For the past few years, most of my friends have been getting married or moving in with significant others, and oftentimes the question arises: when it is time to merge your finances, what do you do about the money you had before you knew each other?
I will admit straight away that I am not the most romantic person to ever walk the Earth, and at the moment, BF and I share a joint account for our shared expenses (living and business of our 90 acres land development) but other than this, each of us earns, saves and does whatever he wants with his money. If I die tomorrow, my money would be split between my brother and my little niece, as splitting it to my sister would result in more taxes than passing it straight to her daughter. And moving forward, I am wondering what I would want to do with the assets I have worked hard, on my own, while I was single, to build.
Going all in and putting it all into “our money” would freak me out. Not only am I fiercely independent, and see money as a way to achieve such independence, my F you money if you will, to walk away and still have a roof over my head if things get sour, but I also worry about the future. I have seen too many marriages fall apart, for as much as I want to believe in forever couples, I know it may not be a reality.
I would want things to be fair, so each partner could bring in equal or similar parts to the union. If one of you brings in £50,000 of debt while the other brings £500,000 in the form of a house and several savings accounts, depending on the terms of the marriage, in case of a break up, the savvy partner would see his or her net worth divided by two, while the other one would suddenly be sitting on a pile of cash.
And things do go bad. My sister just went through a divorce and from living in a nice 4 bed house to a 400 sqft flat she shares with her 4 year old. She sleeps on a sofa bed in the living room so the kid can have her room. While she didn’t bring a lot into the marriage, she did have a small savings account that went into house renovation and would have been more than welcome now to furnish her new place and put down a deposit.
F-you money doesn’t mean I don’t believe in love and durable relationships, on the contrary. If you have the means to walk away at any time, your staying proves your love every single day. Many low income earners are stuck in toxic relationships because they can’t afford to get out. Keeping your pre-marital savings could prevent that from happening.
I also fancy the idea that you start building a future together, from scratch, just like your relationship. It wouldn’t be that fun if you already bought a nice place and have to go back to smaller living quarters because your other half can’t afford to buy half, but it would be truly “our home”, not one living at the other’s. You could solve that by adding a small rent to the partner who doesn’t pay the mortgage, until you are comfortable enough to put both names on the deed.
One scenario I like is each partner contributing to the joint account based on his or her income. If you make twice as much as your partner, you put in £200 for every £100 they contribute. Meaning if you each have a 10% savings rate, you would be saving double the money, but the same percentage. If the other person is bad with money, you can still have your ways with your disposable income.
In France you can get married three ways. One is shared assets, all that is mine is yours from the day we get married, and split evenly if we get divorced. For me it is a no go, as I think each partner should be able to enjoy the assets he/she worked for before being in a relationship, or if in debt, for paying it off without being a drain on the other.
The second option is shared assets from the day you get married. It is quite reasonable, if you had a house before you get married it stays yours, if you buy a house while married, it belongs to both of you. I could imagine having such an arrangement, even if the other person earned less. In the case of a stay at home parent for example, I consider the SAH to be equally important to the couple’s finances as the paycheck brought by the other half. The stay at home parent brings in a ton of value by raising the kids, keeping the household budget in check, you pay lower taxes, have no work related expenses, can often ditch the second car, etc…
(On a related note, check out my post on why I think the lower earner is often better off staying at home from a strictly financial viewpoint, not if you absolutely love your work or couldn’t find happiness in being home all day).
So for me this is a sound option as you indeed become one when you get married, and success or failure should be both of yours.
The third option is to simply separate assets, and keep them separate during marriage. A couple of friends does that and it is working quite well. The woman earns about twice as much as her husband, so when they bought a house, she put 2/3 of the deposit, 2/3 of the monthly payments, and if they ever get divorced, she would get 2/3 of the proceeds of the house. Aside from that one asset in common, each contributes separately to savings accounts and retirement. While I would lean more towards the previous option, I could get on board with this one as well, although like I said above, for me what you do once you are married is the result of both people working toward a common goal. My friends chose it because the husband is not great with money and she didn’t want to get bitter every time a paycheck disappears in frivolous stuff. I have a responsible partner so that wouldn’t apply. I also think about what happens once you have kids. Do you keep paying 2/3 of the kid on one side and a third on the other side?
For me, you do it all to pass on an inheritance some day, so if it will all be for the kids anyway, why not put it in a common pot from day 1. Although once again the odds of staying married forever are getting pretty slim and the assets will probably have to be split down the road.
What do you think, would you or did you bring all your assets into your marriage?
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My husband and I kept our finances separate for the first four years or so of our marriage. Then one day we realized that life was just too complicated that way and we had a lot of accounts to keep track of, so we merged our finances at that point. We are both responsible with money and we really don’t fight about that, so it works for us. The French system sounds interesting- do you have to formally decide which asset structure you are using before you get married?
Yes yo do, when you get married at the council, they ask you what your choice is then report it to a notary to write it down. I think you can change it down the road though.
At first glance, prorating based on income seems like a good idea, but upon further reflection, it seems judgmental. Like, the person who makes more is more important.
The tough part is what to do about assets and debt coming into marriage.
After marriage, income and expenses are pretty simple: Each spouse keeps. Joint income and expenses at start of marriage go into a pot for sharing. However, from that pot an equal amount of ‘spending money’ within their budget is taken for each partner to spend as they wish, no questions asked (salons, electronics, clothes, eating out, entertainment etc.) Planned spending is also set aside for big ticket items for joint use (appliances, cars) – what is purchased is a joint negotiation/decision. All the joint money goes to expenses, retirement savings (equally, I might add), emergency fund setup. But how much goes to previous debt repayment? This is where it gets tricky. Especially if one spouse has only debt and one has assets and debt.
