Managing a blended family: crafting a financial for two families that merge through marriage is serious business. Here's how to do it right

Black Enterprise, Feb, 2004 by Sheryl Nance-Nash

These days, the Hales have been forced to batten down the hatches. Before William lost his job 18 months ago due to a legal complication with his employer and Kim was unable to handle the physical demands of nursing as a result of her pregnancy, their household income was $120,000. Today, their household income has been downsized to $35,000. To make ends meet, William sells health plans for AmeriPlan USA and Kim sells real estate. The two also generate limited income from Pure Word Ministries (William is a licensed and ordained evangelist). Over the past two years, they have tapped William's entire 401(k) account--roughly $40,000--to maintain living expenses.

The good news, however, is that William will return to the electric company as well as gain 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

Websites:

Family and Stepparenting Tips:

www.blended-families.com