By Geoff Williams
Combining finances is often the easy part of blending a family. Just ask Harley Turner, an aspiring author, seasonal tax preparer and stay-at-home mom in Beloit, Wisconsin. She says that in the early days of dating her husband, they only saw each other on weekends, when her other kids were with their fathers, "because I didn't want the kids to meet him right away."
She has been married over a year, and the most challenging part of being a blended family is still the family dynamics. "My stepdaughter constantly fights with my son, who is just six months older than her, and she definitely dislikes my youngest daughter because she is no longer the baby in the family," Turner says.
She adds that the father of her older two children isn't around "and my husband is trying to find a way to be there for them without making them feel that he is taking over his position as dad," Turner says. "Some days we blend nicely, and other days are a constant struggle."
So if you're in a blended family, you may find the banking part pretty easy. Even fun, compared to the other family chaos. Still, managing finances when you've merged families can be stressful. Your ex-spouse may be worried that his or her money isn't always being spent on your kids but your new partner's kids. Or if you're the one paying child support while married to someone else with kids, that may cause stress with your partner. You or your spouse may want to keep your finances separate, having already been burned in a marriage once before.
If you're wrestling with these issues, keep these guidelines in mind, experts say.
Figure out the finances beforehand. If you're blended and just now addressing your money problems, better late than never, but if you're planning to marry, you definitely want to discuss this now.
And when you do, "be transparent," says Katherine Dean, the San Francisco-based managing director of wealth planning for Wells Fargo Private Bank. "There is no room for secrets. Openly share your income and expenses, including information on debts or other obligations, like child support payments."
There is no right or wrong way to do this. Some couples keep their money separate; many don't. Some experts will tell you that there's a best approach or a worst, but many will also say that it does ultimately come down to whatever is best for you and your family. That's where Dean comes down.
"There is no one way of doing things," Dean says. "The key is to find what works best for you."
Kelsa Dickey, who owns Fiscal Fitness, a financial coaching service in Tempe, Arizona, agrees.
But she says the first question you should ask yourself is a tough one: Are you labeling the children, "the kids," or "your kids and my kids"?
That may sound harsh, but it may be understandable for some couples, if you have a child who is mostly at another parent's house, or in college, and Dickey says that either approach is fine.
"But it's a crucial question to answer because people usually feel strongly one way or the other," she says, adding: "If they both consider each other's kids as one big family, combining finances is much easier."
If you are going to keep your child expenses separate, so that you're spending money on your kids, and your partner is spending money on his or her children, then Dickey recommends sharing accounts and expenses for all the joint expenses and keeping separate accounts for "your kids."
That can be challenging, though. "I find this approach is actually harder because there can be two very different incomes, which creates different lifestyles for half the family," Dickey says.
You'll need an emergency fund. You may have had a constant stream of minor crises when you were single, and found an emergency fund helpful, or found yourself constantly wishing that you had one. In any case, just remember that if you now have two cars, and perhaps two homes (maybe you haven't sold one of them yet), and generally there are more people in your household than there used to be, your odds for getting into financial trouble are worse than before.
"Start this process immediately. I recommend setting up automatic distribution from each paycheck to help build an emergency fund that can be used just in case. It's an easy way to protect your future," says David Hryck, a prominent tax attorney in New York City.
Keep your taxes in mind. If you want to think ahead, start thinking about your tax returns now since who is a dependent and who isn't can get tricky if your kids and stepchildren aren't always around.
"It's important to refresh yourself and make sure each parent abides by IRS rules while agreeing on who provides the primary support for each child," Hryck says.
Now that you've fallen in love and are starting a new life, think about dying. Yay. Isn't this going to be fun? OK, maybe this isn't the best time to bring this up, but you probably will want to change your will soon and buy some more life insurance, now that you have a bigger family.
You might also want to consult an estate planner. Obviously this largely depends your assets. Your kids and stepchildren someday may be fighting over your things – either because they want what you're leaving behind, or maybe because nobody wants to manage the yard sale to sell off your belongings. But certainly if you do have a lot of assets that either you or your partner will leave behind, you'll want to talk to an estate planner early on.
"Estate planning for blended families can be a minefield and will eventually be a big problem if not adequately addressed. The proper use of trusts can ensure that everyone is treated fairly and that one side of the family is not accidentally disinherited," says Jeffrey Gottlieb, an estate planning attorney in Palatine, Illinois.
Ease into the process. When you do move in, if you start merging your finances, you don't have to do everything at once. In fact, if you're able to avoid it, it's probably better not to do everything at once.
"Go slowly," advises Mitch Reiner, a certified financial planner and chief operating officer of Capital Investment Advisors in Atlanta.
Ideally, Reiner says, you would keep your accounts separate and share the obvious expenses like mortgage and food.
"I see problems when people try and throw everything into one pot and argue over who is contributing for what," Reiner says.
Of course, that won't work for everyone, say if one partner is staying home to take care of all the children, for instance. But whether you're splitting expenses or combining your financial forces, if you have a lot of kids, and you have some other players in the mix, like an ex providing child support, it makes sense to join forces gradually and see what works and what doesn't.
And this is not the time for anyone to go on automatic pilot and assume that a partner knows what he or she is doing with the household income. You can do that eventually, if you want, but while you and your partner may know each other intimately, your bills, direct deposits and child support checks are probably just now getting acquainted.
"Check in with one another," Dean says. "What you thought might work initially may not end up working in reality."