Congratulations on your recent or pending nuptials! Deciding to get married is an easy decision with the right person. Deciding how you will manage life together might be a little more complicated. Fighting for real estate to arrange your stuff on the bathroom counter may be hard, but creating a calm and well-organized transition in finances doesn’t have to be. Sean Keating from Rosso Financial Group is here to help!
Partnering about finances is an extremely important part of a relationship. People are very sensitive and sometimes secretive about their finances. In any marriage, secrets aren’t good, and finances are usually the number one topic couples fight about.
First big decision, “Should we combine finances?” Today there are three schools of thought as to how to manage this:
1. Each partner keeps his or her own bills and splits who pays what common bills.
2. Each partner pays his or her own bills and creates a joint account for the common bills.
3. Keep traditional and both partners combine everything.
Before we can make that decision, we need to know a few things about our spouse:
• How is their Credit Score?
• Any Debt ?
• Philosophy on Money
Are you a saver, conservative investor, risk taker?
Some people run their own businesses and some are used to W-2 income. Make sure you spouse is comfortable with the cash flow in the household.
If there is debt, not combining accounts can help protect some of the assets. If there are any an old IRS issues, how you file your tax returns may also need to be considered.
When you have a starting point and understand how the other sees and acts with money, here are some of the questions you will have to answer:
• How and who will pay the bills? Are we going to split the bills or combine them? If so, do we do this evenly or decide whoever makes more pays more? Who will take care of sending payment in?
• What are our goals? What are some of the major purchases and life events each of you see in the next five, 10, or 20 years until retirement?
• How are you going to finance those future goals? Buy a house, a new car, start a family, go on vacation, retire, and other small items like that.
• How are we going to invest for those goals? Are we going to save and invest? Do we take risk in the stock market or play it safe with CDs?
This probably sounds a bit daunting, especially with all the other changes going on. However, it doesn’t need to be that hard. Here are some simple suggestions to make it easier:
1. Make a date night. Regularly get together with a nice bottle of wine and review. Make sure there is transparency and understanding. Even if one is handling everything, both need to understand what is going on.
2. Write down your goals. Make sure they clearly state what each of you wants so you are both working in the same direction.
3. Discuss your accounts. Where are we today? Are we on track for the goals we set?
4. Have an emergency fund – six (if two incomes) to 12 (if one income) months of house bills.
5. Design a budget. This will help make sure both understand what the other expects.
6. Watch your spending. Make sure you watch the debt spending to prevent any real issues.
7. Protect each other. You have responsibilities now to another person. It is not for you, it is us. Make sure you have (at a minimum) the following:
b. Springing Power of Attorney
i. Financial Springing POA – Banks want to see it
c. Living Will
d. Health Care Directive
8. Review accounts and benefits
a. Review health insurance
b. Check beneficiary on accounts
c. Update name and addresses on personal records
i. Social Security, work, bank accounts, driver’s license
9. Commit to doing this for each other. It will help in the long run.
10. Be honest and considerate. This is a tough topic for people to talk about. Listen closely to the other, but make sure you are heard also.
There are plenty of free resources to help you with this journey. New apps are coming out every day. Don’t be shy about asking for help. This can be complicated stuff which is new for both of you, but is also useful in helping each other grow into a comfortable financial life together.