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Ask the Expert: What's the best way to merge your finances with your partner?

Happy Latin American couple at home paying bills online on their laptop and smiling - financial technology concepts
If you're in a committed, long-term relationship and considering this next step, experts suggest adhering to specific guiding principles to foster a healthy and happy partnership. (Getty Images) (Hispanolistic via Getty Images)

Money can make or break a relationship.

At least that’s the view of three-quarters of Canadians surveyed by Coast Capital earlier this year, underscoring the need for a thoughtful approach to merging finances.

If you're in a committed, long-term relationship and considering this next step, experts suggest adhering to specific guiding principles to foster a healthy and happy partnership.

Determine your own values and needs

There isn’t a one-size-fits-all approach to merging finances because each individual will have a different idea of how money should work, often deeply rooted in their upbringing, says Natasha Knox, founder and financial planner at Alaphia Financial Wellness.

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“Some people are happy with interdependence, but some of them see it as dependence,” Knox said in an interview with Yahoo Finance Canada. “Some people are very comfortable with a high degree of transparency, other people value privacy.”

Understanding these differences will help couples navigate financial discussions more empathetically and constructively. So, before they “even think about merging finances,” Knox says people should really think about their own dominant values and needs.

Set the ground rules early

One of the keys to effective financial collaboration is proactivity, says Jason Heath, managing director and financial planner at Objective Financial Partners.

“The earlier you set the ground rules the better,” Heath told Yahoo Finance Canada.

For instance, couples opting for joint accounts solely for shared expenses must decide whether contributions will be equal or based on a percentage of their income.

Knox suggests delving into additional topics such as how an individual’s debt is handled, and what happens if one partner loses their job.

Recognizing the potential impact of past money traumas, Heath stresses the importance of approaching these conversations with an open mind and refraining from taking anything personally. Otherwise, it may spark conflict or cause a partner to shut down.

“And if you don’t talk about these things ... it can just fester and cause issues later on,” he said.

Look for ways to maximize your finances

Even if couples “don’t fully co-mingle,” Heath advises them to explore opportunities to maximize their finances within their established parameters.

“Generally speaking, there can be some real advantages for a couple to look at their finances as a whole rather than separately,” he said.

If one partner is in a higher tax bracket, for example, contributing to their Registered Retirement Savings Plan (RRSP) can provide more tax relief for the couple.

Heath referenced another scenario where one partner has debt and the other has money in a savings account. In such cases, he says it could be beneficial to use some of the savings to pay down the debt, as the returns on the savings are unlikely to outpace the interest payments.

“If you look at things in a silo, sometimes you leave money on the table,” he said.

Consider family law implications

Both Heath and Knox advise couples to be mindful of family law in their home province.

In B.C., for example, common-law couples who live together for two years are treated the same as legally married couples, meaning that family property and debt incurred during the relationship are generally divided equally in the event of a separation.

“In other provinces, the person who borrowed the money is the person who’s responsible for the money,” Knox said. “I would just say, read the family law act in your province, understand how it applies to you, and arrange your finances accordingly.”

Commit to transparency

No matter how you decide to manage your finances, Knox says it’s essential for committed couples to have some mechanism for transparency – even if it’s a “good old spreadsheet.”

Finances don’t necessarily need to be “structurally shared,” she says. Couples can adopt different methods to suit their preferences, and she’s open to all of them.

“But there does need to be some way of visualizing the family so they can actually see where things are at,” Knox said. “Because at the end of the day, you’re in it together.”

Three ways to manage your money as a couple

1. Joint account

Consolidating funds into a single joint account simplifies tracking and emphasizes the collective nature of a partnership, Knox explains.

“It’s not even a question,” she said. “There’s no ‘mine.’ It’s just ‘ours.’”

This model can be helpful for households with asymmetry in their incomes, Knox adds, but may not suit those who value fairness and could lead to control issues in certain cases.

2. Joint account for shared expenses, individual accounts for personal use

This popular hybrid approach allows couples to combine their resources while retaining some autonomy. While “it mostly works,” Knox cautions that it can occasionally mask overspending.

“The spouse comes to the table with their amount ... but maybe they’re not saving,” she said. “Or maybe they’re accruing debt quietly that they aren’t talking to their partner about.”

3. Separate accounts

Typically, in this scenario, bills are divvied up between the two partners.

“Maybe one covers the mortgage, the other one covers the insurance, the wifi, etc, and it kind of evens out,” Knox explained.

Doing this in a healthy way requires a high degree of trust and communication, she adds.

Farhan Devji is a freelance journalist and published author based in Vancouver. You can follow him on Twitter @farhandevji.