Things to consider when financial planning & budgeting as a Blended Family.
Managing money with your spouse is a challenge by any measure, but when you merge two families under a single budget, it can be harder still to strike an expected balance.
Blended families bring a different "persona" to the table. A mix of assets and debts, established careers, and firmly entrenched financial habits — not to mention kids from a prior relationship. But they also bring life experience and a desire to avoid past mistakes.
One of the biggest misconceptions, couples think they have to be high net worth or filthy rich to plan for such things.
The biggest challenge most new blended families try to wing-it is that this comes about because they're in love. Still, when reality sets in after the marriage ceremony, they later discover that their values clashes are so massive that they are challenging to overcome. For example, the step-children did not view their step-mother as a true mother even though she cared for the children for 30 years. Now, after dad has passed and they ask step-mother to move out of 'the home' so that they can sell the asset (home) to close out the estate! Sounds Harsh, but sometimes it becomes a reality.
To create a fully functional household, couples tying the knot for a second or subsequent time must be open and honest about their assets and debts, how they view money, and how they spend it. They must take steps to align their values and vision.
I want to give some easy steps to follow, and mostly I want you to have an open and honest conversation with your partner about finances, budgets, expectations! Even at some point down the road, you will all have to talk with adult children to inform them of your financial and estate plans.
A healthy marriage requires the willingness to share serval things; your heart, your home, your money, and your trust. Marriage is about becoming one, and trust is the main component in your relationship, you need to know that you and your spouse are on the same page. Working as a team to set financial goals together, tackle debt, to better position yourself as a team, trust comes first. If you cannot have regular communication about your relationship and money and budgeting, your trust will diminish.
In a recent study, Fidelity Investments asked in a retirement survey; they wanted to see how couples would advise others. Their best piece of advice to newlyweds about handling their finances. The study found that the top two responses were. To "save for retirement as early as possible" (57 percent) and two. "make all financial decisions together" (41 percent).
Let's have a money talk.
First and foremost, communication is a challenge in second marriages. It is vital because you are merging two families into one with a lot of baggage. You might have children from the previous marriage, and that alone will bring a particular dynamic into the new household. You or your partner might have a closely held business that is owned or large assets that are owned before you meet or any scenario that you can think someone would own.
The desire of a couple to blend does not magically produce a family "smoothie" — it takes work, cooperation, and collaboration to bond stepparents and step-children and to integrate family narratives. And that's if everyone is equally open and willing to try. You can imagine, or perhaps you already know firsthand what it's like if some aren't.
What does this have to do with financial planning and money management? Everything. Before marriage, if one parent offered their children an allowance as a reward for completing chores, but the other parent did not, which system will they use in their stepfamily? Assuming at least one parent (and maybe both) has to make changes, will their children resent the changes? Will they refuse to accept the transition?
Underneath many financial conflicts in stepfamilies are much bigger issues of belonging, loyalty, trust, power, control, acceptance, perceptions of favoritism, and fears of relational uncertainty.
Understand Your Partner's Money Personality and Parenting Style
When it comes to your partner's view on money, you both need to take the time to have meaningful discussions about how your partner grew up with money, how parenting decisions were formulated, and how your partner feels about childhood experiences or prior relationships surrounding the use of money. All of these variables impact current decisions that you now make together as partners and as parents of a blended family.
Here is a practical guide to help you have a meaningful conversation with your partner to plan accordingly for your financial future.
Get Expert Advice.
Getting expert advice will be a big help in the long run. A financial planner will be able to help you navigate through the complex scenarios that can come about. He or she can talk about how to structure even help you with your agreements on how your financial picture should look. I have sat down with many couples and talked through planning issues, called in attorney's and tax professions to assist with coming up with solutions.
Draft a plan for merging a relationship and finances.
I believe this is an essential first step, it make you both communicate about your current and future plan, place them on paper. Making a detailed plan for your future is a good idea: you need to do so in a way that facilitates togetherness. Once you have done everything you know to do, it is a good idea to have a third set of eye's and ear's listen to you and your partner. Going back to the financial planner will allow him or her to make suggestions to you.
Gather documentation and track Dollars (Cash Flow and Budgeting).
