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 will share some tips for couples combining finances after marriage to avoid conflict and more serious issues in the future.
What does combining finances after marriage mean?
When it comes to combining finances after marriage, it can mean a variety of things. Some couples may decide to combine bank accounts, credit cards, and co-signing on loans together. Others may only combine bank accounts and keep other finances separate. It depends on what is best for your relationship. Combining finances after marriage can be a great way to work as a team to achieve financial success.
Tips for combining your finances after marriage
Based on the above, here are some key tips to help with combining your finances after marriage!
1. Talk about your finances (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 should communicate about is 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.
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.
An excellent 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. You can agree that if something non-essential will cost more than a certain amount, you both have to talk about it and agree on it first before the purchase is made.
3. Decide who pays for 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. Whatever you decide, you should consider automating your finances to simplify your monthly budget. This will ensure you pay your bills on time and prevent late fees.
4. Decide on if you will keep joint accounts or not
When it comes to combining finances after marriage, one of the biggest questions/concerns is if you should combine bank accounts. 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 a couple what makes the most sense for you.
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 agree on who gets added to your accounts as beneficiaries. Having an estate plan in place is also an important step in planning your finances.
6. Consider life insurance
Life insurance is something to consider 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 is 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.
7. Work on your financial goals together
Creating financial goals together is a vital step in combining finances after marriage. Financial goals are the key to financial success. Sit down together and make a financial plan to ensure you are on the right track with your finances.
This would include the following:
- Contributing to your retirement accounts with a goal of eventually maxing out your contributions
- Funding your emergency account for 3 to 6 months
- Creating a plan to pay off debt aggressive (and working on it)
- Saving for your goals such as buying a house etc
You can create short-term goals to make your long-term goals more attainable. A great way to do this is by creating a financial vision board. A vision board is an excellent motivational tool to remind you of your goals daily.
8. Discuss big purchases
For some couples, this may seem like a given, but you'd be surprised at how some big spenders will purchase items without consulting their partner. Regardless of whether or not you combine bank accounts, discussing big purchases is a must. Discussing big purchases shows respect and keeps your finances in check. Again, communication is key to a successful marriage and is especially important when combining finances after marriage.
Make combining finances after marriage easy
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 combining finances after marriage 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!