How to Manage Money as a Couple: Home Budgeting That Works
When it comes to relationships, money isn’t usually the best topic for a first date. But, as things get more serious, couples eventually need to decide when and how to merge their finances after marriage. In fact, many couples start planning their joint financial future before they say, “I do.”
Although there’s no one best solution for everyone, Quicken’s suite of personal finance management solutions makes it easy to manage your money as a couple no matter how you decide to do it — even if you’re not merging your finances at all.
For love or money: how should you manage your money as a couple?
When should you talk about budgeting as a couple?
It’s a good idea to talk about merging finances before you make a lifetime commitment. While there’s no magic moment when couples must discuss the matter, many financial advisers agree that a conversation should take place well before the actual wedding.
According to Erik Klumpp, a certified financial planner and founder of Chessie Advisors, LLC, “Once a couple is engaged, it’s a good time to begin discussing how to handle their finances together.”
According to Eric Roberge, a certified financial planner in Boston, “In most cases, finances are the last thing couples talk about. Unfortunately, it’s usually after they get married. Personally, I recommend bringing up the subject before getting engaged. It’s important to understand the impact of marriage on your finances.”
Managing your money as a couple or separately
There’s no right or wrong answer for how any given couple should manage their financial lives, but Roberge suggests at least discussing how you’ll pay for expenses, including how to divide those expenses if you have significantly different incomes. If nothing else, knowing what to expect ahead of time will make things easier as you start your new life together.
On the plus side, merging your money into a joint account can make life simpler, with fewer accounts to manage and more transparency. “Both spouses can know exactly where they stand financially since both have access to the accounts,” says Klumpp. “Combining expenses also provides a reason to communicate and hold one another accountable for their spending,” adds Roberge. “It’s very much a team approach.”
But there’s also a downside: Each partner can scrutinize every purchase made by the other. Klumpp also cautions that “it’s easy to take the money and run. Since both spouses have equal access to the money, in many cases, they can withdraw the money with just one signature.”
Deciding to merge your accounts into joint accounts when you’re not married (or before you’re married) also comes with tax implications you might not have planned for.
On the other hand, keeping things separate gives you both more independence. “But,” adds Klumpp, “if not carefully managed, this freedom could cause concern for the other spouse.” Roberge agrees. “One spouse might always question what the other does with his or her money,” he says, “adding additional stress to the relationship if these concerns are not communicated.”
Consider a hybrid option
Fortunately, managing your money as a couple doesn’t have to be an all-or-nothing approach. “I suggest that my clients create a joint checking account and add a certain dollar amount into that account each month from their personal checking, or vice versa,” says Roberge. “You can then use this joint account to cover all shared expenses.”
For many couples, a hybrid approach is the best of both worlds. You can take care of your expenses together while still enjoying enough independence to surprise each other for Valentine’s Day. It can also help keep the spark of dating alive by creating a way to give each other gifts that don’t feel like you’re just spending your joint money.
Whichever direction you choose, a joint savings account for married couples can help you work together toward your long-term goals.
Discussing your long-term financial goals
Even if you’re both smart with money management, you still might disagree, at least at first, when it comes to your long-term priorities. For example, one of you might consider buying a house to be a higher priority than saving for retirement. The other might feel the opposite.
Certified financial planner Craig Schmith says typical goals you might need to work out together include saving for college and retirement, buying a new house, or changing careers.
Talking about money can feel awkward, but it doesn’t have to be that way. Consider it just another aspect of getting to know each other. One way to start the conversation is for each of you to draw up a list of short and long-term goals, then compare your lists.
Talking about why you each feel the way you do can help you get to know each other on a deeper level. Did your parents struggle to go to college? Did you spend your childhood in urban apartments, wishing you had a home with a yard to play in? As you discover the feelings behind each other’s reasons, you can decide together which items to prioritize.
Usually it’s not a matter of choosing one or the other—say, house or retirement—but how much you can and want to spend on each. Schmith says he often gives clients a matrix with more than a dozen options.
If the breadwinner is looking at a job change that cuts her salary, for example, the matrix can show the consequences of a 10 percent, 20 percent, or 50 percent cut. Multiple options give you more flexibility in negotiating a plan you can both live with.
Once you set your mutual goals, try scheduling regular meetings to talk about your progress. If problems crop up, it’s usually better to talk about them than hide them. “I encourage people to be on the same page” when planning, Schmith says.
Ten questions to ask when managing your money as a couple
Want some guidance for discussing those long-term goals? Here are 10 questions to ask each other on your next financial date. It might not sound romantic, but then again, arguing over money management is one of the biggest causes of marital tension. An open, honest talk about your finances could be just what Cupid ordered.
“Financial dates are a great way for couples to set priorities, build trust and increase marital bliss,” says Jennifer Openshaw, chief executive of FamilyFN, a Los Angeles, California company that provides financial advice. “Probably the biggest mistake couples make is not talking about money management. It’s really about setting aside time so you can both plan for your hopes and dreams.”
1. Where would you like to be in five or ten years?
This question is the best way to start a money conversation, says Openshaw.
For example, does one of you want to go back to school, start your own business, or buy a vacation home? If you plan to raise a family, how many children and when? Would you both continue working, or would one spouse want to quit and stay home with the kids?
Discussing your hopes and dreams together will help you set priorities and identify savings goals.
2. What are our assets and liabilities?
Before you can create an effective strategy to reach your goals, each person should fill out a net worth worksheet, detailing their assets and liabilities. Once you know where you stand right now, it’s much easier to move forward.
Also, if you haven’t discussed it already, engaged couples might want to discuss a prenuptial agreement (prenup) to decide how assets would be distributed in the event of a divorce. If either of you owns a home or has investments, owns a business, plans to support the other through school, or has children from a previous marriage, a prenup might be worth the time and effort.
