Congratulations on your nuptials or your recent engagement. As you prepare to spend your life together, don’t neglect having that talk, you know, the one about money. A marriage unites not just two people but two incomes and two different styles of money management.
What works for one might not work well for the other. The goal as newlyweds is to make it work for both of you.
Set expectations early
There’s no better time to talk about your personal finances than when an engagement is announced. It’s an opportunity to sit down and openly share your income, debts and thoughts about how managing joint finances. The clearer the expectations, the less chances there will be arguments over money.
This discussion should include who will pay what bills in a joint household and what your financial goals as a couple. For example, one spouse might prefer to eventually stay home to raise future children. The other might want to travel or buy a home first. It may help to write down your financial goals, both for the short-term and long-term, so they feel more real as you start your life together.
Determine how finances will be handled
The next step is to determine how your joint finances will be handled. Will you both use a joint checking/debit account or keep your separate accounts? Who will be in charge of actually writing the checks or conducting the online transactions to pay the bills? Who will do the taxes? Who will track savings?
Combining all of your income into a joint checking account with debit cards can simplify your finances because you can see when money comes in and when it goes out. If you both want to maintain some level of independence, you should keep your existing accounts (don’t forget to change it to your married name, if needed) and directly deposit some of your income to a joint account for shared household expenses.
Build a budget
Once the logistics of money management are agreed upon, it’s time to work on a budget so you don’t start your new life as a couple going into debt. Review your combined expenses over the past few months and compare it with your combined income. If needed, set limits on discretionary spending such as entertainment, food, travel, sports, etc. to keep spending under control. Remember to set aside money for your various savings goals.
It may help to discuss your finances once a week or every payday just to ensure you’re on track. Use the opportunity to talk about what bills are due and what unbudgeted expenses may come up over the next few months such as last-minute travel, car repairs or the latest release of that must-have technology.
Your wedding vows likely included a commitment to work together as a team, and this should include personal finances. Encourage and support each other during any trying financial periods and always be honest about money.
Trust is a big issue when it comes to joint finances. The more you trust each other and work together, the more confident you’ll be as a couple in accomplishing your financial goals.
Sources: MINT.com; Moneycrashers.com