For Richer or For Poorer
As two become one in marriage - Does your money?
Don’t let your finances be the stress of a new marriage.
Up until getting married you had the familiarity of financial independence. For some, that independence can be a challenge to sacrifice, and for one to acquire if there is significant financial debt. These days, it’s not necessarily a given that newly married couples will combine their individual checking accounts into one joint account. Finances are often complicated by previous marriages, child support or alimony, student loans, car loans, existing mortgages, credit card debt, and other issues such as a sense of autonomy and financial independence.
With these complications, combining both incomes into a joint checking account may not always be the best solution. It can add confusion and complications, causing resentment and power struggles within a marriage.
So what should a couple do?
Before you tie the knot, talk about how you will manage your finances. Discuss your options, weighing out the pros and cons for each option. Some of these options may include:
Joint Account - Combining all of your earnings into one account. If you are both comfortable with this approach, it can be the easiest logistically. If one of you is deeply in debt or bad at managing finances, this may not be the best method and can cause turmoil in your relationship.
Separate Accounts - Keep your accounts separate and privately managed. This option is good for retaining autonomy and financial independence. By having separate accounts both are still in control of each their own finances. This option works for some, but can get complicated as you decide to have children, make combined purchases, etc. Therefore, another option to consider, is the One-Two Method.
One-Two Method - One joint account, plus two separate accounts. This option still retains autonomy and financial independence with separate accounts, but also allows you to combine finances jointly. If this method is used, determine how much each of you will contribute to the joint account, and what purchases will be made using that account.
You'll want to determine your budget which includes your shared monthly expenses and how much is need in your joint account to cover these expenses. If you're not sure how to make a budget, check out our 6 easy steps to create a realistic budget.
If you both earn roughly the same amount, you should each contribute the same dollar amount to the joint account. If one of you earns substantially more than the other, contribute on a percentage basis.
It may also be a good idea, to set-up a joint savings account that each of you contributes to for your shared financial goals, such as saving for retirement, investing, buying a new vehicle, taking a vacation, etc.
Your separate accounts should be used to continue to pay your own pre-existing credit card debt, student loans, vehicle payments and any other pre-existing financial obligations. If one of you finds yourself stressed in debt, check out our 5 get-out-of-debt-steps to financial freedom.
Not one option is the right or wrong way to manage your finances. Each couple should do what works best for them and their marriage. Resentment over money can fester and poison a relationship if it’s not addressed in a way that satisfies each partner. It’s important that each of you feels good about how the money works in your relationship.
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