I don’t have the answers, but I don’t think one size fits all either. It depends a lot on the spending and savings values of each spouse. If they are aligned, then it would be easier to get aligned paying off debts and even sharing assets coming into the marriage. If they are not, then I see lots of friction and strife – but then maybe they should not be getting married.
Definitely something that needs to be discussed at length and documented. Usually marriage prep courses cover this topic. It’s important to really probe couples on this area, because when they are young and in love they are in bliss, what’s yours is mine blah blah blah. When reality hits the fan later in marriage, it can be difficult if they did not do some deep dialoging on this topic.
You can have the same values and still have one partner that has double the debt, because one went to med school and the other one to trade school. Following your idea they would have the same disposable income, meaning the med student would have the same money to put toward debt as the trade partner.
Or it could be proportional to income just for debt repayments.
Finances and relationships can be tricky, that’s for sure. We faced some obstacles before we got married. We don’t have a way to keep assets separate like in France and there was no way for my spouse to purchase a condo without me having a claim to it, should we break up. Things all worked out and we are married now, which changes yet again how the law applies to us.
So you must bring everything you have into the marriage, even inheritances for example?
Wow, Pauline. I had no idea in France you had to decide how to handle your assets before you got married. Very interesting. It may not seem ultra-romantic but I wonder if it helps avoid some future arguments by making couples think about finances and come to agreement before they say “I do”. We were married young and neither of us had any real assets or debt so for us it made sense to combine finances from the get-go. It’s definitely an important conversation for couples to have before they move in together.
For sure, after all money is one of the main reasons for fights and even divorces. Marrying young may not raise all those issues but with the age of marriage being pushed further, in your 30s it is likely that you would have something saved, or so I hope!
Once my wife and I got married it didn’t matter where the money sat it was both our money. We save it and spend it together. When we were dating well of course money was in our own accounts as we never lived together before we got married like some do. In terms of debt we both brought $0 debt to the table which worked out great. We also brought just about the same amount of savings together. It’s always a tough decision when you are talking about relationships and money and debt. Sometimes you either just accept it or you don’t. 🙂 Cheers mate
Probably bringing in a similar amount made things a no brainer. If the gap was huge I’d have my reserves.
Right now, because we are just living together, our money is separate. But we have thought about getting joint accounts once we finally tie the knot. It just seems easier giving over a portion of my income to cover the few expenses we have than going through and putting it all together and then divvying it up from there.
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We have a joint account without being married, there is no overdraft on it so no bad surprises and we each put in the same amount when the balance is low. It is easier to pay common bills.
Very interesting info about marriage in France. Maintaining a complete separation seems like it would just make things harder the longer it goes on, especially once the house and kids become a factor.
My wife and I merged together all debt and assets. We still have our own accounts, but we have access to each other’s. We both had student loans coming into marriage, but it was a great first step of marriage for us to pay mine off together (since it was lower) and then together pay hers down.
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Good thing it worked out well for you. I don’t know how I would feel about paying one’s debt while waiting for mine to be paid.
Well, to be completely honest, neither of us had any material assets so yes we brought everything into the marriage. From that point going forward I see it more as a team effort and what’s mine is my wife’s and vice versa.
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Seems much easier if you both start from 0.
We have all of our finances combined, but unlike you, we were both poor before we got married. It’s a lot easier to grow your wealth together when you were broke when you met! =)
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I can imagine that, it didn’t cross my mind while in college.
Money goals should definitely be discussed and planned for as couples prepare for marriage. But there simply is too much risk to combine finances before marriage. I wouldn’t want to be paying on someone’s debt only to have that person skip out on me once it was paid off. This sounds extreme but I’ve listened to enough personal finance podcasts to know this type of stuff happens all the time.
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I saw that happen in marriages as well but then if you didn’t know who your spouse were before getting married that is probably a bit your fault too for not talking more.
Our finances were separate until we got married. We didn’t live together before, so there wasn’t a need to pool expenses. I am the one who pays the bills, so it makes sense that all the money goes into one account and I pay the bills from there. It also prevents arguments about “my” money and “his” money. It is all our money. No one focuses on who makes more, we just pay what needs paid and both have a debit card linked to the account. We have a set budget for things so we know how much we can spend on random things and we discuss large purchases before we buy them. We trust each other and it works for us. I think it depends on each relationship, though. You have to find out what works best for you. I do think that setting a budget for each month is important though.
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And fun money for each one too. I wouldn’t like to see how much my birthday present cost when checking the joint account.
I would probably not bring all my assets into the marriage since I have too much to lose. The exception is if my future partner also has like a million dollars in assets, but that’s not likely. That’s cool you can choose how to get married in France. In Canada the only way I’ve seen people get married is the 2nd method you mentioned, unless couples get a pre-nup or something. Divorce can be be messy, that’s why I want to make sure I find someone with the same views on finances as myself 🙂 But even then, it’s no guarantee the marriage will last. Thanks for the mention 🙂
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Being on the same page financially is a must for a lasting union. I get why you wouldn’t want to bring so much straight away, maybe you’ll change once you have kids?
I would probably roll with combining assets after marriage. I came in the marriage with debt, but I also had assets, so I would want to keep those. I like the way France gives options.
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I think I prefer option 2 or 3! I’ve built up a pretty decent net worth for a 25-year-old (a bit over $350k) including about 50% equity in a condo and really wouldn’t want to lose all of that in the case of divorce. That said though, I do believe mostly that in marriage, finances including cash flow/investments/savings/income should all be considered joint, just leaving out the pre-marriage stuff. This is actually the scariest part about marriage to me and why I’ve been trying to put it off for so long! I am so scared of the idea of marrying someone and then them walking off with half of my assets from before we got married! A pre-nup may help, but it would need to be able to hold up in multiple states/countries since who knows where we would move later…
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