18 months in back pay. He plans to use the money to pay off debt that the family has accumulated, build up retirement savings, and develop a fund to help their children finance their college education. Kim and William hold life insurance policies but admit that they have yet to complete their wills. “With a blended family, it’s more than a notion about what to do about the kids,” says Kim. “Somebody’s not going to like the decisions you make, like the children’s mother. It’s a sticky situation because we haven’t legally adopted each other’s children though we have custody.”
Making household finances work will mean that couples must pay attention to details and diligently handle legal and financial matters. But in order to truly secure their family’s future, each spouse must embrace the planning process as a joint venture.
How to Blend Your Family’s Finances
- Re-evaluate all of your insurance needs. Review your policies—health, property, auto, and, especially, life. Your expanded family will likely mean you need to increase coverage. Consult with your financial adviser.
- Update all financial documents. Any paperwork that named your previous spouse as a beneficiary should be changed.
- Create a budget and stick to it. With a bigger family, there is less wiggle room for money mistakes if you want to achieve your financial goals. Be sure that budget includes a fund for emergencies and savings for the short and long term.
- Rethink your asset allocation. Before it was just you and now it’s you and your spouse. Look at both portfolios closely. You don’t have to merge accounts, but it’s important to note, for example, if you both have shares of the same stock or if your respective portfolios are heavily weighted in a particular asset class or sector. In all cases, think diversification.
- Develop a will or living trust. If you already have one, it will need to be changed to reflect your current situation. If you don’t have one, by all means complete one. In the document, name guardians for your children. This is a tough issue for any parent, but particularly when there are different sets of children and possibly multiple guardians.
Resources for Stepfamilies
Family and Stepparenting Tips:
The Stepfamily Association of America:
Blending Families: A Guide for Parents, Stepparents,and Everyone Building a Successful New Family (Berkley Books; $14.00)
Money Advice for Your Successful Remarriage:Handling Delicate Financial Issues Intelligently and Lovingly (iUniverse.com; $14.95)
The Complete Idiot’s Guide to Step-parenting (Alpha Books; 16.95)