Dealing with money as a newly married couple
How will you handle money as a newly married couple? One practical matter that you should discuss, preferably before you say yes to each other, is how you will handle money in the future. While it's true that it generally makes financial sense to get married, how do you make it sensible and profitable for yourself?
Couples have three basic ways to manage their finances: jointly, separately, or by combining these options. Here are some tips for understanding which method will work best for your couple.
Money serves as a stumbling block for many couples and as hard as it may be for you, you should always understand that lies degrade when it comes to marriage and money. Honesty is great for discussing your affairs together and planning your household budget.
Separate accounts in money management as a newly married couple
Keeping accounts separately is a very good option for people who like to manage their income independently. It's a great option for couples who have about the same income and are willing to put their money toward common purchases when necessary. A separate accounting system will help you understand who earns more, who spends more, calculate debts, and find ways to solve financial problems.
Even though everyone is responsible for their own income - it implies more communication as a couple. You may be more comfortable investing your money in proportion to your income, or perhaps splitting your expenses equally. A simple Excel spreadsheet is the easiest and most elegant way to divide and track your budget.
Of course, you'll still need to add up for general purchases, plan a budget for household expenses, strategize for a comfortable retirement, and achieve your overall long-term goals. But still, separate accounts give you more freedom to manage your finances.
- Advantages: Each of you is responsible for your own spending habits and paying off any debt you brought into the marriage. Assuming you're both comfortable with splitting joint bills, this way of managing money is the "fairest," and you may find yourself arguing less about your spouse's spending habits.
- Disadvantages: Keeping track of who owes whom and how much is quite difficult and involves a lot of work. You can also expect disputes, which will have to be resolved by cleverly coming to a compromise that will be beneficial to both of you. This option will also be uncomfortable if one of you wants to change job, start education, or you might wait a child into your family - and that could seriously hurt your plans.
Using a joint account
This is an easy enough plan to simplify your management as a couple. It also has its advantages and disadvantages. You don't have to count who has to contribute how much to the budget, you don't have to constantly update the spreadsheet, and all household or child expenses will be paid out of the overall budget. You can also plan your budget in a spreadsheet or using some third-party application from the internet. It will be much easier with a shared budget.
- Advantages: It's easier to track budgets and expenses, plus there's no monthly breakdown of resources and no financial changes are required when comes in your life.
- Disadvantages: Perhaps one partner earns much more than the other, or one of you is a bigger spender. This can be very unpleasant in the long run, but if you know how to negotiate with each other, all of this can easily be avoided.
With separate and joint accounts
Co-opting joint and separate accounts is a great way to find trade-offs between the two aforementioned options. The basic idea behind this strategy is that all income goes into a joint account and common family expenses are dealt with from a common budget, but everyone has their own personal account into which a set amount is transferred each month. "A personal fund" helps you manage your finances independently, spend a few hundred dollars on any thing you want and not be judged by your spouse if that money was not taken from the common budget. The amount you want to transfer to your personal accounts should be discussed with your spouse to avoid conflicts.
- Advantages: You work together on joint tasks, a timely and comfortable retirement with your significant other, but everyone has the freedom to spend their money the way they want.
- Disadvantages: The method requires managing multiple bank accounts, which can be quite difficult given everyone's busy schedules at work.
Additional advices for all couples
Regardless of how you decide to plan a joint budget, you must also be prepared for other complexities in life together.
In marriage, you have to decide who pays for what. Of course, this is not the most pleasant aspect of living together, but it is the most necessary. Paying your debts, loans, and bills on time will help you and your spouse worry less. Who and how much money contributes to the common budget, and how you work on your common tasks is an important element to discuss first before moving in together. Talk about your finances regularly, and if you are unhappy about something, try to resolve it sooner to avoid conflicts with your spouse.
Even if it's not the most romantic part of moving in together, newlyweds need to talk about household logistics - who will pay what bill, how you'll reimburse each other, and how you'll work toward common goals. Plan to sit down and discuss these logistics to make sure you both understand and agree on the plan, and that all your bases are covered. Once it's determined who will pay which bills, automate payments so you never fall behind and your spouse doesn't have to worry. And continue to discuss your finances regularly. Clarity is key when it comes to money matters.
There's no real right or wrong way to manage your budget. Each married couple should choose their own strategy by discussing it with each other, then your marriage will be free of conflicts related to money. If you are experiencing some difficulty in deciding and planning your household budget, then contact a financial advisor.
Was this article helpful?4 Posted by: 👨 Brian C. Clark