Tuesday, 5 December 2017
Many engaged couples spend more time talking about cake, flowers, and honeymoon plans rather than their finances.
Yet money issues are a common trigger for marital spats. Sorting through how to combine your finances before you walk down the aisle is an important first step to avoiding future conflicts.
When you and your partner both come to the marriage with multiple accounts, what is the best way to merge them? Should you have one checking account or keep separate ones? Here are five steps to help you figure out the best approach.
The first step recommended by many financial experts is to have an open and honest discussion about your income, your assets, your debt, and your spending habits. What are your long-term financial goals? Work out a budget and figure out the details, such as who will pay the bills. Measure your progress toward goals on a regular basis, whether it's weekly, monthly or quarterly.
Many couples find it easiest to have at least one joint checking account to pay for regular expenses, like rent and utilities. But if that makes you uneasy, you can also keep your financial accounts separate and split the costs, notes Kiplinger's Personal Finance.
Keep in mind: this method can make it more complicated to track overall spending. And if one person earns a lot more than his or her partner, the couple will need to have some frank discussions about the most comfortable way to divide expenses.
Even if you have a joint checking account, you still may want to have individual accounts for savings. In fact, a Money magazine survey found that the happiest married couples have a joint account and some discretionary money either in a separate account or just some money set aside for their personal spending.
Some financial expert recommend a "three-pot" system — a joint account for shared expenses, and another account for each partner for discretionary spending. The advantage of this system is that the partners have some money that they can control completely, but couples also still hash out how much money goes into these different accounts.
Whether you have one, two or three accounts, it's wise to establish a limit for purchases that can be made without discussing it with your spouse. That will ensure neither of you is blindsided by a large, unexpected bill. You may want to set up text or email alerts on your accounts so that both of you know if a there's a low balance; and you'll be notified if one of you spends above the limit you've set.
You and your spouse need to revise your retirement accounts to add each other as beneficiaries so that in the event of death, the surviving partner has access to the funds. While you're at it, update any life insurance policies with your new beneficiary.
As part of your combined budget planning, decide how much each of you will contribute to your retirement account in the context of your new financial partnership.
Kiplinger's financial experts suggest that each partner keep one credit card in his or her name in order to establish and maintain a credit history. Many married couples opt to have at least one joint credit card account for convenience and for mutual expenses such as traveling together.
While each of you has a separate credit history, your payment history on a joint account impacts both of your credit scores. Both of your credit histories and scores will be reviewed when you apply for credit together, such as for a mortgage, so it's important that both of you develop a strong credit profile.
There's no right or wrong way to mingle your money. You need to find the right fit for your relationship. Whether you opt for combining all accounts or keeping some separate, the key to a financially-solid union is to take a team approach — and make decisions together.
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