of typing with one hand!

 

[Mountain_Mike]

Caroline,

Good questons....and difficult ones. I'm in the "married for decades" category, so everything is split 50-50, even though I am a much better "saver" than my spouse. I just figure I need to save enough for both of us.

Personally, I think I'd keep things pretty "informal" and keep "my" assets in in my name only. After all, I worked for them....but then, I may be even more risk adverse than you

You didn't mention children, but if you have any, they should be a consideration. Are you thinking of getting married sometime down the line? If so, a pre-nup may be a good idea.

 

[P.S.]

I Re: Blending finances with new spouse / partner

Greetings to All:

I still have questions, however, and one of them is this: how are members sharing finances with their significant others?  To what extent do you or would you combine your financial lives with your spouses / significant others?  
How have you divided responsibility for expenses between partners with disparate incomes?  Fifty-fifty, or in some other way?

How are you handling housing costs when one person is responsible for the mortgage and benefits from housing appreciation?  Does the other pay "rent" or "buy equity?"
 
For those who have not been together for decades, how did you combine or not combine finances?  

For those have been together for many years, how likely is it that you would have a successful relationship without the commitment to completely share resources?

When it comes to lifestyle choices, does each party have an equal vote, or does the person who is working and paying the bills have a larger share?  (I telecommute to work and could save a bundle by leaving the San Francisco Bay Area, but that might make it harder for my partner to find a well-paid job.  Who decides, and how?)

Does anyone have a relationship in which traditional male / female financial roles are reversed (the woman making significantly more)?  Has that caused issues, or is it a red herring?

Has anyone decided to work additional years to make up for a spouse / significant other with fewer resources?

How do you handle potential inheritance?  (I'll have nothing from working-class parents -- he might get quite a bit, potentially.)


Caroline

Greetings to you Caroline:

You have really good questions, that I'm sure you already figured, are much better thought of, thought over, mulled, and pondered a thousand times before you make any decision.

My experience is different since I married in my 20's, and you and your SO have lived a good part of your adult lives already.  So our forward perspective I think is totally different.  

But to answer some of your questions, we go/combine entirely together.  When we were first engaged, DH felt that he should be entirely responsible for all financial matters, my fingers stay out of pot, and he did not happily field questions, perceiving them as a lack of trust.  His given reason was that I had never balanced a checkbook, didn't know when I got paid, and in general was clueles, which all may have been true, but I think the bigger issue was that I was in a sub-field almost entirely of men that considered themselves "gods", with huge financial pay, and accorded the highest status by society (note I was in the "grooming" stage not the big bucks stage).  Eventually changed to another more "family friendly", shoot- marriage friendly field, and that tug of war ceased.  By then, we had also established a trust/equality that worked at each level of marriage.

So it's evolved not to how do we divide, but more DH knows that I care for every little thing about him and I know that he would die for me, and all decisions stem from that understanding.  Okay, this probably comes across as very hokey, but I think others can vouch similarly.  It's another way of looking at what th said "I think the minute you start playing..."

Re: inheritance...we don't talk, think or touch it...too morbid for me...and I'm superstitious enough ... would be afraid of jinxing.  My preference and probably DH's, would be to not outlive our parents   (how selfish)

 

[cute fuzzy bunny]

Honestly, its a good idea to get to know each other well before marriage and to be married before significantly combining your financial resources.

You might consider separate accounts with a joint "house" account. You each contribute to that in a pre-agreed amount on a pre-determined period and pay the bills from that. About all I can say is no two people will come to the same conclusion and what works for one couple wont work for another. Talk it out until you're sick of talking about it.

If its been more than 2 years though, and you're still both feeling good about the relationship, you're probably in safe territory. Allegedly, your hormones will do the job for you for roughly those first two years. Once those wear off its all cognitive

 

[laurence]

Caroline, only you know how to proceed in your relationship, but I second grlcndream's feelings on this. I had a couple of friends not only get into financial trouble by comingling funds with boyfriends/girlfriends, but had their credit ruined, too. If there are particular reasons you are not getting married, that's fine. But if it is a possibility in the future I would wait until then to start pooling financial resources, especially with such a disparity. If nothing else, with all the divorces there is bound to be precidents for whatever financial wrangle you find yourself in the future! Also, with the health problems, a lot of states don't let "partners" or "girlfriends" visit or make health decisions for an ailing spouse like married couples can. I also don't know what your financial liability would look like if he were to require high cost care. Will you get a pension at 55? Retirement health care?

Caveat: I am married, and we totally mingle our funds, all for one, one for all, and have not hesitated on any of the above points or what they might portend to us. We benefited from meeting each other when we were young and (net) worthless!

 

[P.S.]

