Many couples wonder if tying the knot also means merging your finances. Sometimes the discussion of finances and money gets left on the backburner. Understanding how to manage finances in a marriage involves discussing your goals, current financial situations and choosing an approach that suits you and your significant other. Let’s look at how establishing open lines of communication from the outset might help set you up for a brighter financial future.
Planning for the future
The communication skills underpinning successful finances are the same that may help reinforce a healthy relationship. Practicing them can potentially bring you closer and might illuminate effective ways of tackling challenges that spring up in other areas of life.
Understanding your finances
Before developing a financial strategy with your partner, it’s usually helpful to have a clear understanding of each other’s financial situation. This means understanding your individual incomes, expenses, debts, savings and any other financially relevant information. Leaving out important details may hamper your ability to tackle challenges that might arise later.
The next step in managing finances as a couple is typically to set short, medium and long-term financial goals. This could include anything from paying off debt to saving for a down payment on a house or planning for retirement. Whatever they may be, setting specific, measurable and realistic goals can provide a target to measure progress.
Couples finance requires clarity and transparency. Before discussing your finances and future together, agreeing to collaborate and prioritize honesty with your spouse may be key. By regularly discussing your finances, including your spending habits, income and progress towards financial goals, you might help provide a framework for identifying challenges early and developing a well-informed plan to overcome them.
Should married couples have shared bank accounts?
When learning how to handle finances in a marriage, one of the first questions people may ask is, “Should married couples have separate bank accounts?” In reality, there’s no right answer. A more appropriate question might be, “Are shared or separate bank accounts right for us?” Let’s look at some of the pros and cons and why some couples might choose a hybrid approach.
Shared accounts mean both of you maintain equal access to the same account or set of accounts. This accounting style can possibly help both partners track their spending and make decisions together, promoting transparency and accountability while helping to pool resources for larger expenses.
Sharing accounts can also present some potential disadvantages. For example, if spending habits or preferences differ, disagreements may arise over how the shared funds are being used. Shared accounts might also blur the lines of fiscal responsibility, making it more difficult to decide who is responsible for specific expenses.
Separate accounts mean both of you maintain your individual accounts. For some partners, keeping separate accounts might help preserve a sense of financial independence. This arrangement allows both of you to manage your finances according to your own preferences and needs and can potentially protect one another’s finances.
But separate accounts could come with a downside too. Separate accounts might make it more difficult to track expenses or pool funds for future goals. This arrangement may also require more careful planning when deciding who handles which household expenses and when.
Shared and separate bank accounts
For some couples, a mixture of shared and separate accounts might be the answer. Typically, both partners maintain a set of individual accounts, plus one or more shared accounts.
The individual accounts are often used as a “partition,” allowing each partner financial freedom within agreed-upon limits. For example, you could set up direct deposits for a set amount each month, potentially aiding in budgeting. The shared accounts are ordinarily used to combine resources for savings. When combined with a sound budget and savings plan, the style might allow you and your partner to spend or save at your personal discretion while working together towards future goals.
The pros and cons of a hybrid financial management style are a mix of those that come with shared and individual accounting strategies, to varying degrees. It might be helpful to think of a hybrid approach as a “compromise” in which the strengths and cons of either option are mitigated by each other.
Budgeting tips for couples
Managing finances as a couple takes effort, but practice provides an opportunity to develop the communication and planning skills that contribute to a successful long-term relationship. Here are a few tips to consider as you tie the financial knot:
- Budget together: Working with a budget might help you both stay accountable and work towards your financial goals. Whether it’s the 50/30/20 rule or another method, budgets give you a compass and a map to navigate your financial landscape.
- Use technology: Nowadays, countless tools are at your disposal. Many banks have their own mobile banking apps that might help with checking your account and managing your finances on the go.
- Automate your finances: Finding ways to automate your finances might just help reduce some of the workload. For example, setting up automatic savings transfers and bill payments may help grow your savings while reducing the chances of incurring late fees.
- Plan for emergencies: Emergencies can happen to anyone. Keeping aside an emergency fund to cover unexpected expenses is key to weathering financial storms when they arise.
- Seek professional help: If you need help managing your finances, consider seeking the aid of a financial professional. This could be a financial planner, accountant or other financial expert who could potentially help you develop a personalized plan for your financial future.
Remember, every couple is different, and there’s no one-size-fits-all approach to managing your finances together. The key is to find what works for you and to adjust as needed to ensure you’re on track to achieve your financial goals.
Learning how to handle finances in a marriage often takes communication, sound planning and mutually agreed upon accounting strategies that help you and your partner reach your goals. There’s no perfect financial management style, but now that you know more about how to manage finances in a marriage, you’re well on your way to building the life you’ve always wanted, together.