Remarrying or living with a new partner or spouse often involves adjusting to a different financial relationship. Accommodating changed money roles and personalities may require breaking old patterns and adopting new ones.
There are typical issues that arise with any newly married couple such as when to spend versus save, how much debt is too much, which investment choices work, and whether to combine personal daily finances.
Second marriages or cohabitations inherently tend to come with more complexities: ex-spouses, stepchildren, and financial complications. Are either of you paying maitenance towards the child/children, paying spousal support or installments in a property buy-out to an ex? Have you considered how your pensions will be impacted?
The experience of losing a partner – to divorce or death – also likely influences your or your new spouse’s attitudes towards things like prenuptial agreements and life insurance. If there are children from previous relationships, more challenges emerge : additional expenses for one or both spouses, child support payments, and the handling of future costs such as private lessons and university tuition.
These issues can all significantly affect your current relationship.
Money is already an emotionally charged issue that couples fight about, and with the more challenging financial picture that often comes with second marriages, it makes these arguments even more likely. It is important that you openly talk about how you will sort out the household finances. Ideas about how to pay the bills and manage the money might differ.
So how can you reduce the chances of financial conflicts in your second marriage or cohabitation?
Share all your financial information with each other. Be specific and thorough. If your divorce decree stipulates that support cheques from your former husband will stop when you remarry, tell your new partner. Discuss what you spend on your kids each month – both formal child support and the informal amount you spend on gifts, phone calls, piano lessons or whatever.
Do not skip or gloss over subjects that make you squirm. Disclosing your debts to each other before getting married is also important. These will affect your monthly cash flow as a new couple and may provide important information about what each party considers acceptable purchases to borrow for or how each party has handled credit in the past.
Once you have talked about facts, it’s easier to share feelings about money-related issues and figure out how you are going to handle finances as a family. Make sure you set ground rules early so that you can do things consistently. First is the matter of who pays for what and out of which account – adopting any one of the following:
o One-pot system involves having all the family’s accounts — cheques, savings, investments, everything — in both names.
o Two-pot system divides accounts into “mine” and “yours” — and rarely comes out evenly. This option works for those who are adamant about handling their own finances and who may be happier not having to justify their decisions about individual expenditures. Couples who opt for this tend to be more affluent or have strong needs for personal autonomy but watch for problems when there’s an inequality in income.
o Three-pot system involves a “my” account, a “your” account, and an “our” account. It can work in one of the following two ways:
1. You pool all resources first for joint expenses, such as housing, food, household and car expenses, then withdraw money for individual accounts.
2. You each deposit pay cheques into the individual accounts, then pay a percentage into the joint account.
It is important that you set up joint priorities. The older you are, the more engrained your spending and savings habits may be. Still, it is important to determine how you can work together with your new husband or partner as a financial team. As you move forward, be sure that you both agree on any investment, insurance, or estate planning decision you make.
It is important that you both stay informed about the overall financial health.
o Failing to update beneficiaries: Legal issues regarding finances can get more complicated when you remarry. To protect assets for your children from a prior marriage, it is important to update your will. If your new spouse inherits your entire estate, it could affect your children’s inheritance.
o Concealing Income and Benefits: Concealing anything in a marriage can lead to distrust and resentment. This is particularly true when it comes to money matters. Negative experiences in a first marriage could lead to hesitancy to discuss finances openly in a second marriage, but that would be a mistake.
o Overlooking Existing Obligations: Former spouses and children from your prior marriage often have financial demands that new spouses need to know about. Child support and spousal support payments to your ex-spouse can also be a drain on current resources. Any financial arrangements tied to your divorce agreement should be discussed with your new partner.