Marriage is about compromise, and whether you’ve been married for two weeks or twenty years, it’s important to be able to work together with your spouse – be on the “same team” as we say in our house. Financial stress is one of the top reasons for marital conflict and divorce. So before you walk down the aisle, be sure to have the “money talk.”
A Set of Shared Priorities
Personal money management should always begin with an understanding of what you value and what you want. Coming together as a combined household, you’ll need to merge those ideas and create a list of joint priorities that you both support and believe in. These priorities will help influence your most crucial financial decisions.
A Household Budget
At its most basic level, a budget should tell you how much money you anticipate having and where you think it will go. Your income and expenses will almost certainly change once you’re married, so it’s important that you either create a new combined budget, or revisit your individual budgets.
A Spending Plan
While your budget represents a theoretical version of your finances, your spending plan makes that theory a reality. A spending plan provides the details missing in your budget – it tells you how you’ll address your expenses and how you’ll work towards your goals. It’s especially crucial to make sure you have a plan when combining finances to avoid misunderstandings and confusion.
Those three pieces of personal finance are important no matter your relationship status. But before you make those kinds of decisions in a newly combined household, you have to lay some groundwork. Search the internet for various web-based financial software to link all your accounts to track spending patterns and budgets.
Money Talk Can Be Difficult
Talking about money can be hard and uncomfortable, especially if things are not going well. Avoiding a conversation, financial or not, that is difficult only creates anxiety. Get it out in the open sooner than later to start down the right path. The first conversation is always the toughest. If you’re having a hard time starting the conversation, I may suggest setting a time with your spouse to discuss finances. That way you both know what the conversation will be about. Just like anything else in life, the more often it takes place the more comfortable it will become.
Opening a joint account may also be helpful to newer couples who are combining their finances. Couples may find it easier to have a single account into which they can deposit their paychecks and make payments for their rent or mortgage, bills, or other joint debts. Retirement accounts such as IRAs, Roth IRAs, and your work place retirement accounts will not allow for joint ownership.
Joint accounts can cause problems, however, because they generally provide all parties unlimited access to the funds. Thus, if one spouse has difficulty controlling their spending habits, this may affect the other spouse, who may be more frugal. The frugal spouse cannot challenge the withdrawals or transactions of the other spouse with the bank because they are listed as a joint account holder.
Another thing to keep in mind with joint accounts is that all parties with access are responsible for any and all fees and charges. If your husband runs up your joint credit card, you are equally responsible for paying it back. Similarly, if your joint checking account goes into overdraft, you are both liable for the negative balance.
The government may seize any funds in a joint account to satisfy an outstanding order. That includes back taxes that may be owed, child support, or other court-ordered garnishments.
It is best for both parties to speak to discuss the responsibilities associated with opening a joint account before doing so. This can avoid any unnecessary problems and conflict that may arise.
There are several titling mechanics that designate how the funds are divided if one of the parties on the account passes away. These options are required on brokerage accounts.
Joint Tenants with Rights of Survivorship (JTWROS): If one of the parties passes away, the assets in the account pass by the rule of law—outside of probate—to the surviving parties.
Tenants in Common (TIC): This allows each joint holder of the account to designate their own beneficiary for their portion of the assets in the event they pass away. Instead of transferring by the rule of law to the second account holder, the assets are passed to the beneficiary. In addition, the assets may not be automatically split 50/50. The TIC designation allows the tenants to divide ownership of the property any way they choose.
Joint Tenants option: Selecting this option mandates a 50/50 split of the assets in the joint account.
Once you’re married, or experience any other life changing event, be sure to review your retirement account, life insurance, and HSA beneficiaries. It is also good practice to review these annually. When life changing events happen this is not top of mind.
It’s important for couples to work together towards a solution that they’re both comfortable with. Finding a compromise can take some time and it may require examination of your personal spending habits and beliefs about money. Creating a plan for managing your finances early on in marriage can benefit you long after the honeymoon period ends.
If you’re having trouble getting on the same page financially, consider meeting with a financial advisor who can discuss different options with you. Having a third-party perspective included in the conversation can make it easier to talk about money as a married couple and find a system that works for both of you, without compromising your individual or joint financial goals.
Here’s the good news—you and your spouse will continue to get better at managing money together. The more you work together, the easier it will be to work together. That’s why it’s important to not be discouraged during the first few conversations. Ultimately, money is a part of life, but it’s not everything. Shared goals, common values, and open dialogue will help you and your spouse create a happy and wealthy life together.