Merging your Mula

Sharing your finances with your partner, especially for the first time, can be stressful and scary. It’s hard to hide some of your past mistakes when you’re consolidating finances and it’s even harder to continue to hide them if you’re still indulging some poor financial decisions. If you’re serious about getting your relationship started on the right foot, here is the best advice I can give you, whether you just started dating or even if you’re 30 years married.

Create Transparency – the sooner, the better

When we got engaged over three years ago, we immediately consolidated our finances by laying out our combined net worth, every single bank account balance, 401K, credit cards, student loans, mortgages, etc. Sharing these personal financial details was the critical first step in our long-term financial dialogue, creating transparency to our current financial picture.

Since we track these balances every month, neither one of us can hide a big purchase from the other. As two people who were used to having autonomy over our finances, having someone to be accountable for was a huge change and uncomfortable for us both at first. Over time we’ve learned that by being transparent, we’ve created more trust and credibility with each other.  Although we’ve kept certain individual accounts open for various reasons, we gave each other full access.

A downside of being so transparent – it can ruin the good surprises when it comes to birthday’s, holiday’s and special occasions if you can see each other’s spend.

The upside, there are no bad surprises – in the sense that you are not caught off guard by finding a bank statement for an unknown account, money stashed aside, or transactions you didn’t authorize.  Once, I heard a woman advertising that when she’s buying something she doesn’t want her husband to know about, she writes Giant Eagle Groceries in their personal checkbook ledger. She even laughed as she described how expensive her husband thinks groceries have become. This is the kind of behavior that creates distrust in the relationship. 

[Try to] Remain judgement free

As you start to merge your finances, you’re almost certainly not going to bring equitable net worth into the relationship. Although I had a reasonable 401K started, I’ve always rented and most of my excess cash went towards lavish travel. The Hubs on the other hand had been a home-owner since his early 20’s and was smart about investing is rental properties and other assets.

While he still may have still carried a student loan balance, he brought to the table a fully paid off car and equity in the house. While I had zero student loans, I had recently financed a new car and didn’t have much of a savings. Thankfully, neither of us had credit card debt. 

I have a lifelong friend that consolidated finances and still feels overwhelmed with her husband’s substantial student loans, especially because she is totally student loan debt free thanks in part to her parent’s foresight and financial planning. The bad news is, student loan debt will not go away, not even if you file for bankruptcy.  Thankfully she’s committed & motivated to help tackle the debt as a couple.

It may seem obvious, but you cannot change the past. If you’re not willing to take steps forward, you’ll just remain stuck in a mound of debt.  If you’re caught off guard by the magnitude of your partner’s financial situation, take some time to digest and revisit when you’ve had some more time to process.  If you cannot accept their debt as if it is your own – you’re very likely to fall into that statistic of more than 1 in 3 couples that end their marriage in divorce.

Discuss your financial values and find common ground

Two years into my marriage, Mr. Mula and I have surprisingly seldom fought about money. We do, however, value money differently. It wasn’t that long ago, he talked about wanting FU Money— enough money to be able choose to stop working his executive job so he could focus on his entrepreneurial interests. Meanwhile, I have a bit different relationship with money. I like the stability of having a reliable stream of money, a predictable job, and a desire to live comfortably and some flexibility to travel.

But for both of us – the common ground is financial security. Although we take financial risks, we do so with an isolated portion of our finances. We agreed on an amount of funds to reserve in the bank as liquid cash to cover expenses and we’re motivated to pay off all our debt as soon as possible.

Mr. Mula also values his time in relation to money and is constantly upping the ante. For him, it’s a no brainer that we’ll hire someone to mow the lawn for $35 a cut. I would have no problem mowing the lawn once a week, but I appreciate the convenience of paying someone else to do it to avoid the stress and hassle.  We also know, that if we ever left our corporate jobs, this is a luxury we could easily cut.

Our relationship and our viewpoints on money are also continually evolving. We are prioritizing our financials goals in terms of our free time together and working on passions, rather than committing to drudge it out in corporate America.

Set money guidelines

I really don’t like the idea of rules, because when it comes to money circumstances and life can get the better of you. It is important to set some guidelines as a couple to ensure you’re not undermining each other and your financial goals.

Guidelines can be as simple as a dollar threshold to clear major purchases, maybe it’s anything over $25 or maybe it’s anything over $500. You can also do this in the form of setting a budget – setting the expectation on certain level of spend to categories of goods. For example, the Hubs and I set a budget for liquor purchases. We were indulging for a while in expensive wines (for me) and scotch (for him), until we realized just how much our indulgences were costing us. Ultimately, our budget equates to us buying some everyday wine and liquor and about once a month indulging in something we really love.

Other guidelines could be cutting expenses and bad behaviors all together, maybe it’s designer clothing, going out to lunch every day at work or online gambling. Discuss the options and agree on solutions but stay flexible if occasionally the other person slips along the way. Set financial guidelines, not rules.

Establish your money routines

They can be routines like setting up your payroll accounts to automatically deposit funds in your retirement account or directly into an investment account. Or they can routines in the sense of touch points you have to talk about your finances.

Mr. Mula and I have a Financial Date once a month. We have a calendar reminder on the first of every month when we review our net worth and our actual expenses for the month versus our budget. We talk about major expenses for the next month and review the budget for future months. If we off track, we talk about items we can cut. 

The Hubs also likes to see a weekly status of our actual expenses versus the budget on certain variable expenses, such as groceries, dining out, retail purchases and entertainment so we can flex and adjust earlier in the month. Honestly, this is something I haven’t been as good about sticking to a regular weekly routine, so my goal is to at least do this in the middle of every month going forward.

They say habits take time to develop, so put a calendar reminder to review and manages your finances. You might be surprised that over time it becomes something you look forward to, instead of something you dread.

Actively participate

Share in the financial responsibilities. You may not contribute the same income, but you can share in the day to day management and decisions related to your finances. You can help by paying the bills on time, keeping and updating the budget, setting up calendar reminders to talk finances, tracking your net worth, cutting non-essential costs, clipping coupons and shopping for deals.

The worst thing you can do is load the financial burden on just one person in the relationship. Finances are overwhelming, even if you have a good financial foundation.  If you’re not engaging with each other about your finances, there are risks that the expectations of your financial circumstances and the reality of the situation may diverge over time.

Even though Mr. Mula & I always tracked our net worth, we had several years where we were passive about our managing our money.  We’re now both actively engaged in a budget to help us towards a stronger financial foundation.  He pays the bills and helps key an eye out for good deals online, while I keep us organized tracking our net worth and periodic budget updates.

The only way to ensure you stay on track is to keep each other accountable for your finances. It’s not just a onetime exercise. It’s managing your money daily to make decisions that benefit the collective and not just the individual.

Questions, Comments, Thoughts?