Experts say couples considering marriage should talk about their financial plans before they get married. But many newlyweds find themselves married to a person with very different thoughts and habits concerning money. The following tips will help newlyweds get on the same page about how to handle money in their marriages.
Don’t Keep Money Secrets
The most important tip for newlyweds who want to get on the same page with their money is to be open about their current financial situation. “You should disclose as much as you can to each other, including your salary, debt load, student loans, inheritance, savings and credit status,” advises CNN/Money contributing columnist Gerri Willis in “5 Tips: How to Talk to Your Partner About Money.”
In addition to discussing each partner’s finances, it’s important to share attitudes about money. “Sit down and share what money was like in your family growing up, what money messages you might have inherited from there and what money personality you tend to have,” therapist Olivia Mellan told Today financial editor and TodayShow.com contributor Jean Chatzky in “Here Comes the Bride… and Bickering?” Be open and understanding about each other’s situation and make a pledge not to keep secrets going forward.
Decide on Joint or Individual Accounts
Newlyweds need to decide if they are going to have separate or joint bank accounts. Alternatively, married couples can choose a system that incorporates both a joint account for household expenses and individual accounts for personal expenses and former debts. There are advantages and disadvantages to all three systems, but deciding together how the finances are going to be handled is the key.
“There is no universal right answer to the question of whether to merge your accounts or keep them separate,” says Kiplinger’s Personal Finance reporter Stacy Rapacon in the October 2008 article “Marriage and Money.”
“What’s most important is to agree on what works for you,” Rapacon says. Newlyweds should also agree how much each person can spend at one time without consulting the spouse. Whatever the amount the couple decides, each partner should respect that threshold and discuss larger purchases with their spouse in advance.
Make a Monthly Budget
Start with a list of all expenses, Rapacon says, then add all income, assets and debts. Use actual financial documents to gauge expenses and income for the most accurate monthly budget. While one person will be in charge of paying the bills, it’s important that both partners are aware of what is going on financially and where to find account numbers and passwords, Rapacon recommends.
“The person controlling the checkbook not only has the power that goes along with managing the finances, but the worry,” Chatzky says. That’s why it’s important for both couples to have similar financial goals and regular budget meetings.
Plan on Monthly Budget Meetings
It is important to set aside a specific time to have monthly budget meetings as a couple for several reasons. Budget meetings serve as an opportunity for both partners to ensure they are working toward their joint financial goals and to discuss spending priorities.
“To get things off on the right foot, start with the positive: How are you doing saving for the next big vacation? Are you close to a down payment on a house?” Chatzky advises. “The excitement of closing in on these goals is something you can both share. Talk about any new goals as well, and how you’ll start planning for them.” Discuss financial challenges and upcoming expenses as well, she says.
Budget meetings can provide an opportunity to talk about long-term goals and set financial goals together. Willis recommends discussing dreams, future goals for home ownership, plans for children and whether one partner wants to pursue additional schooling. “Creating goals will give you the drive to save more,” Willis says. Couples who use individual accounts can use budget meetings to make sure plans are made to handle one-time expenses or annual bills.
Update Financial Documents after Marriage
Newlyweds need to take care of a few business items to update financial documents. Rapacon says couples need to update the beneficiaries on any existing insurance policies, retirement plans or IRAs. Changing tax-filing status, adjusting withholding allowances at work and changing documents such as Social Security cards to reflect married names are all important. Married couples may want to make a prenuptial agreement or arrange for a power of attorney in case their spouse is incapacitated. Willis recommends making a will and considering if life insurance is needed.
Married couples can learn to handle money in marriage by eliminating money secrets, making financial plans together and setting monthly budget meetings. Couples who have trouble following these money tips may benefit from meeting with a financial planner or marriage therapist. For more about married money management, read How to Stop Arguing with a Spouse about Money.