My husband and I had a “big pot” financial management style when I was married. We tied the knot young, when neither of us had anything, and it was easy to combine finances. Later, I added a retirement account and a taxable investment account, as well as a savings account and a Health Savings Account (HSA).
I tried to get him interested in our shared finances and to share some of these accounts, but he never wanted to be bothered. He eventually got a retirement account through his work and set up his own HSA. This turned out to be fortunate since we eventually went our separate ways. We still had to manage the “big pot,” but it was remarkably easy to divvy everything up because our other finances grew separately.
Turns out the fact that we didn’t share everything was a good thing — as was the fact that my ex and I didn’t try to ruin each other during the divorce. Mikel Van Cleve, CFP and director of personal finance advice at USAA, points out that some things are better separate, such as:
Watch Out for Taking on Debt
My husband and I both had student loan debt and credit card debt when we married. We pretty much tackled it together, using the big pot. However, for those who don’t get married before finishing college, there is a higher probability that someone will have more debt than the other.
Van Cleve warns against cosigning on debt with your spouse. He points out that, in most states, your credit is separate from your partner’s. Cosigning “impacts your debt-to-income ratio for future loans, and if payments aren’t made by the borrower, your credit score will suffer, too.” Not only that, warns Van Cleve, but things can change over time and you don’t want to be on the hook for your partner’s debt after the relationship is over.
In some cases, it makes sense to take on joint debt. My ex and I bought a house together (we sold it and moved before the divorce, so it wasn’t an issue) and we still have a joint car loan together. However, I made myself primary on the loan since I have the car, and I make the payments. Things get ugly if you aren’t reasonable, though, since an ex can trash your credit without too much trouble if you share the responsibility for debt.
Don’t Share All Your Financial Information
True story: I could destroy my ex if I wanted to (I don’t). Because he didn’t want to bother with the finances, I know all of the accounts in his name, and where they are located. He even gave me his new bank account information for some reason. “Sharing your financial passwords and PINs could be an opening for them to scam you if the relationship goes awry,” Van Cleve warns. While it’s tempting to share your financial information with your loved one, he says not to do so pre-marriage.
While you do need to share some things, such as a joint bank account, be careful. Even after you marry, it can make sense to keep some of your assets separate and secure — just in case. While my ex and I parted amicably (if painfully for me), things could have been much different if one of us were vindictive and bent on cleaning out the joint account to “get” the other person.
Your relationship is important, but so is your financial well being. Be careful about how you merge finances with your significant other.