Money management in a new blended family: a step-by-step plan

Money matters can be tricky in any relationship. But that’s likely even more true of a blended family. In addition to making two family cultures mesh with each other, each partner contributes their own sources of cash. These sources may be large or small, with or without debts, with or without their own roof, and so on. In addition, each partner brings their whole financial history through the front door with them. Creating a lean, mean financial machine with different pieces from different boxes can be a challenge. “Starting up” a new household is always difficult, and this applies equally to the financial housekeeping side of things.

1. It all starts with a good conversation

People grow up with different attitudes to money. This is influenced by their parents and the lessons they learned later in life. Habits and experiences from previous relationships also play a role in how a person deals with money. The chances are slim that you have exactly the same vision and opinions about financial matters. A first step is to accept that there are differences – large and small – and to understand where those differences stem from. One person saves every penny and rarely spends just for fun, while the other spends money as if there were no tomorrow. Some people never tip in a restaurant, while others always do. One checks their bank balance three times a day, the other three times a year. One person keeps going to see their lawyer to make sure "everything" is in order, while the other has never spoken to one before. Personal experiences, values and beliefs tend to lie behind these differences.Take the time to look into your partner’s baggage and open up your own. If you understand your partner’s history, you may be able to better understand their expectations and dynamics around money matters. The same applies in reverse: if you are sufficiently open, your partner will be able to grasp your approach to money much better. Did your parents often argue about money? Were they struggling to make ends meet? Did your previous relationship end because of a fight over money? Was there a battle royal over who kept what? Did your ex-partner run up sky-high debts? ... The more transparent you and your partner are about those personal experiences (don't forget the positive ones!), the more space you will have to manage your differences and the easier it is to meet each other part-way. During these conversations, don't just focus on your differences. Also look for similarities that could help you integrate your values into joint financial goals.

2. Prepare an overview of your financial situation

Putting the financial puzzle pieces on the table can be a sensitive issue, especially if (one of) the partners has been badly burned by financial problems in previous relationships. Putting all your cards on the table may be a big step (too big, even). If this is the case, try to take a step-by-step approach and give each other time to build up trust and confidence. Don't drill down into details straight away. Instead, discuss your financial situation in general terms. For example, are there debts or major differences in income? Does one of you have to make steep alimony payments to an ex-partner? The goal is ultimately to gain an overview of what you have, what may be needed, what your individual and shared goals are, and where you want to set the boundaries in terms of responsibilities.

3. How will you organise your money matters?

The way you used to approach your monetary affairs and share your responsibilities in a previous relationship may have worked well back then. However, doing the same in a new relationship is no guarantee of success again. Every relationship is unique, which is why it is important to find an approach together that suits your circumstances and characters. Some of the things you need to put on the table:

• Are you opting for a separate account, a joint account or a combination of the two? [1]
• Will you each contribute the same amount to your joint expenses or will it be proportionate to your income?[2]
• What about any debts either of you may have?
• What about alimony?
• How will you cover unexpected expenses?
• How will you save for shared future goals, such as a holiday?
• What about dividing up financial responsibilities? [3] Will one person take the lead, will you work together to pay bills and prepare a budget, will you regularly swap roles, etc.?
• What happens to the joint finances if the relationship ends? How will you divide what you own?
• What about insurance?
• How will you handle gifts from family and friends? Are they treated as shared or individual?
• And so on...

It is also important to agree on how expenses for each other’s children and other family members are handled. In most families, the parents often arrive at a share that is not identical for all the children. Nor is that necessary, as there may be many reasons why there are differences: age, needs, hobbies, education costs, medical costs, etc. You should also identify these differences and reach agreements that you consider fair. Depending on the relationship with the ex-partner(s), it may also be an idea to save or invest for any children you had together with them. Read some tips and insights to reduce conflict about money in a relationship

4. Asset planning and the broader picture

Married couples with children from the same parents: that was the "norm" a long time ago. Today, there are other forms of cohabitation. There are fewer marriages, often with no children involved or with children with different partners, a new partner may enter the picture, and so on. Legislators have been trying to keep up with these social trends, but there are still major differences in how certain forms of cohabitation are treated in terms of inheritance. Fortunately, legislators also offer many options to adjust to your situation, so you can protect your partner or your children as far as possible, or include your stepchildren in your inheritance planning. It is important to remember that you need to take these steps yourself. If you do not define anything different, your estate will follow the rules of the standard statutory inheritance, which may not be ideal for your situation. Every family and asset is unique. This is why it is a good idea to ask a professional to guide you through a tailor-made plan.