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Family finances can be complicated under any circumstance, but this is even more true in blended families, where two sets of well-established money histories and philosophies attempt to merge into one.
At Groupe Financier Semmax, we have observed some blended families in which other people have remarried, either after a divorce or after the death of their spouse. Sometimes these are older couples who have already retired. In other cases, it is a younger couple still looking to raise children. But regardless of the specifics of each individual situation, when families blend, so do their finances, and that’s where things can get problematic if careful planning and communication is rarely put in place.
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I know. I have a blended family myself, and one of the first questions my wife (then my girlfriend) asked me was about my credit rating. It was a great question because, if you plan to buy a house together, buy a car together or handle a variety of issues involving money, both of your credit ratings will come into play.
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None of this is to say that you deserve to let finances come last when deciding whether to take these dates further. But you need to make sure you are aware of the many monetary problems that can arise.
Beyond credit ratings, here’s a checklist of a few things to consider:
People grow up with different thoughts about money, influenced by their parents or by the circumstances of their formative years. Some people are exceptionally frugal, saving every penny and seldom, if ever, splurging on something just for fun. Others spend with abandon, unconcerned about the unexpected expenses life can throw at them at any moment. Many are somewhere in between these extremes.
If you are entering a serious relationship, you should talk with your new partner about how each of you approaches spending money.
Once you know the person’s monetary philosophy, you will have to make decisions. Should you combine your money accounts or keep them separate?
If you’re very concerned about your finances and how you handle your expenses, you may want to combine it all. If you’re older, have adult children from past relationships, and are more financially established, you may need to keep things separate. For many, a hybrid strategy might be the most productive solution: keeping a few things separate, but having joint savings, investments, and family accounts to achieve their mixed goals.
When there are young people from a previous marriage, especially young people, more monetary conditions come into play. Does a user owe or get child support? How does this fit into the overall budget? What is the state of school investment for young people? Are there other similar obligations? All of those questions want to be addressed and debated.
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Furthermore, beyond monetary issues, do not take into account that it takes time, patience and a concerted effort from everyone to be successful in starting a satisfied family. Understand that it may take some young people longer than others to settle. with the “new” addition to the team.
Where will you live, and what will you do about any houses you already own? The option you choose could come down to a combination of financial prudence and personal desire. You could live in one house and sell or rent the other. Or you could sell both houses and buy a new one, giving your blended family a fresh start.
As you make this decision, you should consider such factors as how much of a mortgage is owed on each house, how much are the property taxes, and does one house meet the blended family’s needs more than the other.
It would possibly be prudent to reach a prenuptial agreement, especially if significant assets are involved or if you have large differences in your overall finances. Additionally, as your circle of family grows, make sure your beneficiaries are up to date, whether it’s a will, life insurance policy, or retirement accounts.
In addition, you will want to update medical directives and durable power of attorney. It’s best to consult with an attorney when working on these issues.
It’s important to have common goals for the family and the finances and to communicate those goals. A good visual way to do that — and a good family project — is to create a “vision board” with everyone involved participating so that all points of view are heard.
Of course, there’s a lot to think about here, but a monetary professional deserves to be able to provide recommendations on what to do, as well as the pros and cons of each option that comes up. However, the final decisions will be up to you and your partner.
Above all, it is important to understand the (non-financial) cost that each user brings to dating and how they can work as a team to achieve their dreams.
Ronnie Blair contributed to this report.
The data contained in this document is intended for educational purposes only. They are not intended to provide or be used for tax, legal or investment advice. You are requested to seek the recommendation of a qualified professional before making any informed decisions. on the express data contained herein.
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This article is written and presents the perspectives of our contributing advisor, not Kiplinger’s editorial staff. You can check the advisors’ records with the SEC or FINRA.
Michael Sellers is a financial adviser with Semmax Financial Group in Winston-Salem, N.C. He has a wide breadth of experience in financial services and earned his CERTIFIED FINANCIAL PLANNER™ (CFP®) professional designation while working at Vanguard in 2017. Sellers has a Bachelor of Arts in economics from Wake Forest University.