“For better or for worse… For richer or for poorer.” This is what most of us promise to our spouse when we pledge ourselves in marriage. But unfortunately, many couples today can’t seem to survive either richer or poorer due to poor money management skills. Money can cause stress when in a relationship. It is nothing new that disagreements over finances are one of the main reasons couples end up in divorce court.
Combine everything into a single joint checking account or keep things separate? Invest together or separately? Who pays for what? There is hope, but you need to act early. Money management can be a rewarding way to bond with your loved one. As you couple up with your partner, here are Six tips to keep in mind to help you combine your finances while you combine your lives.
Open, Honest Financial Conversation
The most important thing you can do to effectively manage money as a couple is to be as open and honest as possible about the current state of your finances. Communicating with your spouse about finances isn't easy because money can symbolize different things to each partner. One may view money as security and the other as power. It is important to discuss finances together regularly as well as review and re-commit every six months to a year.
Set Financial Priorities Together
After you have determined your baseline financial status, discuss your long-term financial goals in-depth. This can even get you to work together towards investments like a house, retirement, or a trip. Making big plans and having things to look forward to can help strengthen your relationship and make your bonds stronger.
Establish a budget (and track it)
Start by reviewing your joint expenses over the last few months to determine how much you’ve been spending and if you need to bring that amount down. Then, establish dollar limits per category that you create according to your after-tax income. Tracking your spending is critical to being financially secure. Unless you know where your money is going, it is impossible to set financial goals you are both comfortable with.
Discuss Bank Accounts
There are both pros and cons to opening a joint bank account or to maintaining your accounts after you’re married. Discuss this at length with your spouse to make sure you’re both comfortable with whatever you decide. If you choose to open a new account together, make sure you use a free checking account to avoid unnecessary fees. Also, if you don’t already have an emergency fund, consider making this a top priority.
Get Out of Debt and Stay Out of Debt
Although it may be true that many people are heavily in debt, that doesn't mean it is a healthy way to handle your finances. Debt can be damaging to any one person, but it is a double threat when you’re married because two people are responsible for paying the money back. Start your marriage outright by eradicating debt and not racking it up again. Work out a plan with your spouse on how to get out and stay out of debt.
When it comes to combining your finances, the biggest factor to success is communication. Transparency is vital to any relationship and to properly work as a team; you must have the same goals in mind and merge your lifestyles. Be open with your partner, understand where they are coming from on finances, and work to find solutions that both partners can live with now and in the future.
The views expressed are not necessarily the opinion of Social Advisors, and should not be construed directly or indirectly, as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed.