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Merging Families—and Finances

Q: Dear Carrie,
I have two young children from a previous marriage and my soon-to-be husband has one (we will be sharing custody of all three kids). Given that we’re facing major adjustments as a new family, I’d like to ease the way. Do you have suggestions for how we should manage our finances?
A: Dear Reader,
First, thank you for asking a question crucial to so many families. Whether it’s the result of marriage, divorce or remarriage, now more than ever parents and kids alike are having to adjust to changing circumstances. According to data from the Pew Research Center, one in six children is living with a stepparent, stepsibling or half-sibling in what the U.S. Census Bureau terms “blended families.”1
But as common as these transitions have become, as a child of divorce myself, I know they aren’t easy. Divorce can strain a family’s finances, and money in general can stir up emotions and rivalries.
Of course, every family is different in terms of wealth, structure and dynamics. Therefore, I can’t give you hard-and-fast rules—but I can offer some things to think about.
Agree on the basics
I believe a strong relationship starts with understanding and supporting each other’s values. As much as a compatible financial relationship can support your mutual goals, differences can pull you apart. In fact, a 2012 study found that disagreements about money are the top predictor of divorce, regardless of age or income level.2
So, I’d advise you to reach an understanding now. You can start by asking yourselves:

 

  • As a couple, what do you want for each other?
  • As parents, what example do you want to set for your children?
  • How do you feel about spending now versus saving for the future?
  • Would you prefer to spend your extra money on your dream home, family vacations or top-notch schools?

Decide what’s fair
In addition, discuss what “fair” means to each of you, especially as it pertains to your children. One of you may be coming into the marriage with more assets, or come from a family with greater resources. And different kids have different needs. How will you deal with these and other imbalances?
Think, too, about the role your two exes and multiple grandparents will play. Because you will share custody, discuss the impact these potential caregivers will have on your family and finances.
As in all other matters, I wouldn’t make assumptions about what your fiancé believes; rather, ask for his thoughts and be open to surprise. If you’re honest, you’re much more likely to stimulate an interesting and meaningful conversation—and to reach common ground. And later, when you’re caught up in the whirlwind of your daily lives, you’ll be able to use these discussions as the basis for your financial decisions.
Settle on day-to-day matters
Once you’ve talked big picture, get to the practical. If you each own a home, will you sell one or both? How will you equalize ownership and register the title or titles?
Next, will you have joint or individual bank and investment accounts? I’m a big believer in having a combination—yours, mine and ours—so you can each have autonomy as well as share in joint responsibilities and goals. That said, every couple has their own preferences.
Also, talk about how you will split up financial tasks: paying bills, managing investments, preparing your tax return, etc. To my mind, it doesn’t much matter how you divvy up these responsibilities so long as you both have complete knowledge of and access to the family assets and fully participate in every important financial decision.
Look to the future
Looking ahead, think about how you will pay for cars, college and other big-ticket items. Do you intend to save and purchase these things on your own, or do you expect your children to contribute? Do you plan to pay for private school and extracurricular activities or would you prefer to save your education dollars for college?
And don’t forget about retirement. As much as we all want to support our children, it’s essential to put retirement savings at the top of your list. My recommendation is that you each figure out how much you can afford to set aside for retirement every month and automate your contributions. Your kids will have options for paying for college, but you can’t count on anyone but yourselves for financial support once you’re no longer working.
Finally, don’t neglect your estate plan. As a responsible spouse and parent, you’ll want to appoint a guardian for your kids and ensure that any inheritance goes to the right people. My advice is to consult with an estate-planning attorney before you get married; that way you can be confident that everything will be handled according to your wishes.
Consider a prenuptial agreement
Even if you don’t create a legal document, I’d recommend you and your fiancé discuss the issues that would normally be covered in a prenup, including the extent to which you want to combine your assets and who will pay for what. The key is to find a solution that works for both of you. Even if you never formalize the document, these conversations can serve as a road map for the ways you will share expenses and responsibilities, especially as they pertain to your children.
An important part of every prenup is full disclosure. Coming into the marriage, you and your fiancé have already established separate financial lives. As you combine them, you each need to know exactly how much the other earns, owes and owns. That’s not to say you shouldn’t have separate property. You just shouldn’t have secrets.
Keep talking
As you and your fiancé enter this new and exciting phase of your lives, you have a lot to discuss. But once you get the conversation started, don’t let it fade. As your needs evolve, keep talking. And as your kids grow, include them in family discussions about how you manage and spend your money. That way, you’ll all be in the best possible position to flourish in your new lives.

1. “Parenting in America,” 12/17/2015.

2. Jeffrey Dew, Sonya Britt and Sandra Huston, “Examining the Relationship Between Financial Issues and Divorce,” Family Relations, 10/2012.

What You Can Do Next

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