You’re driving along the road of personal finance; your sweetie is in the passenger seat, and WHAM! You hit a pothole. Unfortunately, that’s what often happens not just in a car but in a family budget. Many people don’t discuss money while dating, so it’s a big thing when it comes to marriage. You want to make sure you’re safe, taken care of, and that you’re not walking into someone else’s debt. However, that’s not what most people think about leading up to the magical day when two people are bound together through thick and thin, sickness and health, poverty and wealth. This isn’t a Cinderella story though, and there are some issues about money you need to think about before tying the knot.
Married into Debt
When you marry someone, you also marry their finances, good or bad. When it comes to debt, you should try everything to keep your credit separate from your spouse, lest you both go down the rabbit hole of debt problems. However, that doesn’t mean you can’t help each other out to get out of debt and pay the bank what you/they owe.
Zip the Lip and Throw Away the Key
Some people in a couple keep secrets from their partner; now, little secrets like if they look “fat” or not are one thing, but monetary secrets are a big no-no. There’s no shame in having separate accounts so you can each control your own income, do some budgeting, stuff like that. However, having major secret expenses can cause problems, and more than likely, your spouse will open your mail one day and find a secret charge on your account. So it is always best to be up front and honest about your expenses and discuss how you will handle bills, expenses and finances in general.
In Case of Emergency…
…have some funds. Life is unpredictable, and you need a rainy day fund for a multitude of things, none of which need to do with a storm. A rainy day fund could be a jar, or an account you open up and deposit money into regularly. You may have a goal you’re saving up for, but most people use this as an emergency fund when life surprises you in the worst possible way. Sooner or later, there may be a medical emergency that needs tending too and an instance like this is when an emergency fund will come into play. However, it could be expensive and run you into debt. If it does, and you need help to get out of debt, or would like credit counseling advice, organizations like www.consolidatedcredit.org are here to help.
Budget like a Couple
When you want to save money in a relationship, the walls have to come down, and it’s time to be honest with your partner about your income, your expenses, and what changes may need to be made. What if you want to go on a trip and have to budget together? The best way to go about this is combine your income and expenses, do some math, and figure out what you have left over so you can better manage your expenses and your personal finances. Moreover, you should have some basic rules, like not spending X amount of money without consulting one another about the purchase—this can help you snap out of an impulse buy when you think you “need” something you really don’t.
Emergency Documents
No one wants to talk about the unthinkable, but life is unpredictable, and just like an emergency fund, you need to know where to find your spouse’s documents if one of you gets into an accident, or worse. Anything from allergies to insurance, you need to know so you can get the right information to the doctor and your spouse a.s.a.p.
The Will
Speaking of touchy subjects, you should write up a will with a lawyer some time into your marriage—just in case. If something were to happen, you want to know that your significant other and your family will be taken care of. Additionally, you don’t want the memories tarnished by people fighting over something like ownership of property.
Keeping communication with an open door policy is important in a marriage and any couple. Without it, who can be sure what potholes are on your way to a happy life together?
See Also:
- Improve Your “Save-ability”
- The Jars Method of Budgeting
- Investing on a Fixed Income
- The Frugal Guide to Building Wealth
- Planning Your Estate: 6 Things To Remember
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Valuable advice on all counts, Tim.
Setting ground rules about consulting each other before spending X amount of money is wise, but I would like to know if you think this is valid for “joint accounts” only. If it is your own money, there rule does not apply, don’t you think?
Jane,
Good question! Every family is different and deals with the issue differently. There are several ways this could work… if both parents work they could have 3 accounts- 1 joint and 2 separate and put a portion of their salaries into the joint and keep individual spending money in their personal accounts. The Joint account could be used for joint expenses i.e. rent, food etc. and personal accounts could then be used any way the individual sees fit. This may work best to eliminate arguments when one person is a “saver” and the other is a “spender”. Or you could just have two separate accounts and one person is responsible for the rent and the other groceries, car payments or whatever.
The only caveat here is to be sure the spender isn’t spending every cent and then relying on the saver to provide for retirement, vacations, emergencies like new tires etc. Because in that situation the saver is going to feel “used” very quickly. The other situation in which this may not work well is if one person is making a lot more than the other. Where the one has $2000 a month to spend and the other has $20. The key is to come up with a system that both people feel is fair (discussed and agreed in advance when both are in a good mood). And then it might be a good idea to write down the agreement so there is no question later. And then of course stick to it. If at a later point it isn’t working for one or both people the terms can be renegotiated (once again not in the heat of an argument). The key is to find something that works for you, since every couple is different. But it should be fair for both. The problem comes when the “spender” has access to all the money and can drain the household budget for a new tennis racket or motorcycle or whatever while the other partner is scrimping to save for groceries, a vacation, retirement or whatever. So you need to develop a system that will keep both people happy and put your finances on a sure footing.
The system of having to ask each other for every purchase may help in situations where both are “spenders” since it will slow down the impulsiveness. Or where there is only one income or simply where the funds are limited and the spender needs a bit of a check from the saver. But having some money that you can spend without any restraints (even if it is only $20) can help eliminate feelings of resentment toward the other person. Of course having a threshold is another way to handle this. Depending on your finances you may want to say you only have to check with the other person on purchases over $20, $100 or whatever.
Hope this helps, if not I’ll be happy to clarify and thanks for asking!
Tim