Blended family finances can be challenging, but you and your spouse can create a shared vision for your family’s financial future by building relational trust and carefully considering financial agreements.
Imagine a conversation between two people who have been dating for over a year. They’re both single parents. After a romantic dinner, the man reaches across the table to hold the woman’s hand, looks deeply into her eyes and says, “We’ve been together a long time, and I can see our futures merging together.”
Her heartbeat quickens. Her eyes widen. She nods and leans toward him. He’s going to pop the question! she thinks.
“So, I,” he says and clears his throat, “was wondering . . .”
“Would you . . .”
“Outline all of your debts and assets, show me your credit report and sign this prenuptial agreement?”
Ouch, what a way to spoil an evening — and maybe a relationship. And yet at some point, every couple needs to talk about their values related to money and how they will logistically create a shared vision for combining incomes and debt while planning for the future care of their children. If they don’t, blended family money matters might spoil more than an evening.
A shared vision for merging money, merging family
A stepfamily, also called a blended family, is a complex spaghetti of loyalties, cultures, traditions, DNA, expectations, parenting styles, losses, fears and people — those in the home and outside the home (like ex-spouses and adult children). Merging as a stepfamily means merging all of these pieces. Family harmony and peace come when the parts bond and integrate.
A wedding that forms a stepfamily clearly defines the couple’s relationship as “committed till death do us part,” but it’s less clear how children (adult or young), former spouses, grandparents, in-laws, and all the rest will be a family. The desire of a couple to blend does not magically produce a family “smoothie” — it takes work, cooperation and collaboration to bond stepparents and stepchildren 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 are and 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.
Sandra, a divorced mother of two, faced a dilemma like this. Dave, her second husband of five years, wanted her to change her will and leave everything to him. Dave didn’t have children of his own, so naming Sandra as his sole beneficiary was a simple decision. But Sandra was concerned about her sons. They were already in their early twenties and living independently when Dave came into her life, so while the three of them got along well enough, they never really bonded. Sandra wasn’t confident that Dave would take care of them financially if she died … or that they would even let him.
On the surface, this seems to be a question about Sandra’s will. But underneath are a lack of family integration, loyalty conflicts and issues of marital trust. Factors like these influence a blended family’s financial decisions far more than math or principles of investing.
Said another way, financial conflicts are often just a symptom of much deeper blended family dynamics and relationships.
Practical steps to creating a shared vision for your blended family finances
How do you orchestrate a healthy family and financial merger? Here a few practical steps discussed at length in our book The Smart Stepfamily Guide to Financial Planning.
Step No. 1: Take stock before defining a financial agreement
Since stepfamilies are born out of loss (the death of a parent or the dissolution of the parents’ relationship), evaluating the past and your present emotional health is important in understanding how your blended family is functioning — and how well you’ll be able to negotiate financial matters.
You also need to scrutinize your financial situation. In creating a Together Agreement (see below), you’ll examine this in detail, but for now, think in generalities: What are your debts and major assets? Who are the people you are financially responsible for (e.g., children, aging parents)? What happens to all of this if one of you dies?
Step No. 2: Create a togetherness agreement
A Togetherness Agreement (TA) helps your plan to succeed. A TA is a detailed financial vison of your life together. Essentially, it involves putting everything on the financial table — your assets, debts, dreams and obligations — and deciding how you can meet your needs and facilitate the permanency of your marriage. This takes work, but the net result is a stronger relationship as you design your positive, secure future together.
Some people will choose to have their TA drafted by a lawyer so that it’s binding (a legal contract). Others will be satisfied to talk through the matter on their own (with or without an attorney) and design a path forward. Both create a shared vision for life together. You’re not just drafting a financial agreement, you’re considering your spouse’s emotional needs and working toward marital harmony.
The specific stipulations included in a Togetherness Agreement vary by couple but will give consideration to your specific blended family. Your TA might include general agreements about handling finances, such as whether you will merge bank accounts and how you will manage retirement portfolios, debt, insurance and businesses (all discussed in detail in The Smart Stepfamily Guide to Financial Planning). It might also include agreements regarding the financial support, rights, roles, responsibilities and overall well-being of spouses, children, stepchildren, grandchildren, stepgrandchildren, parents, stepparents, grandparents, stepgrandparents, and other significant relationships.
The TA is not just about money; it’s a plan for how money will help care for your family over time. And therein lies an important attitude distinction that influences whether money matters help or hurt blended families: A prenuptial agreement is done to your spouse when you want to protect yourself in the event of a divorce. A Togetherness Agreement is done for your spouse. Better yet, when it is created with your spouse, both persons make promises on behalf of the other and lay a positive foundation for their life together.
Step No. 3: Build relational trust
A trust is a financial tool that can help couples design how money is used to care for others. Relational trust is how much confidence you have in your spouse’s love, dedication and goodwill. Ironically, without relational trust, the financial trust won’t accomplish its goal.
Merging a blended family requires developing trust on many levels. A shared vision for how finances can serve your family is just one important area of trust that can lend strength to other areas, as well.
Planning to succeed as a couple takes more than just financial planning. Consider making some investments into your relationship — the kind that take personal time and energy. Schedule regular date nights. Spend time talking about something other than the family or problems. Money can so often be a difficult topic for couples from any background, so if and when things get a little heated, put the paperwork aside and do something that you both enjoy. Go out for ice cream. Take a walk around the neighborhood. Those are the little deposits in your relationship that will build the kind of trust that says, “No matter what our financial situation, what matters to me is you.”