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.