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Q: I live with my boyfriend, and we're considering combining our finances. Is that a good idea?
A: I know it's annoying for an advice columnist to say, "it depends," but, it depends. If you're 23 and you've been dating for three months, I'd put on my mom hat and say that you should wait until you and your partner have been together longer before you combine finances. If you're 28 and you've been together three years, I'd be less inclined to run over and grab the shared debit card out of your hand.
Combining finances involves setting up joint checking and savings accounts, applying for a shared credit card, and potentially helping each other pay off student loan or existing credit card debt.
But deciding to merge your money isn't just moving cash around. It also means choosing to trust your partner completely with your finances. You need to know that there won't be any impulse motorcycle purchases or secret wine club memberships. You must have a clear understanding of each other's current financial circumstances, future goals and spending habits, which doesn't happen overnight.
Let's say you're in your late 20s, you live with your partner and you're planning for a future together (basically, you're saving engagement rings to Pinterest). Living together before marriage is more common than ever. Among adults ages 25 to 34, 14.9 percent of men and 14.3 percent of women lived with an unmarried partner in 2015, according to the U.S. Census Bureau. Those numbers have nearly doubled since 2000 and nearly tripled since 1990.
After moving in, many couples consider combining finances, but it's not strictly necessary. If you want to merge your money, you should have an open, honest and low-pressure money discussion, in which you lay out all your current and past financial information. Share your income — how much you earn annually and how much hits your bank account each pay period — and your debt, credit scores, savings, investments and financial goals. Set a specific day and time to have this chat, and pick a spot where you feel relaxed and focused.
Talking about money is hard. You or your partner might feel embarrassed or ashamed about your financial history. But you can treat this initial discussion as an opportunity to make a clean start and to prevent money from being a big, scary monster in your relationship. You'll be doing each other a favor: In a 2009 study published in the journal Family Relations, researchers found that money wasn't the cause of the most fights among married couples — children and chores topped the list — but arguments about money matters were the most pervasive and problematic over time.
So when you've checked off the boxes and you're ready to merge finances, how do you do it? You can keep your accounts separate, except for a shared savings account for a down payment on a house or to pay for the wedding to which each partner contributes monthly. Or you can open a joint checking account from which you pay rent and household bills and maintain your own savings.
Rachel Rabinovitch, a certified financial planner at the Brookline, Massachusetts-based Society of Grownups, which offers financial advice to 20- and 30-somethings, says she's also seen couples assign particular savings goals to one person (you save for the house, your partner saves for the wedding), which helps each feel ownership. Helping a partner pay down debt if you're not married is risky, because you won't have many options to recoup that money if you break up.
When you're married, deciding on a tactic might be easier. Some financial advisers recommend the whole-hog approach of joining all your finances. It's easier to track fewer accounts, and sharing is in line with the nature of a lifelong partnership.
"From my perspective, when you're married and you're making a commitment to the person, I think it's important to be transparent in everything. And that includes the finances," says Chuck Donalies, a certified financial planner at Donalies Financial Planning in Washington, D.C. You also have legal rights if the relationship ends.
Joining finances with a partner is a big move that requires soul-searching and some difficult money discussions. When you mix love and money, the most crucial ingredient is trust.
This column was provided to The Associated Press by the personal finance website NerdWallet.
Brianna McGurran is a staff writer at NerdWallet. Email: firstname.lastname@example.org. Twitter: @briannamcscribe.
NerdWallet: Living Together? Ask Your Partner These 5 Credit Questions — http://nerd.me/1-nerdwallet-finance
Family Relations: For Richer, for Poorer: Money as a Topic of Marital Conflict in the Home — http://onlinelibrary.wiley.com/doi/10.1111/j.1741-3729.2008.00537.x/full