I cannot express the importance here. If you want to know where the rubber meets the road, here it is. This will set the stage on how your financial household will look going forward. My suggestion to couples is to pull the last three months of all accounts – Bank, Credit Cards, savings, investments, and etc., and etc. If you have money stuffed under the mattress or credit card debt, this is the time to review, communicate, and plan.
Knowing your history and your spouse/partner's history can shed a lot of light on the subject. If you see a recurring theme happening of a spending issue, a discussion will need to happen and or even having some financial counseling to occur.
An essential exercise that both of you do separately and then together is to develop your current and future budget. I state separate is to know what you spend and how you budget as an individual. When you work together on a budget, where you are developing something together, you can take your separate budgets and use them as guidance on how you build your joint budget.
Talk early and often about financial issues.
Having regular talk or meetings about financial issues and planning is better than not having them and finding out you have built a mountain of Ohs. A suggestion here is to set up regular times that you both meet to go over finances. I suggest to couples to have the following:
Weekly – to go over what happened this week and what will need to be addressed next week, taking no more than 10-15 minutes to discuss.
Monthly – to review that past month and add in any new items to the monthly budget. This should be about 30-45 minutes in length at most.
Quarterly – this is an excellent time to have one of those get-a-ways. Yes, that is right, take time to go off for a weekend, or take a day to discuss and plan, if a weekend is not monetarily or physically available. There should be no distractions. Plus, this is a great time to renew yourself with your partner and do something that you both enjoy doing together vs. have all the kids around distracting you both. I have recommended that you preplan these times, place them on your calendar at your annual meeting.
Annually - This is a must-to-do, and one of your quarterly meetings will be used for this meeting. What time of year do you do this meeting, depending on your family's needs and family situation. This is where you do need to have a getaway weekend to plan. You will discuss everything your family is involved in and will not. Set the annual budget and planning, schedule the quarterly meetings, set short term and long-term goals and obligations.
Financial Planning: For You, Your Kids, And Your Step-Kids
Deciding how to allocate financial resources for your child's benefit and your own long-term goals, such as retirement, is a common parental struggle. Regardless of family structure and coming for a single parent role, the decision was singly focused.
In blended families, your financial decisions extend to your step-kids too. Balancing your own needs with those of your kids and step-kids can be challenging. The conversations that you and your partner have will hold structure through each life stage for you as a parent and spouse and the children themselves. Remember, you are setting an example of oneness, not separation.
Differing Co-Parenting Styles
Parenting and financial decisions can differ from your own style and beliefs. It's even more important to explain your core values to your kids and to solidify those values in your actions. Focus on the positives, not the negatives, and find ways to be a good role model. Look at your parenting decisions in the areas where your values overlap and find amicable solutions where they diverge. Developing a plan or guidelines to communicate your and your partner's joint vision will place a big roll in your blended family. Work together to align your values and discuss how it might influence your children's outlook, not just six months down the road, but look at even a decade or more.
Identify Your Kids' And Step-kids' Needs
It's expensive to raise children. Many costs are essential, like food, childcare, and school supplies, but there's an endless list of optional expenses too. Blending two families can bring on the added cost that needs to be addressed and decided on.
The Funding Decision
Every parent needs to decide what's in the best interest of their children by:
– balancing the needs versus the wants.
- Are there Special Needs Children involved that will take time and funds to meet the needs of their daily routine.
– installing the values, you're wanting all children to learn – how are you showing them the correct way to budget and determine the needs vs. the wants.
– considering the financial education, you're instilling - How to teach the value of hard work.
– remembering longer-term needs and goals: e.g., college, first car, trips, etc.
The Equality Decision
When you're part of a blended family, your goals and resources might differ from those of your partner. If adopting a fully unified approach to finances and parenting, you'll likely need to balance your needs or desires to provide for your biological kids and provide for your step-kids.
This requires collaborative discussions to address: the two main topics that continue to arise: how decisions affect joint household finances. – how parenting differences will be explained to children.
However, you and your partner decide to develop and plan for your blended family, take the time to discuss and put it to work, the first plan may not be perfect and will take some tweaking to get it to the point you will see the fruits of your work. You may need to seek advice for a financial professional and a marriage & family counselor in your area that works with blended families. But whatever you do, plan grown, prosper, and go out and have a Smart Money Moment.