One of the most important things to discuss in a marriage is finances. You and your spouse now share financial responsibility. Each spouse should be open and honest about their current situation with money. You two will have to work together to decide what financial choices you’ll make in the future. Here are the basics of discussing finances in a marriage.
1. Bring up the subject casually.
The time to talk about merging finances should actually be before you marry, but many engaged couples avoid discussing it. When starting the conversation, bring up the action items that are important to you. One thing you might want to discuss is both of your credit scores as you prepare to buy a house. You can tell them you’re going to look at yours, and then you can suggest that they look at theirs. If one of you has a higher credit score than the other, it might be better to buy a house without both of you on the mortgage.
2. Have data gathered to support decisions.
Credit reports, account balances, credit card debt, and other supporting documentation should be printed. You and your spouse should agree that all financial decisions will be based on numbers and not facts. You should both also have a clear idea of the debts that have come into the union and the plan to pay them down. It’s a good idea to take time to sit down and look at your numbers once a month.
3. Be open about bad habits.
It’s important that you and your spouse are both open about bad habits that may not be apparent on the credit reports. One example will be if one of you doesn’t take time to write down purchases made on a debit card to balance the checkbook. As a single individual, you might not have thought much about tracking every purchase, but now that you’re married to someone, not keeping up with where the money is going could cause future frustration. Both spouses should also detail any blemishes on their credit, such as having too many credit cards open, having bills in collection, or being in default on student loans. Additionally, arguing and casting blame over money should be avoided. It will cause one of you to not feel comfortable about being as open and honest about money issues in the future.
4. Decide whether to merge money or maintain separate accounts.
Even though you two are married, no laws state that you and your spouse have to merge your accounts. But then, if you do decide to have separate accounts, both of you should have access to each other’s records since you’re sharing a household. Depending on your credit scores, it may be better for you and your spouse to maintain separate accounts. As noted earlier, it can impact options, such as buying a home. One spouse on a mortgage alone will have a better chance of getting a loan than two people with mixed credit scores.
5. Settle who’s the overseer of the money.
It’s good to let one person have the final say on decisions related to small and large purchases. It’s usually best if the person whose most organized and financially savvy manages the finances. Still, both partners can take on responsibility in different ways. Duties can be chosen based on each person’s individual strength. If you happen to be better at saving, you can be responsible for building the emergency fund and monitoring the retirement savings. If your spouse is good with balancing the checkbook and paying monthly bills on time, they can be in charge of that.
6. Make no big purchases without your spouse’s approval.
No matter who makes the most money in the marriage, all big purchases should be decided on together. Boundaries should be set about how much either of you can spend without discussing with the other person. As an example, you and your spouse could set a spending limit of $100 without checking. The number should be a low amount in the budget and won’t overdraw from the account.
7. Set a household budget.
When setting up a budget with your spouse, it should include items such as outstanding bills before you were married, ongoing needs, and household bills. The budget should be realistic and something that you both agree to commit to. Be sure to add up every single monthly expense you have to spend, and plan in advance for them. You should also include separate and joint goals that you two have financially. Make long-term goals such as saving for a down payment on a home.
8. Discuss building an emergency fund.
If there was no emergency fund made before you married, you and your spouse should start a discussion about building one. Emergency funds help when unexpected expenses come up, or one of you is unemployed for a time period. Ideally, it’s best to put away enough money to pay off at least 3 to 6 months of expenses. You and your spouse should also come to an agreement about what defines an emergency.
9. Plan for retirement.
You and your spouse should decide on a retirement plan, and then start saving. Payments to 401K and any other investments can be written down as a part of your budget. In addition, the beneficiaries for each account need to change now that you two are married. Lastly, if it hasn’t been done yet, you and your spouse should draw up life insurance policies to ensure both you and your family are financially secure in the event of a tragedy.
Money can be challenging to discuss at times, given how personal the subject can be. Nonetheless, it’s necessary for you and your spouse to have these conversations to properly manage your finances. Another key thing to focus on in these discussions is taxes. Knowing how to calculate them can be useful for both of you to know. Consider looking into learning how to use an income tax return calculator.
