With wedding season winding down over the next couple of months, there's a whole lot of merging going on: furniture, daily routines, maybe some annoying habits you never noticed about your partner before, and most importantly, financial assets. While talking about money may not be the most romantic thing to do once the honeymoon is over, it's an extremely important next step. A recent study found that 65% of couples argue over money, so this topic clearly must hit a nerve with most people. Discussing money, whether it's with your friends, family or spouse, typically invokes some deeper emotions, so it's entirely normal that these talks aren't the easiest even when you're having them with someone you love deeply.
Here's what you and your spouse need to focus on in order to create a solid foundation for your combined financial future:
Figure Out Your Individual Relationships with Money
Are you the type to stick to a strict monthly budget and not let yourself indulge in too many "frivolous" costs? Or are you more free-spirited with your funds, typically operating without a specific plan? While there are many in-between versions of these sorts of archetypes, or "money personalities" as Psychology Today calls them, two are most common -- The Spender and The Saver. The Spender sees money as a way to increase joy and satisfaction, with the value of money deriving directly from the fact that you can spend it. In opposition to this school of thought, The Saver also sees money as a precious commodity, but for the opposite reason: saving money is what gives it value. It's rare that two people would see money in such explicit black and white terms, but if you're a saver and your future (or current) spouse is most definitely a spender, you're inevitably going to have disagreements about money.
Even if you both consider your relationships to money very similar, there's always going to be things to discuss and compromises to make, so how do you effectively address these issues? Find common ground and understand the context of your partners' habits. Figure out what money really means to each of you and that will help you with this next step.
Create a Financial Plan Together
Unless you want to have the same arguments about money over and over again, it's vital to create a plan and stick to it. This essentially takes the guess work out of how you and your partner will spend and save money together, paving the way for financial bliss. First, get the unpleasant stuff out on the table. Who has debt (credit card, student loan, etc.) and how much? How much income does each person bring in monthly/annually? What are both of your credit scores? These are some example questions, but basically, you need to determine if there are any roadblocks in the way that will stop you from achieving other financial goals.
Once you've had that conversation, you can map out the rest. Here are the areas you'll need to focus on:
- Debt Management - If there is existing debt in the relationship, what is the priority? How fast do you want to pay it off?
- Create a budget - Figure out all of your daily/weekly/monthly expenses and allocate a set dollar amount to each category. This includes everything from rent and utilities to the Netflix account and other discretionary costs like dining out. Use an online budgeting tracking tool like Mint or Budgetpulse. You can also download our customizable budgeting worksheet here.
- Set short and long-term goals - Set your sights on various financial goals and when you'd like to achieve them. Buying a home, taking a vacation or purchasing a new car are all types of things you should discuss and work into your financial plan.
- Emergency & Retirement Savings - Figure out how much you each have saved individually in a 401(k), IRA or similar account. If your company offers a match, you should both at least be saving enough to get that. Set a goal for how much you think you'll need in retirement. If you have no idea, use our Retirement Readiness calculator to get you started. Similarly, figure out how much each of you have saved for emergencies and if you need anymore to cover your expenses for up to 6 months. Our Emergency Fund Worksheet can help you with that.
- Decide on the Process - Determine who will actually manage the finances. We recommend automating as much as possible (paying bills, credit cards, subscription services and savings), but lay out a process that you are both comfortable with first. At the end of the day, even if someone doesn't feel comfortable managing money, neither party should be completely in the dark when it comes to this.
Separate or Joint Accounts?
A lot of different opinions seem to continuously circle this particular issue. Some claim separate bank accounts will save your marriage, while others claim the exact opposite. There's no right answer here. Every couple is different. There's a variety of reasons to prescribe to either strategy. Maybe only one of you is bringing in an income and having one account makes it easier. Maybe you have two incomes, but sharing a joint account makes both of you feel more secure and streamlines things. On the other hand, maybe you have varying hobbies or interests and don't feel that those expenses need to be shared. If one of you is a saver and the other a spender, having separate accounts may reduce frustration when it comes to extraneous spending that veers from your shared goals and budget. No matter what, this is worth a discussion and another reason why having the initial talk about what money really signifies to each individual is so important.
Always Be Prepared
So, you've done all the work, talked out all of your money issues and created a financial plan together. Great! But then...one of you totals your car, loses their job or incurs a major unexpected medical cost. What do you do in the case of emergency? How will you handle it financially? Could both of you handle the finances on your own? These are extremely difficult questions, which is exactly why it's important to map out your contingency plan in case of an unexpected financial burden. Trying to figure out what to do during an actual time of crisis is not healthy for anyone, so take steps to create an emergency plan together. Change your beneficiaries on retirement accounts and insurance policies, along with any other estate planning documents.
There's no one-size-fits-all financial plan. Arguments about money are so rarely simply just about the money: They're usually rooted in much bigger issues, which is why it's important to have a full understanding of your partner's relationship with money. Finding someone you want to spend the rest of your life with is a wonderful thing, but that doesn't mean it comes without headaches. The sooner you complete all of the steps outlined above, the sooner you'll be able to focus on living your new life together, in marital and financial bliss.
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