This is what we did: properties acquired before marriage stayed separate in that they would revert to birth family in case of death. Profits, like rent paid after marriage, goes into combined savings. Maintenance costs come from combined savings. But totally different when you've had mostly separate adult lives with significant disparity in assets.

 

[yakers]

Wow, this is the kind of thread that should go on twenty pages not like some other stuff....



There are both logical/business decisions and emotional decisions and each may effect the other. Not just how you feel about each other, ie "I am sick to death of this company and industry" well, that is good to know and work out how to handle it together. My wife teaches school and last year she got the "class from hell" and decided she would be retiring soon, as in 2006. I can support that and her.
We are both on second marriages, ours for 12 years now. My first wife & I had yours-mine-ours accounts and negotiated work and such. It seemed so "modern" at the time-and it sort of worked, well not so well, I guess. Now my wife insisted we have one account, both names on the title to the house and it works so well I am still amazed. We will spend up to $100 each without consulting each other. But we talk a lot, one of those couples connected by cell phones. I make more than my wife but that was not true when we met. I have more savings and had a house and a real pension. She has some chance of an inheritance that could exceed my financial contribution, we don't plan on that at all. We both have decent medical coverage available although I carry her and my son on mine.

We live below our means, 1000 SQ FT house that is worth more than I can believe in southern California.


I think that the question of marriage is the key, it changes things legally and emotionally. If you don't get married the financial decisions are easier, keep property separate and have a joint expense fund. Contribute and draw out as you decide. I do not think there is any set ratio or guide, create one that works for you two.
If you get married I would go for joining everything. It just works for me. I really take to heart the St Paul reference "the two shall become one" I think its deeper than finances and my wife feels the same way.

As to lifestyle choices, we are pretty compatible. My wife lets me think I am in charge but knows I would do anything she wants. We still have one son at home in high school. When that ends we will have more interesting negotiations about where to live and what to do.

I am working longer than I would if I were a single male, to build up our retirement a little and even more to see my son is set in college. As much as I like my job, I would be gone if I only had to support myself. But this is not some great "sacrifice" on my part, it is my joy to support my family.

Lots of other good opinions to consider on this board, but I think the core issues are about marriage and the financial follow from that.

 

[Nords]

I'll try to answer the questions in the order you asked them!

We're totally combined-- we each have a credit-union account with the other as joint owner (for higher limits on CDs). I execute the investments, pay the bills, do the taxes, run to the ATM, and handle all the financial scutwork. All income eventually drains into our bill-paying brokerage account. She asks those annoying "little" questions that take me about 20 man-hours of research, spreadsheets, & grunt work to verify that she's right. But as another poster has pointed out, we both came to this partnership with nothing but bachelor furniture and we've been mostly equitable earners for the last two decades.

I'd advise keeping the expenses below the lower of your two incomes while you build up an unemployment cash stash. That way a job loss won't leave you with mandatory expenses (mortgage, credit cards) and zero discretionary habits to cut. The other advantage of this system is that you don't have to worry about who contributes to what-- you both pay the bills and everything else goes into joint savings.

If I wasn't on the home's title, I'd sure learn how to do the repairs & improvements. That way you're making a concrete contribution without having to come up with extra cash. And perhaps eventually it does buy equity.

Our partnership wouldn't have made it to 25 years if we weren't sharing everything. Especially child care!

Each of us has an equal vote, although I'm happy to be seduced into changing mine. (This works even better when it's done by my spouse.) You decide by constantly talking and making small compromises that eventually settle the issue without any ultimatums (ultimata?) or epic battles. The point is that your lower-income life together is arguably better than earning a ton of money apart.

Gender role reversal is a red herring. My spouse will probably have a pension 50% larger than mine and when she was working full-time her earnings were also bigger. IMHO that makes her even more sexually attractive. (Plus I cook half the meals & clean the entire kitchen, which helps me ensure that all the appliances are properly operated within nominal standards.)

As for working extra years, not me! But sometimes I wonder if this contributes to her interest in continuing part-time. (I think most of the reason is that she's finding it hard to turn it off. Plus she doesn't enjoy surfing as much as I do.)

Inheritances-- don't depend on them. They come at a high price when you lose your loved ones! And besides it's better to make all of your decisions as though the money was going to be spent before dying or donated to charity afterward-- because that's exactly what might happen.

 

[Nords]

One other question.

I don't know the nature of his health issues. But for healthcare insurance/expenses, would it be wise for him to have a share of any of your assets?

Perhaps the less joint, the more better, especially if treatment or medication is based on means testing.

But this is a better question for a lawyer.

