Financial Planning for Blended Families

40 percent of families in the U. S. are blended with at least one partner having a child from a previous relationship. Every situation's different, and there is up to 67 different possible stepfamily combinations.

Ron Deal, author of the “The Smart Stepfamily” series, draws comparisons to blended families and common kitchen appliances. Often times many of us jump into these new family dynamics with a lot of gusto and good intentions but end up throwing everyone into a blender. A blender chops up its ingredients, trying to mix everything together very quickly, and in the process, each ingredient ends up losing its distinct flavoring. On the other hand, if we treat this new endeavor more like a slow-cooker crockpot meal, all of the individual ingredients have time to warm up and soften, ultimately maintaining their individuality while creating a beautifully merged recipe. 

Combing families and bringing children in the mix is obviously challenging, but it is just as important to be aware of the trials you may face when it comes to working alongside your new spouse. The divorce rate for second marriages is significantly higher than first marriages. It is imperative for success to set realistic expectations early on, arguably before you get married, and continuously work to keep your line of communication open.
 
There are certainly enough struggles and tensions when it comes to blending families, but money does not have to be one of them. Financial conversations can seem awkward or tough to initiate, but are incredibly important. As humans, we have this innate desire to be heard and understood, so getting and staying on the same page with each other, understanding what's important to each other, and setting standards and boundaries together for your home is crucial. 

When sitting down with your new spouse to discuss finances, where should we start? 

Get a feel of where you both are financially – Are you saving for retirement? Do you have life insurance? What kind of debt do either of you have? Take some time to look at your budgets as a whole and don’t be afraid to ask the deeper questions. If handled right, even the most seemingly uncomfortable topics might surprise you how easy they end up being to talk through once you get them out in the open.

 What are some of the topics we should cover when creating our financial plan? 

• Does the new spouse plan to file for guardianship of any stepchildren?
  • Do the children get added to the new spouse’s beneficiary designations? 
• Do you want to have more children down the line? 
  • Does your current residence allow for more family members? 
  • In the event of a home sale, who has ownership? 
• Do you have an estate plan in place in the event that you both pass? 
  • How old are your children? Do you need to designate a guardian? 
  • How do you want to setup inheritance? Does it make sense to setup a trust? 
  • Are you familiar with local rules and regulations when it comes to alimony, child support and/or FAFSA requirements? 
• What does your current cashflow look like (i.e., what does your spending vs. saving ratio look like)? Do you have an investment portfolio? If so, what are you investing in? 

Asking these questions allows you and your spouse to begin to draw out a financial roadmap toward reaching your goals together. Once you are able to assess where you are both coming from, you can set some ground rules to eliminate future discord when it comes to decision making. 

Sometimes it can be helpful to set aside separate individual funds for each of you to spend however you would like, almost like an allowance of sorts. This option gives you both the freedom to make smaller purchases guilt free without feeling like you need to ask your spouse for permission, with the intention of saving larger purchasing decisions to be made together. 

In the end, every stepfamily has very different situations, needs, and goals. Consulting an advisor who believes in comprehensive planning could be the key to solving your financial puzzle. Having an advisor can help bring clarity, set realistic expectations, and nudge you to ask the truly important questions.

If interested in connecting with one of our advisors, please contact us at [email protected]. 

Recommended Reading Material

• The Smart Stepfamily Guide to Financial Planning
• The Smart Stepfamily: Seven Steps to a Healthy Family

About Schneider Wealth Management 

Schneider Downs Wealth Management has been providing investment and retirement services since 2000. Although our service platforms continue to evolve, commitment to our clients remains our first priority. Our service is tailored to your individualized goals but built on the fundamental principles of our practice: fiduciary guidance, fee transparency and goal-based decision making. To learn more, visit our dedicated Wealth Management page.