Second marriages can bring about a whole new set of financial challenges, and one of the most crucial is figuring out how to split finances in a blended family. If both the spouses come from different income brackets, it is highly probable that they are used to handling money in different ways especially when it comes to their children.
Even if the merging families are from the same background both the parents may have different philosophies regarding allowances, chores, and saving strategy. Furthermore, as a single parent, you may have gotten used to making financial decisions without consulting anyone.
Plus there is a chance that one or both the parties may bring financial obligations and debts with them.
1. Have financial discussions before getting married
It is best for couples to talk about finances before getting married.
You can engage the services of a financial planner to map out how obligations and debts incurred with a previous spouse will be handled.
Besides, discuss how new spouses and children will be protected financially.
Thus when you are about to engage in a blended family arrangement communicating a financial plan with your spouse helps to ensure that you both are on the same page and are sure to spend a successful life together.
2. Plan a budget and strictly follow it
Prioritize your expenses collectively.
Determine the things that are important and the percentage of each individual’s income that will go towards the household expenses. Make sure that you keep aside a fixed amount for savings before incurring any expenses.
Your priorities will most likely be:
- Educational costs
- Auto insurance and maintenance
- Household expenses such as groceries and utilities
- Medical bills
Allocate these expenses fairly by taking each person’s salary into account. Make sure that you decide on the allowance for your children or how will the college-going children spend the money given to them.
Another important consideration that should not be overlooked is if there is any child support to be paid or whether any alimony payments are ongoing. These issues can cause stress at home if they are not discussed freely.
3. Every couple should have their separate bank accounts
As a couple, you should have a joint account so that both of you have access to household expenses, vacations, etc. In addition, both of you should maintain separate accounts also.
These accounts should have a certain percentage of your income as savings or child support paid by the previous spouse to keep the amount separate.
4. Have family meetings
Merging of two families means a change for everyone. It also means that financial rules are going to change too. Furthermore, as the kids get older family finances and expenses will need to be updated.
You can have family meetings where you can explain the situation to the kids and keep things informal so that kids look forward to such meetings.
5. Keep a tight check on the expenses
Although in a blended family you will be trading your single-parent income status in for a dual family income you cannot live above your means. Make sure that you do not buy anything that you cannot afford.
It can be very tempting to overspend or take on new debt after moving into a higher income group but it vital to remember that blended families usually require larger expenditure.
6. Decide your budget for special events beforehand
Decide on a budget for holidays or birthdays beforehand as everyone believes their holiday traditions are the best. Set a limit for presents on birthdays and Christmas to make sure that you keep in your budget.
7. Find out about the financial habits of both the parties
Statistics show that different habits in money management and financial difficulties are a major cause of divorce. Therefore, it is important to discuss money styles before marriage.
Communicating about spending habits, desires, and money availability before exchanging vows can prevent couples from incurring financial losses and having arguments about money.
Share with each other past financial problems, failures, current amounts of debt, and credit score.
Discuss who will manage or control bank accounts. It is also important to decide on future plans for large expenses such as buying a house, educational expenses, and saving for retirement.
When two families merge into one, there is more to manage and organize than just the wedding and living arrangements. There is a possibility that both the partners have their own financial obligations and may need to split mutual expenses.
A realistic, well-balanced budget can help reduce money-related stress and make it easier to manage finances.
By communicating the money rules with your spouse and kids, you will have a consistent set of principles effectively outlining how the money should be spent.