 

[Martha]

My personal situation probably isn't very relevant. We lived together when we were fairly young, had nothing to speak of but combined it all. Basically it only amounted to joint bank accounts and a crappy car. We married and continued to combine everything. I often spoke of my husband's apartment buildings as his because he did all the work. But really, they were ours.

It is so much more difficult to work through these issues when children from prior relationships are involved. You would hate to see the situation where one spouse dies someday, the other inherits it all and then passes it all to the second spouse's own family, leaving out the other spouse's children. Pre-nups work well for that situation.

But kids from former relationships aside, it just somehow seems right to me that when you marry, you do become one unit with both bringing something to the whole so the idea that each keep their separate assets doesn't sit well with me. But that is a personal opinion that others are free not to share.

Before marriage, I like Laurence have seen some bad situations resulting from breakups. For example, the title to a house is in one person's name, and the other made most of the payments. Or what do you do if you both own a house and break up? What if one person doesn't cooperate? Do you really want a judge involved to sort these situations out? If you co-own property before marriage an agreement as to how that property will be divided on breakup would be helpful. GRLCNDREAM, if your boyfriend pays half the mortgage payments for years, and you break up, what if he says he is entitled to some equity in the house? After all, he contributed to it. This is Caroline's issue of paying rent vs buying equity.

Caroline, until my husband started making a bunch of money from real estate and investing, after college I was the big earner. He earned money for us while I was in school. No issue for either of us. Oddly, my husband's brother also married a big earner as compared to him. Both of us wives kept our own names and had professional careers. The brothers were seamen and took college classes in the winter off season. They both met us in college. I just found out recently from my husband that one of the reasons he wanted a serious relationship with me was that I ate vegetables. Gee, who woulda known. I was attracted to him in part because no one could whistle flight of the bumble bee quite like him. Well now I am getting off track.

Marriage is a wonderful thing. Good luck in figuring it all out.

 

[Martha]

Re: One other question.

I don't know the nature of his health issues. But for healthcare insurance/expenses, would it be wise for him to have a share of any of your assets?

Perhaps the less joint, the more better, especially if treatment or medication is based on means testing.

But this is a better question for a lawyer.

The health issues do put another twist on all of this. Caroline, does your BF have insurance coverage or other coverage which would be put in jeopardy if you combined any assets or married? You should at least know the anwer to that. Also, if you married or combined certain assets and he was unable to pay for healthcare, some of those assets may be at risk.

 

[charlie]

Caroline,

I don't know about your SO, but most men would
feel more comfortable paying at least their share
of living expenses ...... it's a male hormone thing.

It seems fair to me for each of you to keep your
financial assets separate until after you marry
but set up a joint account now for living expenses
and split them down the middle. If he can't handle
his share of the living expenses right now then do
what your heart says.

The most sensitive issue, IMHO, is how to handle
the housing expenses. My suggestion is for you
to pay the taxes and insurance plus the equity
part of the mortgage and 1/2 of the interest. Then
split the utilities and let him pay the other 1/2 of
the interest.

Keep the house and your savings in your own name
for now. You can always change that later after you marry.

I have been married to the same woman since before
I was born, it seems, so your situation is pretty alien
to my experience. Please forgive me if my suggestions
seem insensitive.

I wish you the very best!

Cheers,

Charlie

 

[ordway]

My husband and I have been together for about 12 years now... married for 6 of them. We've had totally joint finances from almost day-one. Sometimes one of us has made a lot more than the other, sometimes only one of us has been working, sometimes both, but in all cases it just went together into the communal pot. All our spending and lifestyle decisions have been joint, but with a practical bent: our choices of where to move are based heavily on my husband's job, since he makes a lot more money than I'm ever likely to. But it's not like "he decides" - we decide together.

I can't comment on the mortgage/home equity question, as we've always rented so far.

As for the various decisions about where to work, how long to work, etc... We have to make those decisions too, but they're all framed in the context of what's best for *us*. We're working together (each in our own way) to have an enjoyable lifestyle and early retirement for both of us. He and I contribute different things, both tangible and intangible; it all goes to the same end.

I guess I think of our money a lot like our kitchen pantry. Who would think of having "his" and "hers" cabinets full of food, and when it's one person's turn to cook dinner, he only can use what's in his cabinet?

This approach may be more comfortable for me because when we met we each had nothing; every penny of our net worth has been earned since we've been together. I can see as it could be different with so much of your savings having been earned on your own. (Good job, by the way!)

 

[haha]

I don't know about your SO, but most men would feel more comfortable paying at least their share of living expenses ...... it's a male hormone thing.

Charlie. I used to think that I would really like a go-getter wife with a big job or lots of money, but then I realized that I would really have to be super between the sheets to earn my keep.

