GUEST POST BY: Andy Masaki, author of www.PennyLessDad.com
“Marriages are made in the heaven”. The line is very popular, but when it comes to dealing with money after the marriage, that heavenly feeling disappear. Poor money management habits often sour many marriages. Why?
Being a single, the charge of money was completely upon you. Now since you got married, you are committed to manage your finances with your spouse. The problem is, there are no proper rules to manage a couple’s money. Money habits vary from person to person. It depends on the ways the person grew up and learned values about money.
It is expected that the ways you and your partner handle finances are different
However, millennials are exceptional. They are not hesitant to talk about money with the spouse. These days, many millennial couples are considering splitting money habits to ensure good financial health in their relationship.
In 2016, TD Bank’s conducted a survey on Love and Money. The report revealed that 37% of millennials (aged 18-34) who are in a relationship combine all their finances. 32% of them combine some of their money. The survey also reported that 74% of millennials (aged 18-34) discuss money once in a week or even more, as compared to 54% of persons aged 55 or older.
Initiating money talk with partner is important
Millennials are doing great when it comes to dealing with marriage and money. It is advisable to discuss your money matters with your spouse. Thus, you will be able to decide how to manage your finances. Having an agreement on finance also helps to build family wealth and strengthen the marriage.
Money experts also suggest couples for splitting their finances. It is nothing but to decide who is supposed to pay for what and how to figure out debts in a relationship. What will be the right amount for monthly groceries? What amount should save for financial security?
Though most of the millennials are on the right track regarding their marriage and money, yet they should understand how to split finances in the right way. Because, for many couples, the subject is overwhelming; especially for newly married or who are wondering to take the plunge.
Here are 7 ways splitting money habits help you to deal with your marriage and money together.
1. Knowing your partner’s spending habit
Before splitting money in a marriage, it is important to know your partner’s spending habit. If your partner loves to spend money, and you are a frugal minded person, then it can be a little difficult to split the finance. But proper discussion and dividing the cost can balance it. For example, you can split the rent, restaurant bills with your partner. Or you can ask your spouse to share household chores. Thus, your spender partner will learn financial responsibility.
2. Having separate credit cards
Having separate credit account doesn’t hamper your marital relationship. On the contrary, it is better to have separate credit cards as it can help you qualify for loans in the future; one spouse can take out a loan even if the other one experiences credit problems.
3. Deciding about joint or separate savings accounts
Are you one of those who think that having joint accounts is the secret of a happy married life? Though this is not wrong, yet there are many couples who’re happy with separate bank accounts. So, it entirely depends on you how well you can manage separate or joint accounts. The better you can manage your accounts, the easier it’ll be for you to handle your finances.
4. Helping one another to pay off outstanding debts
If one spouse has credit card debts to pay off, both the spouses should work together to become debt free. Both of you can plan a budget together that would help you to save a substantial monthly amount, which you can utilize to pay off the credit card balances.
5. Saving for retirement separately
Financial experts advice on saving separately for retirement. Each of you should have an individual or an employer-based retirement plan. If one spouse needs to withdraw from his/her retirement fund, then the other spouse can continue with the retirement benefits. So, when couples have separate retirement accounts, they don’t fight over issues like withdrawing money from them if required.
6. Deciding about your dreams and goals
It is quite important to realize each other’s financial dreams and goals – both short-term and long-term financial goals. It is not necessary to have those common. Similarly, your investing styles may also vary; one may be a bit conservative while the other spouse may be comfortable with taking risks. If required, you may take help of a financial advisor to decide about your investment portfolio.
7. Fixing the debt dilemma
“Should I marry first or settle my debts”? This is one of the most crucial decisions to make before tying the knot.
Almost every millennial have some type of debts, it can be a student loan debt or credit card debt or a car loan. The answer should be if you have a lot of debts and even your would-be spouse has a lot of dues, then it is important to pay off the debts first. However, you should discuss the matter with your spouse before making the final decision. If the debt burden is not heavy, you can marry first and then deal with it.
Money woes are strenuous for your personal relationship. So, don’t hide your debt story from your partner; it can create a major problem later.
Lastly, the married couples often fail to save for future as well as emergencies. Thus, many marriages run a financial risk, which creates financial stress. It is advisable that you save a certain amount to secure your financial future. Also saving an amount equivalent to your 3-6 months’ salary if important to fight with the emergencies. It will help you to avoid incurring debt in an emergency (job loss, sudden illness, accident). Because bad thing often happens. So, you can combat with it without building up debt using your credit cards.
About the author: Andy Masaki is a blogger at Penny Less Dad and financial writer associated with the Oak View Law Group. He is a debt expert and a member of several online forums where he shares his advice as well as tips to lead a financially independent life.