Combining Finances After Marriage
What an exciting time in your life! The wedding! The honeymoon! We hope this is a magical time for you two and that it strengthens the foundation of a relationship that will bring you joy, fulfillment, and security throughout your lives together.
Do you remember back in grade school when a shared favorite color was enough to build a relationship on? Obviously, times change.
Now, besides learning what you both like as far as music, art, travel, literature, etc., you should be sharing and writing down what some of your most important goals, dreams and values are. Where do you want to live? What type of employment or business do you dream of? How important are vacations and travel to you? What are your expectations about gift giving in the relationship? How much and to which organizations do you hope to donate?
You may think that these questions should be self-evident and that even asking them somehow cheapens your love for each other. Nothing could be further from the truth.
Now is not only a good time for learning what each of you think about money and how to manage it. It is the best time.
Managing one’s money is hard enough (only 40% of American households use a budget regularly). Throw a second adult into the mix, and the tasks of budgeting, saving, investing, controlling expenses, and building credit become exponentially more difficult.
83% of Couples Argue about Money.
Don’t Be One of Them!
Some of the unique financial challenges that confront couples include the following:
- Couples have to come to a mutual agreement on their financial goals. More often than not, this includes both negotiations and compromise. Sometimes this can lead to differences of opinion and even core values. Couples who think that they can avoid arguing over money (including financial goals) by not talking about it will sooner or later find that they have chosen the wrong path.
- Couples have to establish a financial system that effectively and efficiently gathers household income and allows the couple to pay bills, save for goals, and invest for retirement. Prior to the wedding, each spouse likely had their own checking account. Should they keep both open? Consolidate them? Open new accounts? Who will take responsibility for paying the regular bills? For shopping for insurance? For making investment decisions? For hiring professional services? For deciding where and how much to donate? This is where teamwork and commitment come into play.
Marriage is not a 50/50 arrangement. It is 100/100. Both spouses need to be 100% committed to each other.
Both spouses need to commit to confidentiality. Approaching parents, neighbors or friends for advice or just to talk about financial stresses can sometimes be appropriate, but only after both spouses are comfortable with the idea.
Debt Reduction Services Solutions
Debt Reduction Services, Inc. does not presume to solve all of these unique challenges. However, we do provide our counseling and education services to all populations in need.
- To address concerns over consumer debt, we offer budget counseling and debt management services, effectively lowering interest rates with your creditors and setting up reasonable repayment terms to have you living debt free in five years or less. Debt Reduction Services also has programs to set up affordable monthly payments with medical debts, collection accounts, old utilities and phone bills, and more! If either of you bring debt into the marriage, pay it off as soon as possible. Otherwise, it will likely become the topic of regular stress and even arguments.
- Ironically, while your engagement was a time to dream about your future together, your honeymoon was a time to enjoy the present. Now that the wedding festivities and the honeymoon have ended, it is time to get down to the business of making your future dreams together come true. This cannot happen until you start discussing those dreams, agreeing to them, fleshing out the details, and writing them down. If you write them down and share them with others, you will be twice as likely to see them come true*.
Steps for Financial Planning
Unwritten goals remain unfulfilled wishes
Among your dreams, wishes, and goals, include a discussion about your giving goals as a couple. Do you plan to donate to charities, churches and causes? Which? How much? What will you do if family or friends ask for a loan? And what will your couple policy be about asking parents for a loan, accepting money from parents, or even approaching parents for advice?
- While you may have discussed many things you have in common, such as music genres, favorite travel destinations, foods, drinks, activities, shows, sports and more, it is uncommon for new couples to discuss their money philosophies. Yet, this is important to address. Do you consider money as a tool to security, a tool to success, a tool for fulfillment, a tool to greater social status? Or perhaps you think money is something to fear and despise, or even that wealth is a sin? There are other views of money and wealth (see articles below), including an interesting online money personality quiz.
- Create a household budget. You can choose from the traditional, categorized budget, a refrigerator (simplified) budget, or our Money Pie budget. These three options are explained at www.debtreductionservices.org/emep/its-simple-s-stands-for-spend along with free resources to print out and use.
