How to Manage Your Finances as a Married Couple
Once the anxiety of wedding planning starts to fade into memory, a new possible source of conflict arises: finances as a married couple. Fortunately, by taking charge at the very beginning, couples can minimize a lot of the difficulties that can come when people have to make joint decisions about their financial future. The investment of time and plenty of communication over the years can help married people to build a financial arrangement that will suit them both.
Get Comfortable Talking About Money
For a lot of people, trying to gain a little familiarity with another's financial situation can feel like they are prying unnecessarily. From a young age, children are often taught that it's rude to ask adults how much money they make for a living. However, this situation can create a lot of problems within a marriage, if both sides are worried about alienating the other with discussion of money. In fact, money misunderstandings account for about one in five divorces these days, which underscores the importance of getting onto the same page as early as possible within the relationship.
Of course, talking about money and financial goals in the scope of a partnership doesn't automatically need to include the intense and immediate exposure of all of one's financial records and credit reports, especially at first. Starting slowly with friendly topics is a good way to establish a rapport that will last longer. Talking about basic financial goals for the next few years can eventually lead to the nitty-gritty of debt management and retirement plans.
Build a Strategy
After graduation from college, a lot of people find themselves with a budget and financial strategy as simple as, “Get my student loans to stop strangling me, and then I'll regroup.” The trouble is that it can be all too easy to let financial planning run on auto-pilot, especially when the monthly expenses eat up so much of what's coming in. However, putting money into emergency savings isn't just something for the future. And people who start to think about retirement funding in their 20s will find themselves in a much better place than their peers, 10-20 years down the road.
Adding a co-pilot to the mix requires planning and agreement from both sides in order to achieve financial security. This is where all the dreamy late-night conversations about full vestment into a 401k retirement plan are really going to come in handy. Getting married means planning for two, and planning for two often costs nearly twice as much as one. By getting an early start and defining their boundaries, couples can set a purposeful financial course that will be easier to tweak over time.
Share the Good, the Bad, and the Credit Scores
Financial planning should involve a serious discussion about debts, because married couples usually seek to manage their finances together, even if they don't totally combine their financial lives. When people apply for loans together, such as a mortgage, their debts and credit histories are looked at as part of a single broader package. This means that couples who want to plan a financial future together should be up-front with each other about various aspects of their financial histories, good and bad. It might not be necessary to bring up that one collection debt that was paid and fell off the report years ago. By comparison, sharing each other's current credit reports and talking over plans to handle existing debt brought into the marriage have an important role in financial planning.
Consider Making Accounts for Savings and Fun
Sharing finances is best done simply and fairly, with plenty of room for each person to make advanced budgeting decisions. Financial experts often recommend setting aside accounts for savings, investments and retirement funds with automatic withdrawals. This way, the system doesn't rely on people to make the conscious choice to save each month. It's also practical to use separate accounts for shopping, vacation planning and allowances just for fun. Each person deserves to have some money to themselves, and it doesn't have to be the same amount across the board. Keeping discretionary spending separate from savings gives everybody the space they need to pay for a lunch with friends or another fun activity, and helps to avoid arguments about overspending.
Choosing Between Shared Finances and Split Finances
The ease of setting up automatic transfers these days brings up options in shared finances that might not have been practical decades ago. Couples who don't want to combine all of their finances—or who have good reasons not to do so—shouldn't feel compelled to put every last dollar into a shared account. When one person:
- owns a business,
- supports children from a previous marriage or
- is working to rebuild credit or eliminate debt,
having some separate accounts may make perfect sense. Some couples keep their finances completely separate. Others may have their own accounts, with a combined account that receives transfers from both, from which they pay shared bills. There are virtually unlimited options for managing married finances, and the extremes are just a couple of paths that people might choose.
Ultimately, keeping an open dialogue about financial concerns is the best way to make progress toward shared financial goals and build long-term wealth. Every couple is different, and so the ideal solutions to common financial problems they face will be unique for them. When people work together to research their options, they can build a stronger relationship.