- July 25, 2019
It’s summertime which means that wedding bells are ringing. Blushing brides around the world are preparing for their ‘big day’, imagining themselves gracefully strutting down flower-petaled aisles, where their handsome grooms wait to greet them at the other end.
For some couples though, this is not their first ‘rodeo’. In the United States, 50% of families are remarried or re-coupled and 65% of these unions involve children from previous relationships (The Stepfamily Foundation). Blended families can be stressful as all parties try to adjust. Roles need to be ironed out and agreed upon, not to mention the various physical, emotional and psychological changes that need to be accounted for.
Finances are also a major issue for blended families, but it is far too often overlooked. Not only are two separate families combining into one, but each family’s financial habits as well – whether they be good or bad.
Here are some tips to help blended families avoid serious financial issues that can tear the new-union apart:
Agree on a budget and stick to it!
Before you walk down the aisle, take some time to discuss your new family’s financial priorities. As a couple, determine what percentage of each of your income that will go toward the household each month, with household expenses (mortgage, utilities, medical and educational costs, etc.) as the main priority. Take into account each person’s salary and ensure allocations are fair for both parties. Ensure child support (for children not living with you) and/or alimony payments are also accounted for, as they can be a major source of stress if they are not discussed. From the allocated percentage, also ensure that a portion is set aside for savings.
Once you’ve agreed on your collective budget, commit to sticking to it. Decide how you will keep each other accountable, i.e. no withdrawals outside of agreed budget without the expressed consent of both parties, etc.
Multiple Bank Accounts
Together, decide on an interest-bearing savings account that is a joint account you both have access to for household expenses. From this account, you will pay bills, cover vacation costs, etc. In addition to this joint household account, you both should maintain your separate accounts. Where possible, set up automatic salary deductions so that a percentage of each of your incomes is sent to each of these accounts regularly. While some people believe separate bank accounts is an exit plan should things ‘go south’, it is a great way for individuals to maintain a sense of independence, which can be good for the marriage.
Communicate, Communicate, Communicate!
Forbes reports different money management habits are a major cause of divorce. Before you exchange vows, get to know your future partner’s money habits. This can’t be done in one conversation but requires ongoing communication of spending desires, habits, and money availability. This can prevent arguments about money and incurring financial losses. Be sure to communicate all past financial failures, problems and current amounts of debt with your future spouse.
Once you are confident you both know all the facts, decide on your financial goals and how your collective finances will be managed. This is the perfect time to decide on an investment plan, particularly for long-term savings goals like educational expenses or a retirement plan.
Live Within Your Means
You may be trading your single-parent income for a dual family income, but that does not mean you should suddenly become careless about your spending habits. A larger family usually requires a bigger expenditure. Be careful about incurring debt and as much as possible, stick to your savings and investment goals.
Establish a Trust & Estate Plan
We’ve all heard the story about Cinderella who was banished to the basement and cut-off from her father’s fortune by her wicked step-mother. While your future spouse may have the very best intentions toward your children from a previous relationship, estate planning for blended families may still be a ‘touchy’ area. This is especially true when there are grown children from one marriage and young children from the new one. Before you say, “I do”, talk to a Trust & Estate expert who can help you decide on a plan that protects all parties.
The most important financial advice for blended families is there is no one-size-fits-all approach. You and your future family have to decide on what works best for you. However, before the nuptials are shared, it’s important that you, your new spouse and all the children involved are on the same page for the best possible scenario.