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Blended families: Keys to financial harmony

Posted on Thursday December 19, 2019

Blended families: Keys to financial harmony

Colourful, rewarding and perhaps a little complicated, especially when it comes to finances—life in your new blended family is anything but dull! However, with clear communication and effective planning, you can maintain harmony amid your challenges.

Step 1: Keep your affairs organized

We never know when love will come knocking! Sometimes it happens soon after a separation, shaking up our expectations as we make our way through an already-intense transition. Before you dive into the happy future that awaits, it’s important to take time to resolve any outstanding financial matters from your former relationship. This is key to building a sound financial and personal foundation for your new relationship.

Are you hesitant to tackle this situation?

Disturbing the family balance can raise all sorts of emotions and questions to the point that a person is unsure where to even begin. Have no fear: there are plenty of resources available to help you sort things out.

The For the Sake of the Children program operated by the Public Legal Education and Information Service of New Brunswick offers a free 6-hour course on parenting after separation that also covers the financial and legal issues affecting new partners.

If you have questions about legal issues such as child custody, divorce or pensions, the Family Law New Brunswick website also offers a wealth of valuable information.

Step 2: Have an open conversation

“So, what’s your favourite colour? ... And tell me more about your ex and what’s in your wallet!” Conversations about past relationships and money are hardly romantic, especially early on in a relationship.

However, life in a blended family creates a financial reality that people have to talk about. Every family, couple and situation is unique, as are the solutions you will come up with for maintaining harmony from a financial viewpoint.

Equality and equity: Similar but different

By targeting equitable solutions, you can create a long-term plan that’s fair to everyone involved. Work together to develop a strategy that’s acceptable to both of you and takes your individual expectations and needs into account.

Maintaining absolute equality can often be challenging, especially when the variables involved are complex (number of children, number of custody days, children’s ages and different needs, child support payments, parents’ salaries, number of previous relationships, etc.). For this reason, it’s more logical to aim for equity (along with a healthy dose of equality!). By focusing on building a solid relationship that meets each person’s needs in a spirit of honesty and transparency, you can avoid future conflicts and create a space in which your love can grow unburdened by financial stress.

Working together to create a new financial future

Having the best possible intentions is a good starting point. However, knowing what to do next is something else entirely! To guide you in navigating the various issues you will want to tackle together, the Government of Canada offers extensive advice and suggestions on managing your money as a couple.

Not a fan of complicated spreadsheets? Financial planning is a big job. Financial advisors are available and ready to assist you in planning your financial future taking into account your individual and shared goals as well as the unique aspects of your situation.

Step 3: Choose a merge model

Do you sometimes feel like you’re the only “atypical blended family with multiple specific needs” on the planet? Whether one of you is on your third relationship, you have full custody of two... of four... children, you also have children together, or whether all of the above applies to your case, remember that many other couples have been through the same situation.

There are 4 main models for merging your finances:

Model 1: Each member of the couple pays for their own children’s expenses and then the couple splits everything else (when children from previous relationships are involved).

Model 2: Share all expenses 50/50 (when both members have similar incomes and spending habits).

Model 3: Divide expenses based on each person’s income (when one member of the couple earns significantly more).

Model 4: Calculate the value of each person’s assets at the time of entering into the relationship and then pool everything afterwards (when one or both persons bring significant assets into the relationship and then you have additional children together).

These models can be mixed and matched up to a certain point. For example, you may decide to split all expenses associated with your new family home but continue keeping your incomes separate. Any combination can work as long as both members understand and accept it. And of course, the choices you make will depend not only on your family but also on your individual personalities, values and beliefs.

Important considerations

Besides deciding on everything from whether to buy the regular or family-sized jar of peanut butter to which car to get as your new family vehicle, there are other aspects of your financial situation to keep in mind:

– Managing your investments: RRSP, TFSA, RESP

– Opening a joint account

– Managing your mortgage (if one of you moves into the other’s house)

– Insurance

– Taxation (losing certain government benefits when you begin cohabitating)

Not many people love sitting down to organize their finances, but you always come out on top by planning ahead! And your maturity and life experience will no doubt guide you in building a peaceful, happy new home. Just remember the keys to success: open communication, transparency and the art of compromise!

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