There are a lot of major milestones in life, birth and marriage being two of the biggest. If you're about to get married or contemplating marriage, it's critical to your present and your future to have the "money talk."
Money conversations with a significant other, particularly a future spouse, are not always simple conversations to have. Statistically, married couples are less likely than any other type of couple to have regular money chats. However, these talks should be a priority before you walk down that aisle to avoid financial misunderstandings after you tie the knot. Approaching this conversation with honesty and transparency can help you get started on the right foot.
How to Manage Money As a Couple
When you get married, there are three main options for dealing with your money. Those include keeping your finances separate, merging some of your accounts or putting all of your financial eggs in the same basket. Each option has its pros and cons, which are important to consider as you and your spouse map out your financial plan.
Option #1: Each spouse manages and maintains their own, separate account
Some couples may have cold feet when it comes to joining their bank accounts. They may choose to manage and maintain their own separate accounts. At the same time, they might commit to each saving an agreed upon amount per month, and dividing up household expenses according to a fair distribution.
Pros: You don’t have to worry about your spouse having the same spending habits as you and you can continue to manage your money as you like. That's a plus if you're worried about sacrificing any of your financial independence or if your spouse is a spender, for example, while you're a saver.
Cons: It makes bill paying a little trickier, and you'll still need to communicate about how much each person spends. If one spouse is not a good communicator, this may cause issues. Additionally, if something were to ever happen to one spouse, it could take months before the surviving spouse gets access to the funds.
If you're managing bank accounts individually, take care to consider how much you're each paying in banking fees. Maintaining two separate accounts could prove costly if you're each paying steep fees each month.
Option#2: Merge your money halfway
If a couple decides to merge their money halfway, each spouse keeps a separate bank account in which to put their paychecks, and then there is a joint account funded by both spouses from which expenses are paid.
Pros: The pros in this situation are that each of you has the ability to maintain some independence, while at the same time playing a shared role in your household financial management. When bills are paid from one account, it can take the stress out of keeping track of what's been paid and what hasn't.
Cons: Having multiple accounts to manage could be a little confusing, especially if one of you is more organized than the other. If you and your spouse earn different salaries, you'll have to figure what percentage of each of your incomes is a fair amount for each to contribute toward shared expenses.
If you're setting up one shared checking account, remember to link it to each of your individual checking accounts. That way, you can each easily transfer in your contribution to the household bills each month.
Option #3: Put all the money together in a union - like your marriage!
In this scenario, you'd set up a single joint bank account into which all future paychecks are deposited and from which all expenses are paid. Any spending money, vacation money, and all other purchases come out of this same account. You could also decide to allocate a set amount each month from the account to use as you both wish.
Pros: A joint bank account can offer a sense of unity and partnership. If you're focused on fine-tuning your budget, it'll be easier to track money coming in, versus money going out, because there's complete transparency, and it can be simpler all around to have all your money combined in one place.
Cons: One of the main cons of this set-up for a newly married couple is that one or both partners might feel that someone is always looking over their shoulder. If one spouse tends to spend money more freely than the other, it will be much more readily apparent and that could lead to money arguments.
When setting up one joint account, check the ownership status. Being joint owners with right of survivorship means the surviving spouse automatically assumes ownership of account assets if the other passes away.
Regardless of the approach you choose, it's important for couples to work together toward 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.
Frequently Asked Questions (FAQs)
Are finances and debts automatically intermingled when people get married?
Debts are owed 50-50 by spouses in community property states, regardless of which of them contracted for the loan or obligation, but that applies only to debts taken out during the marriage. Premarital debts remain the sole responsibility of the spouse who signed for them. There are only nine community property states as of 2022: Arizona, California, Idaho, Louisiana, Nevada, Texas, Washington, New Mexico, and Wisconsin.
Does it make it easier to divorce if you keep your finances separate?
It can make it easier for a court to determine who owes what if debts and credit accounts are clearly in one spouse's name, but it doesn't necessarily mean that only that spouse will be responsible for paying it, particularly in community property states. Keeping your finances separate can also make it easier for you to reach a settlement agreement as to how to end your marriage without having to ask a court to decide.
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