Just married: Should you merge your finances?

dubai - We analyse the various approaches married couples use when dealing with money

There are various approaches married couples use when dealing with money - keeping only one joint account or separate accounts, sharing financial responsibilities equally or based on income, and so on.

With many adults choosing to get married later in life, it is very likely that both husband and wife are financially established by the time they tie the knot, and may choose to manage their finances separately. Nonetheless, there are many who want to take the plunge and merge their finances completely.

No matter which category you fall under, the Souqalmal.com team has compiled some practical tips to help you discuss how to manage finances with your spouse in the most amicable way. So get yourselves a cup of tea or coffee, a pen and paper, and pick your favourite corner in the house to sit down for a discussion.

The 100% merger
So you've made up your mind about merging your finances and following the 'what's mine is yours' approach. You decide to keep only one joint account - both your incomes go into it, and all your expenses are paid out of it as well.

* Discuss your joint and personal financial goals beforehand. Since you'll both have access to the joint account, you need to align your short-term and long-term financial objectives. Talk about how much you need to put away towards future savings and investments, and what's the appropriate spending limit for personal expenses and little luxuries.

* If your spouse is unemployed or decides to stay at home to take care of the kids or take a year off to study, you'll have to foot the expenses all by yourself. Figure out your joint financial strategy in this case, and have a clear plan about how you will sustain yourselves on a single income.

* Trust is key when combining your finances, but then again, isn't that what marriage is based on in the first place? Remember to respect each other's financial ideologies, but also feel free to intervene if your partner goes overboard with spending or debt.

The partial merger
If you want to combine a part of your earnings and keep the rest separate, you will first need to figure out exactly what goes into the common pool and what the joint finances will be used for.

* If both you and your spouse are on a mostly equal financial footing, you can contribute an equal amount to the joint account. But if one earns significantly lower than the other, it would only be fair to contribute proportionally, based on a set percentage of your incomes.

* If one spouse enters the marriage with existing debt like a student loan, personal loan and such, you could either decide to manage the repayment separately, or both could pitch in to become debt-free sooner. This would depend on your mutual understanding.

* Decide which expenses will be paid for using the joint funds, and which ones will be handled separately. Ideally, the joint account should be used to pay for shared household expenses like rent, groceries and utility bills.

Detached finances
If you've mutually decided to keep all or a majority of your finances separate, you will need to have a discussion about how you plan to split financial responsibilities.

* As a married couple with independent accounts, you will need a clear plan outlining 'who pays for what'. So if you volunteer to take care of rent, your spouse can handle the utilities, groceries and your child's school fees. For recreation, you can both pay for vacations every alternate year. But again, it would be fair to split the responsibilities based on earning potential.

* Since you're not combining your bank accounts, plan ahead if you want to have any combined savings or investments in the future. If you're managing your investments separately, it would be nice to compare notes periodically and see how you're both doing financially.

The writer is the founder and CEO of souqalmal.com. Views expressed are her own and do not reflect the newspaper's policy.