Yours, Mine and Ours: A Checklist for Blended Family Finances

When combining finances as a new family, there’s lots to consider. To make the best choices, here are six key areas to focus on.

Five set of feet are seen, belonging to a family lying on the beach.
(Image credit: Getty Images)

Family finances can prove tricky under any circumstances, but that’s even more so with blended families, where two sets of often well-established financial histories and philosophies try to merge into one.

At Semmax Financial Group, we’ve seen a number of blended families these days where people have remarried, either after a divorce or the death of a spouse. Sometimes it’s older couples already in retirement. In other cases, it’s a younger couple still trying to raise children. But regardless of the specifics of any individual situation, when families blend, so do their finances, and that’s when things can get problematic if careful planning and communication don’t happen.

I know. I have a blended family myself, and one of the first questions my wife (then my girlfriend) asked me was about my credit rating. It was a great question because, if you plan to buy a house together, buy a car together or handle a variety of issues involving money, both of your credit ratings will come into play.

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None of this is to say you should let finances become the final factor in deciding whether you take that relationship further. But you do want to make sure you have a good handle on the myriad financial issues that can come up.

Beyond credit ratings, here’s a checklist of a few things to consider:

Money habits

People grow up with different thoughts about money, influenced by their parents or by the circumstances of their formative years. Some people are exceptionally frugal, saving every penny and seldom, if ever, splurging on something just for fun. Others spend with abandon, unconcerned about the unexpected expenses life can throw at them at any moment. Many are somewhere in between these extremes.

If you are entering a serious relationship, you should talk with your new partner about how each of you approaches spending money.

Financial accounts and bills

Once you learn each other’s financial philosophy, you will have decisions to make. Should you blend your financial accounts or keep them separate?

If the two of you are closely aligned with your finances and how you approach spending, you may decide to just combine everything. If you are older, have adult children from prior relationships and are more financially established, you may decide to keep things separate. For many, a hybrid approach may be best — keep some things separate, but have common savings, investments and household accounts to achieve your blended goals.

Family

When there are children from a prior marriage — especially young children — additional financial situations come into play. Does one person owe or receive child support? How does that fit into the overall budget? What’s the status of college funding for the children, and are there other obligations related to them? All of these questions should be addressed and hashed out.

Also, beyond the financial issues, remember that it takes time, patience and a concerted effort by everyone to successfully blend a happy family. Understand that it may take longer for some children than others to accept the “new” addition to the team.

Real estate

Where will you live, and what will you do about any houses you already own? The option you choose could come down to a combination of financial prudence and personal desire. You could live in one house and sell or rent the other. Or you could sell both houses and buy a new one, giving your blended family a fresh start.

As you make this decision, you should consider such factors as how much of a mortgage is owed on each house, how much are the property taxes, and does one house meet the blended family’s needs more than the other.

It may be prudent to consider a prenuptial agreement, especially if significant assets are involved or if the two of you have large differences in your overall finances. Also, as your family blends, make sure your beneficiaries are up to date, whether that’s for a will, a life insurance policy or retirement accounts.

In addition, you will want to update medical directives and durable power of attorney. It’s best to consult with an attorney when working on these issues.

Goals

It’s important to have common goals for the family and the finances and to communicate those goals. A good visual way to do that — and a good family project — is to create a “vision board” with everyone involved participating so that all points of view are heard.

Sure, there’s plenty to think about here, but a financial professional should be able to provide guidance on what to consider and the pros and cons of each option that presents itself. The final decisions, though, will be up to you and your significant other.

Above all else, it’s important to understand the value (not always financial) that each person brings to the relationship and how you can work as a team to accomplish your dreams.

Ronnie Blair contributed to this article.

The information contained herein is for educational purposes only. It is not intended to provide, and should not be relied on for, any tax, legal, or investment advice. You are advised to seek the advice of a qualified professional prior to making any decision based on any specific information contained herein.

The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Michael Sellers, CFP®
Financial Adviser, Semmax Financial Group

Michael Sellers is a financial adviser with Semmax Financial Group (opens in new tab) in Winston-Salem, N.C. He has a wide breadth of experience in financial services and earned his CERTIFIED FINANCIAL PLANNER™ (CFP®) professional designation while working at Vanguard in 2017. Sellers has a Bachelor of Arts in economics from Wake Forest University.