When it comes to relationships, specifically marriages, money can be a really tough topic. In fact, statistics show that money is one of the top reasons for divorce and one of the top reasons for breakups before the wedding even takes place!
For newlyweds and even for people who have been married a while, merging your finances can prove to be a difficult task. So in this post, I'm going to share some tips on the best way couples can merge their finances to avoid conflict and more serious issues in the future.
Tip 1: Talk about it (often)
Now that you've committed to being in a marriage and you are planning a life together, communication is very important. One of the key things that you communicate about should be your finances currently and your financial goals as a couple. If you haven't already disclosed your financial situation to your significant other (debt, savings, investments, credit), it's a good idea to have the conversation early on in your marriage.
Keep in mind that this conversation is not a fight or an argument, it is simply you working with your better half to establish your financial plans. Be sure to listen to their own opinions and suggestions as well and make sure you revisit the conversation on your finances frequently.
Tip 2: Create a budget together
Creating a budget together means first of all laying out your total income and all your monthly expenses that are essential to your lives i.e. rent / mortgage payments, insurance, utilities etc. You also want to layout your non-essential expenses, things like going to the movies, travel, shopping etc and your savings / investment plans.
Once you have things laid out, you then want to talk about who pays for what. There are no rules here; So you both want to determine what works best for you as a unit. You might choose to split things equally or based on what you each earn. You also want to be fair; For instance, you may want to consider paying for your personal expenses on your own.
A good way to break things out is to define what you both pay for together, what you pay for separately and what you need to discuss before paying for. You can agree that if something non-essential is going to cost more than a certain amount you both have to talk about it and agree on it first before the purchase is made.
Tip 3: Decide who does what
Once your budget is all laid out, the next thing you want to do is determine who is going to be responsible for managing the bills and making the payments based on your budget each time you both get paid. It's important you decide this so that neither of you thinks the other person has paid the bills and then your bills end up not being paid. The last thing you want is unnecessary late fees.
Tip 4: Decide on if you will keep joint accounts or not
This is usually once, of the biggest questions/concerns when it comes to merging finances. Again there are no rules here. You may choose to have joint checking and savings accounts and then separate checking accounts for your individual expenses. Talk through the options and decide as, couple what makes the most sense for you.
Tip 5: Designate your beneficiaries
You also want to be sure that you update all your accounts and investment with your beneficiaries. If you have children, then they could be your first choice as beneficiaries. If your children are involved you can include each other and/or siblings or parents. However, you both want to be in agreement on who gets added to your accounts as beneficiaries.
Tip 6: Consider life insurance
Life insurance is something to consider seriously when you have a spouse or children, and you have large financial commitments such as a mortgage, childcare expenses or any major debt. The purpose of life insurance to provide a lump sum payment to your dependents in the event of your death. How much life insurance you buy depends on the number of years of income you want to cover.
Tip 7: Start working on your financial goals
This would include the following:
Merging your finances with your significant other may seem like a daunting task but it doesn't have to be difficult or stressful.
Use the tips above to help make the transition as smooth as possible. Remember, when you get married, you become one unit and working together will only help you grow stronger as a unit!