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Whether you are looking forward to tying the knot or already basking in marital bliss, sooner or later you’re going to have to pop the question: “How do we plan to manage our finances as a couple?”
A 2017 study conducted by Dave Ramsey found that the number one issue married couples argue about is money. However, money and marriage can live happily ever after—with proper planning and communication, of course.
Talking about money with your honey doesn’t have to be an awkward conversation!
Here Are 5 Things to Consider When Having “The Money Talk”:
- Time = Money? Many couples assume that they have to completely merge their finances the moment they say “‘til death do us part”. However, doesn’t have to be the case. It’s best to have an open discussion about how much of your finances you would like to combine and what your desired time frame for this transition would be.
Weigh Your Options. There are three general options available for combining finances as a couple:
You can have separate bank accounts in marriage. If you opt for this approach, it is best to have a general understanding of who is going to be responsible for which bills every month
Commingle your finances in a joint account. This option is favorable if you want to have a more collective approach to managing your finances. In this case, both incomes reside in one account that is managed by both you and your partner.
Or you can utilize a combination of both. With this option, you and your partner would continue to manage your individual accounts, as well as a shared account that you each can contribute to.
As a couple, you should decide how much money you each will be transferring to your mutual account. For example, you may settle on a proportional method, meaning you each chip in an amount that is proportionate with your income. Or, you may decide to contribute an equal amount each pay. Ultimately, whichever method you choose, it’s important that both of you are comfortable with your decision and that your plan can be sustained for the long-term.
- Divide & Conquer. What role are you each going to play in managing your living expenses? Is one individual going to handle the day-to-day costs and the other is responsible for managing the larger bills? Or, are you going to assign bills based on the anticipated cost so that you each are paying a similar amount? Addressing these questions ahead of time can alleviate some confusion and financial obstacles down the road.
- Create a Budget. Avoid financial frets by setting spending expectations and limits individually and as a unit. Using a budget binder can help you assess how much you can allocate towards your necessary living expenses and build a clearer picture of how much wiggle room you’ll have each month
- Do Your Paperwork. Maintaining up-to-date information on your essential documents (such as wills, retirement plan documents, insurance, etc.) is a crucial step when merging two financial worlds into one. Speak with an advisor to help navigate the process of updating these pivotal pieces or for taking the first steps in securing and establishing these materials.
- Make Finances a Routine Conversation. Staying up to date on where you stand financially, setting financial goals as a couple or as an individual, and making any needed adjustments to your monthly budget should be an on-going conversation. “One-third of people who say they argued with their spouse about money say they hid a purchase from their spouse because they knew their partner would not approve.” (Dave Ramsey Study) Sure, purchasing a coffee here and there doesn’t necessarily warrant a discussion, but splurging on a new set of wheels or making a risky investment should be addressed together.
There is no one-size-fits-all approach to merging and managing finances as a couple. It’s simply a matter of deciding which option is right for you, your lifestyle, and your financial goals.
Your approach and efforts may shift over time as your incomes, expenses, and overall needs fluctuate. Our team is here to lend a helping hand through all of life’s changes– offering you protection and security today, tomorrow, and for a lifetime. Contact a member of our team to learn more about how we can make it all work together for you and your loved ones.
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