Ahh, love. There’s nothing like two people falling for each other and pledging themselves to each other until death doth them part. It’s truly cause for celebration.
It should also be cause for a serious and ongoing conversation about finances.
Many clients come to me with a scenario like this: “Wes, my son doesn’t know how to have a conversation about finances with his soon-to-be-wife. She loves to spend; he loves to save. What should they do?”
Or maybe the groom-to-be wants the couple’s assets to be shared, while his fiancée wants to maintain separate accounts.
There’s no one way for a couple to manage their combined finances. But having an honest discussion before you say, “I do” is always right.
Our decisions about money stem from our unique investment/savings personalities. A large percentage of marriages end because of money issues, so it’s crucial to begin with a solid understanding of how your partner views and handles money. There are two key financial questions newlyweds need to answer:
1. What do I do with my current bank account?
2. What do we do with our money?
How you answer the second question will help you answer the first.
There are three possible outcomes for the second question:
1. Have one single account with both your names on it. All cash goes into this account, and all expenses are paid from it. For this scenario to work, each spouse needs to have lots of trust and faith that his or her partner will act responsibly. And each spouse needs to spend responsibly.
2. Have separate accounts where your paychecks are deposited, plus one joint account for some amount of fixed expenses. The shared fixed-expense account would be the account from which you pay all your bills. You have to decide how much each partner will contribute to the joint account. Generally, couples base it on a percentage of each person’s income.
3. Have separate accounts and identify which expenses each spouse will be responsible for. One person may pay the mortgage while the other pays for utilities and groceries, for instance. This method helps maintain maximum financial independence.
I have seen all three options work. Most often, couples start with the second or third option and slowly migrate to the first as they become more and more comfortable with their partner’s financial management style.
Marriage is a learning process. When most people get married, they’ve barely figured out theirown money management style. Building trust in your partner’s ability to manage money takes time.
Having frank discussions about money, budgeting, saving and spending can help all newlyweds get to Happily Ever After.