If you think a prenup might be right for you, be sure to broach the subject with your partner as soon as possible, giving you both time to digest the idea and move forward together, well before the wedding.
3. Should we keep our finances separate or manage our money as a couple?
Some couples relish the unity and trust that joint accounts foster, while others prefer more freedom and autonomy by maintaining separate accounts. Or, as discussed above, you can have both—setting up a joint account for household expenses while keeping separate accounts for personal spending.
The key is to find a system that works for you. Make sure you consider your individual money management styles. If you’re a saver and your partner is a spender, for example, you might find managing an all-purpose joint account too nerve-wracking, and opt for a combo approach or separate accounts entirely.
4. What about our investments?
Whether or not you choose to combine your investment accounts is, again, entirely up to you. You can’t open joint IRAs or 401(k)s, but you can change the beneficiary information to name each other.
Nevertheless, it’s important to view your portfolios as a whole to make sure you aren’t overlapping. Even if you don’t combine your accounts, you might want a way to track them together.
5. How will we handle daily spending decisions?
One of the first tasks newlyweds should tackle is creating a budget. Sit down together and plot out how much you expect to spend on groceries, clothes, eating out, and other household expenses.
Remember, budgeting isn’t about depriving yourselves. It’s a financial tool that can help you reach your goals.
You should also take this time to discuss other spending guidelines, such as how much each of you should be able to spend without consulting the other. You probably don’t want to discuss every $5 purchase, but you don’t want to come home from work and unexpectedly find a new Mercedes in the driveway either.
If you’ve had trouble budgeting in the past, tools like Quicken Simplifi or Quicken Classic can make things a lot easier, especially when you start budgeting together.
6. Who will be responsible for paying the bills and preparing the taxes?
In Kiplinger writer Erin Burt’s home, she’s the chief financial officer. She and her husband both contribute to cover the bills, but Erin’s the one who physically writes the checks, rebalances the portfolios, and hashes out the taxes. She’s more organized than he is, so the task naturally fell to her, although you might find that splitting the duties works well in your own relationship.
Erin’s arrangement doesn’t mean she leaves her husband in the dark, though. They have a date every month to go over the budget, review their saving strategies and progress, and discuss upcoming expenses, such as vacations and big-ticket purchases.
No matter who ends up handling the bills in your marriage, make sure each partner knows where to find all the different account information, including websites, passwords, and bill due dates in case the other person ever needs to take over these responsibilities, even temporarily.
7. What’s your tolerance for financial risk?
One of the biggest culprits in marital money management fights is a mismatch of risk tolerance, says Jonathan Rich, author of The Couple’s Guide to Love and Money.
“A lot of life’s most important decisions involve weighing risks,” Rich says. “From investing strategies to career moves, if one of you prefers to take bigger risks in hope of bigger rewards while the other is content to play it safe, you could each end up resenting the other for his or her carelessness, or for holding you back.”
Test your risk tolerance to see where you both stand. If you’re on different ends of the risk spectrum, don’t even try changing your spouse’s point of view—it won’t happen. Instead, try to compromise on financial strategies that both of you can stomach.
8. What are our insurance options?
Adding a spouse to your health insurance may be cheaper than maintaining separate plans. Consider your specific health needs, then weigh the costs and benefits of each person’s plan to make your decision.
Combining your auto insurance will probably also save you money, and you’ll want to make sure you have enough homeowner or renters insurance to protect your combined possessions.
And what about life insurance? Do you need it? If you already have a policy, either privately or through an employer, do you need to change your beneficiary information?
Be sure to take a full inventory of your insurance needs and make these decisions together.
9. How does our credit report look?
The good news is that marrying a person with bad credit will not drag down your stellar record. If you apply for a car loan by yourself, for example, your spouse’s credit report won’t even enter the picture.
But when it comes to applying for joint financing—say, you plan to buy a house together—lenders will consider both histories. Talk about any potential problems ahead of time so you can create a realistic plan to get any loans you might need on the best possible terms.
One thing you and your partner can both do is to examine your credit reports, look for errors, and fix them. Then, if there’s room for improvement, come up with a plan to boost your credit score.
10. How will we tackle existing debt?
Make a pact to pay off your debts, starting with the balances that carry the highest interest rates. You may choose to work individually or collectively to pay off debts you accrued before the wedding, but don’t add each other’s names to your obligations.
Also, consolidating your own student loans to lock in low rates is a good move—but, again, don’t merge your loans with your spouse’s. There’s no good reason to add each other’s existing debt to your credit records. It can only hurt your credit scores, and if one of you were to default, the other would be left holding the bag.
Figuring out how to get there with Quicken
No matter how you decide to handle your finances, says Schmith, “Ultimately you need to be in it together.”
Fortunately, both Quicken Simplifi and Quicken Classic make it easy to manage your money as a couple no matter how you decide to split things up. How? By connecting only the accounts you want to and making sure you both have access to them.
If you want to merge everything, you can manage it all together in one place—from your joint bank account and credit cards to your individual 401(k)s.
If you want to merge some accounts but not others, connect your joint accounts to either Quicken Simplifi or Classicto manage your joint financial life together (including those retirement plans), while keeping your individual accounts separate so you each have your own spending money.
You can even merge your finances without ever merging your underlying accounts. Just connect your separate accounts to the same Quicken Simplifi or Classic account, and you can both see all your finances in one place without having to change anything at all.
Once your finances are connected, you can decide together how to save up for your long-term goals. Whatever they may be, Quicken can help you get there with confidence, living a healthy financial life along the way.
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