Finances for Blended Families

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by Advice Chaser
by Advice Chaser

When two single people get married, their finances become a bit more complicated, but that transition is a well-traveled path. If it’s a second marriage for either of you, or if either of you has kids, blending your family’s finances might be more complex. It’s important to approach these challenges wisely.

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Your Approach to Money

If you get married after years of life, children, and past relationships, you probably already have a financial philosophy and habits, even if you haven’t spelled them out in words. When forming a blended family, it’s important to discuss your attitude toward money. Are you a spender or a saver? Do you and your spouse have the same financial priorities?

Especially if you have different attitudes toward finances, you may want to keep some autonomy over your money. Some couples choose to keep completely separate accounts. Others like to have individual accounts as well as a joint account, out of which household expenses are paid. If you earn very different amounts, it’s wise to contribute to joint expenses proportionally, not equally. Otherwise there can be resentment in the lower earner, especially if the higher earner wants expensive homes, vacations, and cars the lower earner wouldn’t have bought on their own.

Consider how each of you approaches money with your own children. Will it result in a household where some kids earn double the allowance of the others or have nicer gifts? Discuss your expectations and try to get on the same page.

Get a Prenup

Prenuptial agreements are considered optional if you don’t have a lot of assets. However, for blended families they’re often essential. A prenup protects your existing family, especially your children, from unnecessary disruption. Although you surely don’t plan to get divorced, it happens. A prenup protecting your spouse is a way to show them that you love them, such that even if you aren’t together anymore, you want to make sure they are provided for.

If you marry later in life, you likely have both assets and debts. Each can be either kept separate or shared. A prenup can specify which are which. For instance, if you want to keep entire rights to your home, or you want to ensure your spouse isn’t made responsible for your debts, you can specify this in the prenup.

Especially important is any provision for the children. You may wish to preserve your biological children’s inheritance, for instance. Or you might want to keep some assets separate for your children’s sake. An experienced advisor or attorney can help you consider some of the complications in your blended family.

Discuss the What-Ifs

Planning for your ideal circumstances is easy. But what if something unexpected happens? Your planning as a couple should include plans for various situations, such as the death of one spouse, job loss, or disability.

When you get married, it’s time to update your will, or create one if you never have. Your will should include plans for your children. Will your spouse become their guardian, or is there someone else you have in mind? You should also set aside money for their care, such as a life insurance policy. Make sure your spouse also makes the same plans, and that you know what they are so you can help put their wishes into action.

If your standard of living relies on both of you working, you should consider what will happen if one of you loses their job or is unable to work. The most basic provision for almost any emergency is your savings account. Your savings should account for three to six months of expenses. It’s important that both of you contribute, according to your means.

Disability is another consideration. If one of you becomes ill, can the other take over full breadwinning responsibility? Disability insurance, both short and long term, may be a smart idea.

Meet With an Advisor Before Blending Your Family’s Finances

Any time you’re contemplating a major financial change, meeting with a financial advisor to set up a game plan will help. In a one-time visit or a series of visits, you and your spouse can lay out your financial situation and come up with systems that work for both of you. To find the right financial advisor, contact us and be matched with someone qualified and knowledgeable.

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