Budgeting: How to merge your money

Tying the knot involves some tricky financial footwork, but if you know which mistakes to avoid you can focus on building a life together.



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Story originally posted on Chatelaine.

Congratulations! You’ve just walked down the aisle and/or moved in with the love of your life. Combining households and making a life together with your partner is about more than just figuring out whose stuff goes where. You’re now financially tied together, for better or for worse – you probably pay the bills jointly and, if you’re in a long-term relationship, your financial futures are also entwined. If you haven’t yet thought about the money part of your relationship, you should start now. Here are a few tips to get you on the same money track:

Track your expenses together
Before now, you’ve never had to answer to anyone about your spending – as part of a team, everything you buy has an impact on your joint finances. Spend time tracking your spending jointly so you and your partner can find out where the money goes every week. Use that to create a joint budget and, if necessary, find ways for the two of you to trim expenses and save more.

Yours, mine, ours
You’ll need to merge your money to cover joint expenses. Set up a joint chequing account to cover all your bills and expenses. Whether you pool your money together in one pot or you just put in enough to cover the bills is up to you.

Decide whether to split or pool
There are two ways to go about combining your finances. You can both pool your earnings in one pot (probably the easiest way). Or you can each maintain separate accounts but put a percentage of your earnings into a joint account to cover all of your household expenses. If you choose this route, make sure you split fairly based on income levels – it’s not fair if your partner earns twice as much as you and you still have to cover half the expenses. Rather, base your contribution on percentage of earnings – so, for example, you each put 50 percent of your paycheque into the pool and save the rest.

Retirement planning
If you and your partner have committed for the long haul, then you need to sit down with a financial planner and determine how to approach your retirement savings. There are lots of great opportunities for maximizing your tax savings through a spousal RRSP, for example. Note, for tax purposes, if you’re not married, the Canada Revenue Agency defines common-law relationships as couples who have been living together for at least 12 months.

Review your insurance coverage
From property insurance to life insurance, being in a relationship can impact your needs. At the very least, you should make sure your coverage is synched up – you don’t need to have two people holding property insurance on the same place, for example. You should also check and see what kind of life insurance coverage makes sense for you – if you’re planning to have kids and you own your house, you want to make sure that if something happens to one of you the other will be taken care of financially.

Make a will
If you are entering into a significant committed relationship, you need a will – without one, you could lose everything you worked hard to build with your partner. A will is especially important if you’re planning to have kids together.

Deal with your debt
If one or both of you is bringing debt into the relationship, you have to own it as a couple – and find ways to deal with it as a team. Take the blame off the table. Think about consolidating your debt into a lower interest payment program so you can work together to clear it faster and cheaper.

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