Hey Today I want to discuss a topic that some
people might see as a bit controversial
but it’s also a very important topic:
should you combine your finances with
your partner when in a relationship?
Study shows about 25% of couples
have children without getting married
And some couples marry fast but they
decide to keep their bank accounts separate.
Our ideas of marriage and partnership have
changed and so did our perception of whether
we should have shared bank accounts or not.
It’s not an obligation anymore,
it’s a personal choice.
If you are considering combining your finances
but you aren’t sure if it’s a smart choice,
then this video will give you some pointers
to decide whether if you would like
to combine your finance or not.
I will first explain the pros and cons
of combining finances,
then I will suggest
WHEN is a good time to combine,
and lastly I will touch up on what could happen
in case of divorce in canada.
and My team and I spend a lot effort
in creating this video,
so great if you can share your thoughts
in the comments below!
Oh and If you are new here,
My name is Thomas
Here to help Canadians make better choices on
Retirement Wealth And Insurance
My goal is to make sure you take 1 or 2 ideas home
And start making better financial decisions today
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Let’s jump into it!
I think it’s very interesting to look at current trends,
to see how people are thinking
about combining finances.
As I mentioned before,
about 25% of all couples have children
but they aren’t married.
Still,
right now in Canada,
the majority of people are
combining their finances after marriage
- but we can see a downward trend.
Especially millennials living together
are more likely to keep their finances separate.
In a sense,
millennials are the first generation that can
actively choose if they want to combine or not.
It’s great that we have the freedom to choose
but it also creates uncertainty because
there is no one guiding us
and helping us to make a good decision.
Well,
here are some advantages of
keeping your finances separate in a relationship:
Keeping finances separate is definitely an advantage
if one of the partners is in debt.
If you have any kind of debt say student loans
you probably don’t want to burden your partner with it.
So,
it’s easier to keep bank accounts separate.
The second scenario where separate accounts
are an advantage is when
serious problems arise in your relationship.
It’s much easier to end a relationship
if each has their own bank account.
Of course,
we don’t go into a relationship
thinking that it will ever end.
But if you and your partner fight a lot,
a separate bank account has its advantages.
And finally,
many people prefer separate financial accounts
because it allows you to keep your independence.
No one can tell you what you can and can’t buy
since it’s your money.
It’s not an easy decision to give up
this kind of freedom and independence.
Okay,
now that we know the advantages of
keeping your finances separate,
let’s look at some pros of joint bank accounts.
If you combine your finances as a couple,
it’s much easier to work together towards big goals.
Imagine for example
you want to pay off debt and mortgages –
this is much easier
if you have two incomes combined.
What’s more,
if you and your partner plan to buy a home together,
having combined finances makes it much easier.
For example,
In canada,
ususally you may able to borrow
5 times of salary as a mortgage amount.
So if you have two people in the mortgage,
then the bank will able to lend you more.
Combined finances also have advantages
when you want to retire together.
It’s much better to have
two pensions to fall back onto.
Overall,
you are much better protected
if you combine your finances.
Especially if one of you unexpectedly gets laid off,
or when starting a family or transitioning careers.
Thanks to the joint account
you can always help each other out.
And finally –
probably the biggest advantage of combined finances
- is increased transparency and better communication.
Did you know that about 20% of relationships end
because of money problems?
The issue is that
partners often don’t discuss their finances
and they don’t plan financial decisions together.
If you don’t know what
your partner spends their money on at all
it can create insecurity and lower your trust.
Couples who share an account have nothing to hide.
They communicate about their finances
and make decisions together.
They are also less likely to separate
because of financial issues.
Now, as you can see,
both options have pros and cons.
There are advantages
when you combine your finances
but there are also advantages
if you keep them separate.
So,
what if there was a way to get
the best of both worlds?
It’s possible and it’s an option that
many couples feel comfortable with.
When you take this hybrid form,
it usually goes like this:
Both partners contribute a percentage
towards a shared savings account.
Most couples take the
proportional earnings approach,
meaning that the amount they contribute
is in proportion to their income.
This makes it very fair in case
one partner earns less than the other.
You can also leverage bill parsing,
which means that anytime you pay for something,
you either scan the bill into an app
or note it down manually.
Keeping track of all expenses creates
the needed transparency so both partners
know where their money went.
Now, besides the joint savings account,
each partner will also has
their account for their fun money.
This is great because you keep
some independence and don’t have to ask for
permission when buying something you enjoy.
So This hybrid version will help couples to
keep in balance in both their
mental and financial health.
Now that you know the different approaches
and their pros and cons,
let’s also look at timing.
Because there might be situations where
you had separate accounts before
but want to combine after all.
As a general rule of thumb,
people wait for marriage until they combine their finances.
This is because getting married is
usually a sign of a serious relationship.
