Key money questions to ask yourself when you are blending families.
When merging two families into one, there are always plenty of things to consider to ensure that everything goes smoothly. Like a lot of these things, there may be no single ‘right’ answer to the question of how to manage your finances when blending families. Different people will have their situations, needs, and concerns. The important thing is to figure out what’s going to work for you.
Where is square one?
Pretty obviously, the main thing is to keep everyone on the same page. Talking things through openly and honestly before making any decisions is vital to avoid issues down the line.
It’s also essential to both be candid about your finances – income, expected spending, investments, debts – as well as what your financial priorities are. Knowing what you’re working with and what each of you feels you need to consider allows you to make informed joint decisions.
Who else is in the picture?
Outside of your ‘new’ blended family, there may still be the other parents to consider, as well as grandparents and other relatives. Considering how they will affect your decisions before making your mind up over how you plan to manage your finances together can save a lot of hassle.
Altogether, or separate?
The question of whether to pool resources or each be responsible for ‘your’ half of the kids is one of the first things to solve. Simply pooling everything and working from a single joint set of finances may be the easiest solution for some people. It can also avoid the issue of having two halves of the family, potentially operating on very different budgets.
For others, though, it may be more appealing to each keep a separate ‘childcare’ account for dealing with your kid(s), with another for ‘family-wide’ spending. Reasons for this vary, but commonly include concerns from a previous partner regarding where their childcare contribution is going or merging existing accounts and savings being complicated and overall detrimental.
Straight down the middle?
When merging finances, the fairest approach to any pooled resource can appear to be an equal contribution system. You both put in a set amount per paycheck; fair’s fair. However, if you have noticeably different salaries, one of you can end up getting the raw end of the deal – so think about whether you might in the long term have fewer money-related misgivings if you go for a proportion set contribution instead.
How will this affect our tax?
As with all financial decisions, make sure to look at how it’s’ going to affect your tax. Depending on your situation, you may be better off filing tax returns separately or jointly. You’ll also need to figure out whether you can file all, some or none of the children as dependents.
What about inheritance?
It may not be what you want to think about when planning your new life together as one family, but it’s worth putting some thought into what happens in the long run. Making wills and other plans to ensure that it’s crystal clear how you want the estate divided up and what happens if one of you outlives the other can prevent arguments later on and leave you reassured you’ve made the best plans you can for your loved ones.