Merging Your Money

Merging finances with another person can sometimes take the relationship down a treacherous path. Whether the two people are involved romantically or in a business relationship, sharing a financial goal implies that both parties' interests will be met. This goal is much easier said than done. A lot of stress and sometimes legal trouble can be avoided by taking time in the beginning of the relationship to clarify the common goals and the responsibilities of those involved to build a strategy that satisfies everyone.

The Roommate Example

Most people start out with roommates whether it's sharing a room as a child, sharing a dorm room in college or sharing your pad with friends after graduation. Having roommates are a great way to share living expenses, stay social and sharpen your debate skills (i.e., "no, I bought the last package of toilet paper"). In this case, money is really about money and the fastest way to stop fighting is to track the household expenses and how much each person contributes. If the concept of budgeting makes you want to curl into a ball just focus on the household expenses like utilities, cable, internet access, and supplies for the kitchen and bathrooms. Break it down into a monthly total, determine how much each one will contribute (determined in equal portions or by amount of use) and on what day of the month each person will cough up their share. Then schedule a monthly get-together to go over last month's expenses and contributions just to keep everyone current. Introduce a bottle of wine and your roommates will back out less often.

The Relationship Example

Money is an emotional topic. Money and relationships cut to the quick of our feelings of security and control. Mix them together, throw in a little stress and you may have an explosive combination on your hands. Since no one is totally rational about money and relationships woes tend to build on money woes it is critical to be honest with yourself about how much financial compromise you are up for. Some couples share everything from the get-go while some couples are married for 30 years and still don't know what is in each other's accounts. You may want to know what the other person has going on but are you willing to share your own secrets? Being honest about your own financial expectations will help you be reasonable about expectations for your partner.

One strategy that gives couples a lot of flexibility is the mine-ours-mine approach: each person has their own checking and savings account and one joint checking account. The joint checking account is used to pay household expenses (see above) and addresses the "roommates" part of the relationship. If there is an interest in sharing travel costs or other near-term goals, a dual savings account can be created for this purpose. I highly recommend against joint credit cards if there is any history of identity theft or money troubles in either person's past. Keep credit accounts separate until you have household finances down to a science and your bills are all paid on time to avoid any future credit score trouble.

The Business Relationship

Business relationships thrive on documented goals and procedures. If a personal relationship goes sour it's highly unlikely an old partner will sue you for their share of last week's groceries. However business relationships tend to have higher stakes and more legal paperwork to establish financial expectations. For example, if you are considering purchasing an investment property with a friend, take care to document everything spent in the process of purchasing and improving the property. These documents are also necessary to determine any tax breaks you may be eligible for. Roommate and personal relationships thrive on an emotional bond between the parties that helps them resolve technical financial matters. In a business relationship there is no emotional safety net for the relationship, and if a business partner pulls out, you could be on the hook for a lot more than a cable bill.

When you merge finances remember to: 1) track where the money is going and 2) document each person's responsibilities to making the arrangement work. Take these steps and there will be less stress and more transparency in the relationship