While talking about how to manage the family finances can be uncomfortable for newlyweds, it’s also one of the most important conversations you’re going to have throughout your life as a couple. Your spouse is now your lifelong partner in financial management, and healthy communication is necessary if you want that partnership to flourish.
Honesty is a crucial component of both healthy relationships and important financial discussions, so don’t damage your spouse’s trust by lying about money. Be open with one another about your debts, spending habits, and other financial attitudes. From there, you’ll be able to set ground rules, determine long-term goals, and take shared ownership of your family’s future.
Newlyweds can take control of their finances and set themselves up for lifelong success in the following ways:
Set Financial Goals Together
Once you agree to spend the rest of your lives together, it makes sense to start thinking about what you want your shared future to look like. Determine common financial goals, such as saving for retirement or buying your own home. From there, you’ll be able to figure out what concrete steps to take in pursuit of those goals, like taking out a housing loan or setting up a retirement plan.
Once you’ve set your goals, you can begin saving. Many financial experts will recommend setting aside about 15% of your income for retirement in a dedicated account. A relatively simple way to manage this is to have your employer set up automatic contributions from your monthly paychecks. You can also arrange for automatic transfers from your regular bank account to your retirement savings.
It also helps to make intelligent investments in line with your financial goals. Fairly stable investments like shorter-maturity certificates of deposit (CDs) or money market funds are good options for helping you meet short-term financial goals. For longer-term goals, such as saving for your future children’s college education or for retirement, you and your spouse can consider a mix of assets. A combination of bonds, stocks, and short-term investments may make sense for you depending on your shared risk tolerance, budget, and time horizon.
If you find the idea of coming up with a sound asset allocation strategy intimidating, rest assured that it doesn’t have to be. Begin by reading up on investing basics if you and your spouse are constructing a portfolio from scratch. You can also explore the abundance of one-stop investing solutions currently available, like digitally managed accounts, personalized managed accounts, or all-in-one mutual funds.
Determine a Money Management Strategy
Newly married couples may elect to manage their finances in one of three ways: with a joint account, with separate accounts, and with some combination of the two. Ideally, you’ll want to begin discussing which option makes the most sense for you and your partner before you even tie the knot. Naturally, each system comes with its own set of pros and cons, which will be covered in detail below:
Keeping Separate Accounts
If you and your spouse are accustomed to managing your own finances and don’t have too many shared expenses yet, you may find it comfortable to simply keep maintaining separate accounts. This gives each of you the autonomy to manage your own debts, expenditures, and savings.
One challenge of keeping separate accounts, however, is that you and your partner will have to communicate extensively about who is responsible for which household expenses. You may either halve these expenses equally or pay proportionately according to your income. It will also help to devise a way to track expenditures, such as through a shared spreadsheet or a joint credit card.
It’s important to bear in mind as well that this financial management approach will likely get more difficult once you have children, or if one of you decides to shift careers. Saving for retirement and other long-term financial goals based on your individual incomes may not necessarily yield the best returns on your investments.
Keeping a Joint Account
Couples who want to simplify financial management in their household will probably find keeping a joint savings account the easiest option. This approach eliminates the need to determine who will shoulder which household expenses based on their income, and all your children’s expenses can likewise simply come out of the family account. Your household budget will be easily trackable via spreadsheets or any budgeting app of your choice.
On the flipside, keeping a joint account means that each of you will have a full picture of the other’s spending habits. This may lead to judgments and resentment, especially if one spouse earns significantly more than the other. Furthermore, if you’re in the habit of surprising your spouse with gifts, it may be difficult to keep these a secret with only a joint account.
Keeping Both Joint and Separate Accounts
While maintaining both a joint account and individual accounts seems like a handful, many couples ultimately consider it the best possible financial option. Using this approach, you and your spouse will funnel all your income into a joint account, from which you can both co-manage all your savings, debt, and retirement funds. On the side, each partner maintains a private checking account into which you can transfer a set amount monthly.
Under this system, each partner will have access to a personal fund that they can use for any wants and needs that don’t qualify as family expenses. To avoid conflict, it’s important to discuss and agree on how much money will go into these personal accounts each month.
While this method will require you to open and manage multiple bank accounts, you and your partner will appreciate the ease of tracking that comes with paying for household expenses through a joint account. You’ll also be able to work together efficiently towards long-term financial goals. Anytime one of you would like to make personal purchases, you’ll have the freedom to buy whatever you want or need without having to run it by your spouse first.
Organize Your Finances
Taking an organized approach to your day-to-day expenses is a must to keep your household running smoothly. Here are some helpful tips for efficient everyday money management:
- Attend to any necessary paperwork – If your name has changed, or if you and your spouse are moving any accounts to joint ownership, call your bank to implement the needed updates.
- List all assets and debts – Draw up a detailed list of all the investments and outstanding debts each partner is bringing to the marriage, including credit and loans.
- Develop a strategy for resolving debt – Even if one partner is bringing in more debt than the other, strategize together and commit to tackling your household’s total debt jointly.
- Draw up a household budget – Do your best to live within your means and not spend more than what you collectively earn. Prioritize basic needs such as food, utilities, medicine, school expenses, and the like. Allot a portion of your income each month for an emergency fund which you can use to cover health emergencies, sudden household repairs, and the like.
- Determine a spending plan – Have a concrete way to track and manage day-to-day expenses, such as through a spreadsheet or a digital budgeting app. Discuss how you’ll handle saving for big-ticket items.
- Consider consolidating – It may be more convenient to have all your accounts at the same financial institution, especially as your family grows.
Once you and your spouse have developed an organized approach to financial management, check in with each other often to ensure that your affairs remain in good order. Sit down regularly to review your cash flow and verify that you’re staying within your set household budget. You’ll also want to make sure that your other financial to-do’s like regular retirement contributions and loan payments are coming along smoothly.
Review Your Insurance Situation
It’s important for you and your spouse to go over and update your insurance plans and purchase new types of insurance where necessary. Carrying ample insurance coverage is critical for safeguarding your family’s financial security in the event of unexpected emergencies. The following are some essential types of insurance to consider:
- Life insurance – While your employer may provide you with a measure of life insurance coverage, you may find that you and your spouse need to purchase additional coverage independently. If so, determine whether you can benefit more from permanent insurance, which remains in effect for your entire lifespan, or term insurance, which covers a defined period only.
- Health insurance – Being covered by the same plan may bring in substantial savings for you and your spouse. If one of you is covered by an employer-sponsored plan, for instance, they may be able to secure joint coverage for the other.
- Disability insurance – If you become disabled before retiring, this will cover a portion of your earnings. Your employer may provide you with a measure of disability coverage in this case, but as with life insurance, some people find that they need to purchase additional insurance on their own to meet their regular expenses.
There’s no one-size-fits-all solution for managing your money as a married couple. What works best for you and your spouse will largely be determined by your current situation, attitudes, and goals. Open communication, trust, and careful planning are essential for ensuring a smooth, supportive financial partnership.