- Commit to meet for a weekly huddle to review your finances and goals. Arrange to meet on the same day at the same time each week. One of you should balance the checking account ahead of time. As you sit down together, the first thing you will do is remind each other why you are spending this time together: to work toward your mutually-agreed upon goals. Next, catch each other up on any financial activities in your accounts that you know of. Then – and this is the most time-consuming part – look about 10 to 14 days down the road to identify what bills will need to be paid, who will pay them, what shopping will happen, whether that will be with cash or debit, and what income will be deposited. Make sure you are both on the same page and have a good understanding of what will happen in your accounts. This activity is crucial to building trust between the two of you as well as turning you into a cohesive team that is headed in the same direction. Finally, return to your goals and ask (and answer) the question, “What can we do this week to add another $5, $50 or $100 toward our savings goals?” Ready? Break! And go team!
- If you have not done so in the past twelve months, now would be a good time to access and review your credit reports from AnnualCreditReport.com. It’s free (in fact, it’s mandated by the federal FACT Act of 2003) and does not impact your credit rating. With your credit reports in hand, sit down and go through them together. If you find debts that you were not aware of, this is the time to make a debt repayment plan or even call Debt Reduction Services Inc. Avoid criticism and, instead, be supportive in your quest to eliminate your debts in order to reach your mutual goals. If you are unsure about how to read your credit report, please reach out to our counselors and educators toll-free at (877) 688-3328. We are happy to review them with you at no cost.
- One question we are often asked is, “After the wedding, should we close our individual checking accounts and open a joint account or keep separate checking accounts?” Household banking systems are as varied as the married couples are, so there is no one answer that works for everybody. That said, we typically recommend that most couples (with the exception of those bringing individual collection accounts into the marriage and some previously divorced individuals) consider the following hybrid household banking system? Have a joint checking account into which you both directly deposit your paychecks. From there, make sure to automate transfers into savings and investment accounts that are for your mutually-agreed upon goals (e.g. retirement, vacation, holiday, travel, etc.). Pay your bills, purchase groceries, and pay for your date night activities (yes, you should still “date” each other after marriage) out of the joint account. Then comes the key: either withdrawal equal amounts of cash for “fun money” or have it automatically transferred back into your individual checking accounts. Because you are an equal partnership, you should both receive an equal amount of fun money each month that you can spend on anything (legal) you want, no questions asked. This is the money you spend to go out to dinner or drinks with friends, use to purchase the garage toys that your spouse doesn’t want, save in order to buy gifts for your spouse, spend at vending machines, etc. And when we say, no questions asked, we hope that you will take it to heart. If you start asking questions, your spouse might begin to feel guilty about how he or she spends the fun money, which will, in turn, lead to feelings of stress and even distrust.
- Contact your insurance agent(s) about updating your policies according to changes in your situation. This might include car insurance, homeowners or renters insurance, life insurance, disability, and health insurance.
Finally, take advantage of our free webinars to brush up on or polish off your financial skills and knowledge as a couple. Webinar topics include savings, household budgeting, establishing a financial vision, student loans, shopping and spending strategies, spending personalities, as well as relationships and money. These webinars are accessible 24/7 at no cost.
- Forbes: 13 Financial Tips for Newlyweds
- Inc: 4 Money Scripts (and What They Say about You)
- LearnVe$t: 8 Biggest Money Mistakes Newlyweds Make
- MoneyTalk News: 5 Money Moves Newlyweds Should Make but Often Don’t
- US News & World Report: Newlyweds: Here’s How to Minimize Marital Money Strife
- Money Harmony: Online Moneyharmony Quiz
*Matthews, G. (2015). The Effectiveness of Four Coaching Techniques in Enhancing Goal Achievement: Writing Goals, Formulating Action Steps, Making a Commitment, and Accountability, Annual International Conference of the Psychology Research Unit, Athens, Greece, May 25-28, 2015. Athens, Greece: Athens Institute for Education and Research. Retrieved from www.dominican.edu/dominicannews/study-highlights-strategies-for-achieving-goals.