Money Coach: How Blended Families Can Blend Their Checkbooks

More than 40 percent of U.S. adults have at least one step-relative — like a stepparent, stepchild or half-sibling. That's according to a study by the Pew Research Center. In this week's installment of Money Coach, host Michel Martin asks Louis Barajas for tips on how blended families can prepare for the union of two checkbooks.

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MICHEL MARTIN, Host:

Now we want to move to the financial side of the equation, especially for blended families. When two households merge for whatever reason, marriage, divorce, remarriage or two people - one person who'd never been married before and then a couple has a child together, they bring their financial priorities and habits as well.

So, consider what happens when one-half of a new family is super strict with money while the other side may not see the wisdom in counting every penny. The Pew Research Center says that 42 percent of all U.S. adults have at least one step relative - a step parent, a step child or half sibling. And with the frequency of blended families in the U.S., we wanted to talk about the best way to prepare for the union of two checkbooks.

This sounded like a question for our money coach, so we've called upon Louis Barajas, our money coach regular, and he has some surprising insights on this topic. Welcome back, Louis, thanks so much for joining us.

LOUIS BARAJAS: Hi, Michel. Yeah, this is a topic that's near and dear to my heart. I am part of a blended family.

MARTIN: And blended how? If you don't mind my getting all in your business.

BARAJAS: It's OK. I went through a divorce about 14 years ago and remarried 12 years ago and brought in two daughters from my prior marriage, from my first marriage and then my wife Angie(ph) had a son with her first marriage and we got married. We just celebrated our 12th wedding anniversary yesterday.

MARTIN: Congratulations.

BARAJAS: And so we've got, you know, I've got two kids from one side of the family, my side and a stepson from her side and, you know, the kids had to get along and we had to figure out the finances as we went along.

MARTIN: And have you added anymore? Since, just so I want to make sure I catch up with everybody.

BARAJAS: No. We've added a little Yorkie.

MARTIN: OK.

(SOUNDBITE OF LAUGHTER)

BARAJAS: That's all we've added. We - there was just enough issues that - there was enough that we can handle with the three kids, so we'll take on a Yorkie.

MARTIN: Well, you know, finances are, you know, complicated enough when two people marry who have never had any children with anybody else. In fact, that's actually one of the big issues that people often talk about in premarital counselings, how you're going to merge the finances. If you don't mind sort of talking about, when you add people who already have other obligations, you know, children from a prior marriage or relationship, how does that, you know, add a layer?

BARAJAS: Well, it really complicates things. And, first of all, it's because they're very emotionally charged issues. One is, you've got, you know, you got young kids or usually got kids coming in from the marriages that they have to get along. But you've got the parents that have, you know, prior rules, beliefs and behaviors about money and you're trying to meld those together. And it really complicates things to another level.

I've been doing financial planning with a lot of blended families for over 25 years. And I will share with you that this is probably the most difficult issue when I'm talking to - or doing financial planning with couples.

MARTIN: How do you recommend that people start - and you can see why it's complicated. You have maybe one partner who earns perhaps a substantial amount more than the other partner, but has perhaps fewer obligations. You may have another partner who has more children, but earns less money. So, what do you recommend that people do when they get started and try to talk these things through?

BARAJAS: Well, I mean, you really ideally should actually see a family therapist who kind of focuses on money or really sit down and have a candid conversation. And it really takes a third person to allow them to be vulnerable and to be able to discuss this because, again, they do become emotionally charged issues.

So having a conversation about this and really looking at the overall finances is really important. So, sitting down and then putting all your - what I call all your assets on the table, all your debts, you know, what you owe, what you own, your retirement plans and letting everybody really know what everybody's coming in with. That's really important.

MARTIN: What's (unintelligible) biggest mistake people make? Is it not being really candid about the dollar amounts or is it not being really honest about how they feel? What do you see?

BARAJAS: I think the biggest problem is to be quite honest is just not even having an idea that they don't even know that certain things will come up. So for example, in my situation, you know, I grew up in a barrio and I grew up believing in public schools. And everybody I knew that went to public school there kind of made it and went through college.

My wife, all her family went to private school. So now I'm believing in sending my kids to public school and she's believing sending her kid, you know, and my stepson, Eddie(ph), to private school. And so there's issues about how we're going to focus on what's fair. How come I'm spending a lot of money on Eddie versus I'm not spending any money on my other two daughters?

And that's just - you see that a lot. It's just prior beliefs about things that you haven't even thought about. Some families, you know, they're used to their - the parents spending a lot of money on the kids, on education. Other people don't do that. And so when they get together, they forget to talk about these issues and they're not even brought up and they're not even aware. So it's when they show up, it's already a problem.

So, the biggest problem, again, is sitting down with somebody professional who can do that. And then sitting down and once you figured it out, you know, think about doing a prenuptial agreement as well. It's really important to do that.

MARTIN: You know, one of the things I hear you say, which is interesting because you're a financial planner, is you're saying take it to another level, actually bring in some kind of a counselor to deal with these situations.

BARAJAS: That would be the ideal.

MARTIN: What if people don't have that kind of money? Or they think, I don't have the kind of money for that. I don't know anybody like that. What should they do?

BARAJAS: You know, you don't, yeah, you know, you can usually go to somebody at your local church. I mean, it doesn't whether you're Christian, you're, you know, it doesn't matter what religion you are. There are people there that can help you. There are other financial planners. There are a lot of people doing pro bono work as well. You can go to the, like, for example, the financial planning association. They have a pro bono section there.

And so what you want to do is you want to be able to - there are people out there who are willing to help you. But it's just even sitting down and putting everything on the table and being extremely honest and being vulnerable with your partner. And I will share with you, that goes a long way. It gets to the point where you really have to be, when you're coming into a blended family, is both sides of the table have to be really unselfish.

But you have these other things that sometimes will sabotage a blended family when it comes to their finances. You have the ex-spouses. You have the ex- spouses sometimes who will plant ideas to the spouse's head about, you know, now that you have a new wife, now you're spending money on the other kids. They'll use their current kids to punish the other parent. So it really complicates things.

MARTIN: So is the Yorkie going to public or private obedience school?

BARAJAS: Oh, man, it's - I get the way with my Yorkie. She's going to public obedience school.

MARTIN: OK.

(SOUNDBITE OF LAUGHTER)

MARTIN: Louis Barajas talks matters of personal finance with us on a regular basis. His new book is called "My Street Money: A Street Level View of Managing Money from the Heart to the Bank." And he joined us from Costa Mesa, California. Louis, thanks so much for joining once again.

BARAJAS: Always a pleasure.

MARTIN: And congratulations on the anniversary.

BARAJAS: Thank you very much.

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