When my parents got married in the 1970s, they were both young in their careers with little to no financial assets at their disposal.  For them, it was an easy decision to combine their finances and grow wealth together since they were both starting the marriage with essential zero.   The landscape today is different. 

Shifting social paradigms and educational and behavioral patterns influence the average marriage age, which was 31 years old in 2022 according to The Knot Real Wedding Study (https://www.theknot.com/content/average-age-of-marriage).  When people marry later in life, both parties to the union often possess significant resources due to evolved and successful careers.

It's no surprise that many individuals are concerned about how to merge their household finances with their spouse or partner based on these changing dynamics.  Here are the three most common scenarios:

1. Merge Everything

Despite changing marriage demographics, many partners elect to fully merge their finances for operational simplicity since all income is paid to one joint account and all expenses, both individual and joint, are paid from that shared account. 

Another benefit to this approach is transparency since both partners have full access to information about each other's income and spending patterns.  To some, this might initially seem invasive or even fear-provoking; however, I've found it presents an excellent opportunity to work together toward shared goals and collaborate on opportunities for both saving and occasional splurging by introducing an element of mindfulness and teamwork surrounding decision making.

A third advantage is the psychological benefit of building wealth together as a unit. For many couples, this aligns with their personal or spiritual values as they make a commitment to each other, including a financial commitment.

Concerns with merging everything may arise when income or expenses are unequal or one or both parties value privacy and/or independence surrounding their personal expenditures. 

Lastly, there is a temporary administrative burden during the transition period where one partner's accounts are closed and all income and expenses are rerouted to the new joint account.

1. Keep it Separate

Increasingly, I have seen spouses or partners value their privacy and desire to control their individual expenditures.

When approaching marriage, many individuals have built substantial wealth, grown significant cash flows or adopted their own workable approaches to financial management.  Merging those practices with a spouse or long-term partner can present both practical and psychological challenges, which might provide a compelling reason to keep finances separate. 

From a practical perspective, it's prudent to evaluate each parties' assets, income sources and liabilities prior to the marriage and develop an understanding of who is responsible for individual debts, if any exist.  Neglecting this conversation might lead to misunderstanding, frustration, and resentment by both parties.  Keeping finances separate could create an opportunity to increase clarity, individual accountability, and autonomy as it relates to obligations brought into the marriage by one or both parties.

Separate finances may become particularly tricky when one party earns a significantly higher income than the other.  If one party earns more, should they be able to spend more? What if the other spouse earns less because of making sacrifices to the partnership (i.e., raising children)? These are values-based discussions and should be evaluated by each partner early in the union to confirm alignment. 

One potential drawback is confusion surrounding who pays which household expenses and an additional burden in confirming that expenses are paid in full and on time based on the agreed upon arrangement.

If a coordinated financial plan with savings and spending targets is not agreed upon and implemented by both parties, it might create further confusion about future goals when one party can fund the goal and the other cannot.  Thre may be asymmetry between risk and reward.  For example, if wife invested prudently based on financial independence projections, but husband did not because he valued spending more than saving, wife might be upset or resentful about using her assets to fund joint goals like a vacation home or trip he will also enjoy.

1. Hybrid – Some Separate, Some Joint

A hybrid approach is often adopted to bridge the gap between merging finances and keeping them separate.  In this scenario, both spouses or partners maintain an individual account and also open a joint account.  They determine how much to contribute to the joint account, generally based on a pro rata portion of their income.   Household expenses are paid from the joint account and individual expenses are paid from their individual accounts.

While this might seem like a reasonable compromise, there can be confusion about defining household versus individual expenses.  For example, what if one person wants to go to a luxury beach vacation and the other reluctantly agrees to compromise with their partner even though they would prefer to go camping.  Is that a joint or individual expense? Is it split equally or in some other fashion based on proportional income or desire?  These types of questions should be discussed up front to avoid confusion, frustration or hurt feelings.

Beware of Commingling

A potential concern in all scenarios is commingling pre-marital assets with marital assets.  For those bringing wealth into the union, I always suggest collaborating with a qualified financial planner and family law attorney to ensure pre-marital assets are protected in an appropriate manner if there is a divorce in the future.  This could often mean opening a second set of accounts – individual or joint – for marital assets.  Note that a marital asset is an asset earned during the marriage, regardless of how the receiving account is titled.

In Conclusion

Determining which scenario is right for you depends on your unique situation and the dynamics of your relationship.  A qualified financial planner will be able to help you articulate your values as individuals and as a couple and explore the benefits and burdens of each option, helping you find a solution that works for your unique situation.

Nicole Gopoian Wirick, JD, CFP® founded Prosperity Wealth Strategies to help clients define and achieve prosperity. Nicole earned her Juris Doctor, cum laude from Wayne State University and her Bachelor of Arts in Economics from the University of Michigan, Ann Arbor. Nicole holds the CERTIFIED FINANCIAL PLANNER™ certification and serves as an exam mentor and member of Scholarship Review Panel. Nicole is a former board member of the Financial Planning Association (FPA) of Michigan, the leading membership organization for CERTIFIED FINANCIAL PLANNER™ professionals and those engaged in the financial planning process. Recognizing an absence of women-focused networking and programming, she revived the Women & Finance Knowledge Circle as a subgroup within the FPA of Michigan. Nicole believes in giving back to her local community and has served on the board of directors for Variety, the Children's Charity Detroit chapter and has co-chaired the Alzheimer's Association Spring Soiree. 

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