It seemed kind of intimidating when looked at that way.

Mikey

 

[Jarhead*]

Charlie. I used to think that I would really like a go-getter wife with a big job or lots of money, but then I realized that I would really have to be super between the sheets to earn my keep.

It seemed kind of intimidating when looked at that way.

Mikey[/quote

 

[kayelem]

I married fairly late in life...37 yo. (I'm 45 now)  We lived together for several years prior to that.   I earned and earn quite a bit more than my husband, but he is a bit older and had better financial "habits". (LBYM, etc).  If it weren't for him I am pretty sure I would still have some debt and would not have seen the flexibility being debt-free would give me.

For the first couple years of our marriage, I did the bills each month and he paid me his half.  We kept separate accounts, but kept our finances, net worth calculation as one.  It really took me a long time to give up my own accounts and spending habits, but when I did I think I became better about regarding the expenditure as instead of being just good for me as good for "us".

Eventually, we basically lived on his salary and saved mine, which is opposite of most people who live on the bigger salary and save the smaller.

However, I don't think there is anything wrong with not wanting to combine your finances right away.  I really was more ready to get married than I was to give up my own bank account.  I think you get used to your life one way and it is tought to give up your independence when you have worked so hard for it.

I'd keep the finances separate until you feel comfortable and live at the level that his income (or his income plus an equal part of yours) will allow.  Save the rest and be happy.

I do think you need to make a decision about who has "lead career".  It may not necessarily be who makes more.  Could be whol loves their job more or who is more specialized.   In my case I was making more, but my husband didn't really like his job...so he quit and started something that would allow him to be flexible to move when I needed to.  Now we are at the point where I am about ready to quit....he is getting a little bored so we've decided if he finds something he really wants to do we'll go.  We like where we are, so either way it will work out.

 

[kayelem]

Hey, Mikey:
You always struck me as a little more confident than that!

 

[haha]

Hey, Mikey:
You always struck me as a little more confident than that!  

LOL, kayelem. It's the old hemi-in-a -Chevette pose. Keeps the pressure down!

Mikey

 

[Mr._johngalt]

This is an area where I would never presume to tell
others what to do, but I will tell you what we did.

Married 3.5 years now, second marriage for both. Large
disparity in finances. Prenup and all financial affairs
kept 100% separate so far. My presumption is that at some point we will be living on my money, which is okay with me. In the meantime, DW remains employed and pays
for (or provides) health insurance, groceries and
household supplies, gas for her car, and "walking around money". I pay for everything else and basically
own all assets. This wasn't planned but rather evolved
and seems just fine to me.

JG

 

[Calgary_Girl]

We've been married for 5 years and all of our accounts are joint. Luckily, I married someone whose financial philosophy is the same as mine so the decision was fairly easy

All of the bills are paid from the joint account and I'M the one that pays them since hubby couldn't be bothered and I don't really mind doing it. Any major purchases are discussed beforehand as well as our investment strategies. I probably know more about the state of our finances and net worth than my husband does.

I am strong believer that people should discuss everything before getting married otherwise you may be in for a rude awakening.

 

[Mr._johngalt]

Hello Calgary Girl! Well, we discussed "everything"
before we got married. Unfortunately, we are still
discussing it

JG

 

[cute fuzzy bunny]

Charlie. I used to think that I would really like a go-getter wife with a big job or lots of money, but then I realized that I would really have to be super between the sheets to earn my keep.

It seemed kind of intimidating when looked at that way.

Whats the intimidating part?

 

[Helen]

Hi Caroline,

No real advice here, my situation is quite different from most.

My partner and I have been together for over 17 years.  Neither of us had much of a net worth when we first got together, so it was a pretty easy decision to combine our assets.  We are gay so we don't have the choice of a legal union, however we have everything in joint accounts and have the power of attyn, wills etc.

I have always made at least twice what my partner makes in annual income and that does not have much of an impact in our decision making.  The way I have always seen it is that she works just as hard as I do, I just get paid more for what I do.  

I am the one who has taken on the financial planning, but she is on board with me to retire early.  Neither one of us are big spenders, we are both at the point where we just want to save as much as possible.  We've always lived below our means and never had an argument over money.

When we begin living off our assets, we will take our annual 4% from our brokerage account and send half to her checking and half to mine.  (It would drive us both nuts to try and share a checking account - I never balance mine and she is anal about balancing hers).

As far as inheritance, we will set up trust funds to keep the inherited money separate.  If I go first, my partner will use whatever she needs/wants from my trust.  When she passes, the money will revert back to my family.  She will have to decide how she wants to handle any inheritance from her family, but the fair thing is that it will at some point revert back to her family and not to mine.

Good luck with your decision.

-helen