So, to avoid a complicated breakup,
combine finances when you are absolutely sure
that you’ll spend years and years with the other person.
Of course,
we can’t always predict everything,
and unforeseen things can happen.
Still,
it’s generally not a good idea to combine finances
after being together for two weeks.
What’s more,
make sure you discuss finances
before you get married and
before you create a joint account.
Communicating with each other about this topic
is so important but many couples fail to do
If you decide it’s time to combine your finances,
make sure to choose a bank you both like
and set up a joint checking account.
Many couples also like to create a budgeting plan
to define shared financial goals
and to organize their finances and spending habits.
Of course,
there are also situations where combining
your finances doesn’t make sense.
For example:
Probably the biggest reason not to combine
your finances is when both partners have
very different philosophies about money.
It can be that everything in the relationship
works out great and money is the only thing
that you don’t agree on.
In that case,
you are probably happier with separate bank accounts.
But what exactly do I mean
with different philosophies about money?
It could be that one of you was raised very frugal.
You are in control of every penny you spent
and think more about financial security…
While your partner might be a risk-taker
who just spends their money as they please.
As you can see,
this can cause problems because one of you
wants to save money and has to feel secure
before investing money into something
while the other likes taking risks.
In most cases, your partner won’t change.
So just accept them as they are
and keep your finances separate.
As you probably know,
I work as a financial advisor with different clients
And after working with several couples,
I found that this kind of advice
works for most of them:
Most of my clients feel comfortable with a hybrid plan.
Each of them has their own savings and hobby account…
But they also have a joint account for big bills
like their mortgage, car loan, children’s education,
groceries, and other errands, and so on.
When it comes to special savings accounts
such as RRSP, TFSA, or life insurance
it’s better to stay individual and not combine them.
Simply because there is a lot to consider
when it comes to contribution limits and payouts later.
However,
one thing that I am quite certain,
please do not buy a place together
if your relationship is not set yet.
I understand the real eatate market is hot
and it’s easier to get a joint mortgage approve.
But what I saw in my past years,
when couple breaks up,
they often have to go into law suits because
they cannot agree on the property.
Which brings me to the next topic
I want to discuss what could potentially await you,
if your spouse and you go through a divorce.
I’m not a lawyer and every situation can be different.
So,
what I’m sharing is for informational purposes only.
So,
what could happen if you combine your finances
while you are happy and
go through a divorce later?
First of all,
if you have children it has to be decided
at which partner’s house they live.
If one of you earns more money than the other,
the higher earner likely has to pay child support.
Also the higher-earning partner
might need to pay an alimony.
If alimony has to be paid and
the amount is based on the following things:
The length of the marriage
The living standard of the couple during the marriage
Physical condition and age of the spouse
The current financial situation
As you can see,
a lot has to be considered during a divorce.
And there is more.
What if your partner and you have
shared assets like a house or a car?
The thing is,
for any asset that you own together
you have to decide if you sell it or keep it.
Let’s take your house for example.
If you agree to sell it,
both partners get a share of the money.
If you decide to keep it,
you have to decide who will live in it –
as both partners have equal rights to live there.
Plus, the person who now lives in the home
isn’t allowed to sell, rent or refinance the home
without the other one agreeing to it.
And I get this question a lot,
what if you owned a home before you got married?
In that case,
the other person has
no right to stay on the property.
Only if both names are on the title,
you have to find an arrangement.
If it’s yours before the marriage,
it stays yours.
And it's pretty much the same for a
shared car or any other shared assets.
If you have lots of shared assets
but can’t come to an agreement,
it’s usually best to use a lawyer or mediator
to help with the decisions.
And if you do need an advice from a laywer,
i have attached a family lawyer’s info
in the description box below.
Disclaimer,
this is not an advertisement
and I didn’t get paid in doing this
He didn’t even know that I will put his name up.
I want do it because I believe in his passion
and his philosophy when dealing with family lawsuit.
Let’s shortly recap what we covered in this video:
It’s your choice whether you want to combine
your finances or not and
both doing it and not doing it
has advantages and disadvantages
Most couples feel comfortable with a hybrid version
where part of the money is shared
but each has their fun money as well
There are instances where combining your finances
isn’t a good idea,
especially when you have
different philosophies about money
And while we don’t hope that divorce
ever becomes an issue in your life –
it is worth considering that both partners will have
equal rights to shared assets and
there are a lot of decisions that
have to be made during a divorce.
I truly hope this video was valuable to you and
that you have more clarity on combined finances now.
If you liked the video
give it a thumbs up and
please share this videos to your couple friends.
if you want more financial tips and tricks
to get more clarity,
consider downloading my financial clarity checklist.
This checklist helps you evaluate your current finances
and helps you to find out what you can do next
to be more financially healthy.
I’m excited to see you inside –
download it now with the link in the description.
This is Thomas
And I will see you in the next video!