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Empowering your money

How to manage money as a couple

At a glance:

Money can hang like a dark cloud over even the sunniest wedding day. There will now be two of you handling money together, which can double whatever angst there was before.

There will be clashes and disagreements. As money is one of the common causes of marital failure, it is wise to put aside your discomfort and deal with it before you say "I do."

Often, one spouse is a spendthrift while the other is a tightwad — this difference may have been part of what attracted you to each other in the first place. In the movies, it makes for great comedy.

In real life, it can make for great tragedy. Any differences you have in how you handle money will be amplified afterward, no matter what type of union you choose.

They will not magically work themselves out, but they can magically ruin your lives instead, sometimes very quickly and very easily, and leave a bitter legacy of anger and lessons hard-learned.

Financial issues to discuss before marriage

You should have "the talk" well before you tie the knot — before you get engaged, even.

If you are lucky, you and your partner will have the same views on money. But there's a strong chance you will not, even if you are otherwise well matched.

You may find yourselves getting defensive and feeling entitled to your financial habits while not seeing the merit in your partner's habits.

Ask yourselves these questions:

  • What does money mean to you? What is it really for?

  • What do you like to spend money on?

  • What are your priorities with money?

  • What are your long-term and short-term financial goals?

  • Can you delay gratification if need be?

  • How much debt does each of you have?

  • How will you pay recurring expenses such as monthly bills? Should you share them?

  • How will you plan for large expenses?

  • What will you do if one partner can't meet his or her share of expenses?

  • How much insurance and what types of insurance do you need?

  • Do you want joint bank accounts and/or credit cards?

  • What other assets and investments will you combine, and which will you keep separate?

  • What types of retirement plans should you have? How much will you contribute to them each year?

  • Who will be your beneficiaries for your various accounts?

  • Do you have a will, a trust, or other estate planning tool to protect your wealth?

  • What kind of housing do you want? If you want to own, how will you finance a home?

  • How many children do you want and when do you want to have them?

  • Do you want to create a prenuptial agreement?

  • Would you benefit from the help of a financial advisor?

Discuss your responses to these questions, and be honest. Write them down if you must. They will form the basis for your lifelong money plans. Revise them periodically as needed, and add additional questions if need be.

Review your credit history

Few things can kill the post-honeymoon glow like finding out your spouse has a big stain on his or her credit report. Check both your credit reports prior to the big day, and then check them at least once a year.

A bad credit score can ruin your ability to get a mortgage or other important loan. Along with your credit scores, find out well in advance just how much debt each of you has.

Make a plan to pay off your debts and set up a savings plan to help you with this. Debts can gnaw away at any relationship until they kill it.

If you are the judgmental type when it comes to money, you should instead be nonjudgmental as you listen to your significant other's money philosophy. Chances are, he or she is having issues with your approach as well.

Financial steps newlyweds should take

Once your honeymoon is over, you can resume facing reality. Finish the financial planning steps that you started before you got married.

Hopefully you asked yourselves several important questions, clarified your wishes and goals, and made concrete plans for your money.

Here are some of the major tasks that newlyweds should do:

Review insurance coverage

Your needs may be different in marriage. Make sure that your insurance coverage is adequate. You may also need to change beneficiaries on some policies.

Look into joint accounts

Some couples like to put all their money into joint accounts for ease of use. Others claim that having separate accounts keeps the peace. Still others use a hybrid approach — one or more joint accounts for specific purposes such as household expenses, while keeping separate accounts for their personal use.

Hold regular financial meetings

Discuss your finances regularly, such as monthly or quarterly. Keep a running list of financial issues, challenges, and sticking points. Make a detailed plan to achieve your financial goals.

Include target dates, methods of financing them, tracking, and plans for troubleshooting. One additional benefit of meeting regularly is that it could prepare you for problems that may arise in the future.

Review this periodically. Set yourselves a nice reward for afterward so that you condition yourselves to look forward to these meetings.

If all of this seems daunting, don't be discouraged. Consider seeing a professional financial advisor to guide you toward your goals.

He or she can help you select investments that are suitable for your goals. If worst comes to worst, consider seeing a relationship counselor who is well versed in marital financial issues.

Determine who pays the bills

Often, one person likes to be in charge of the finances and does a good job of it while the other loathes it.

That's fine, but in the event that the bill-payer becomes incapacitated, the other should know how to step in.

Keep a written plan of how bills are paid, how often, to whom, and where records are stored. Financial software can assist with this.

Kreig Holt, left, looks on as his wife, Lydia, flips through envelopes, each containing money for the each of the monthly bills they have to pay. (Photo: AP Photo/David Goldman)
Kreig Holt, left, looks on as his wife, Lydia, flips through envelopes, each containing money for the each of the monthly bills they have to pay. (Photo: AP Photo/David Goldman)

Create a budget

Most people hate budgets, thinking they can get by without them. While many can get by without them, people also leak money here and there without being aware of it, and that adds up.

A budget is especially important in the beginning of your marriage because there may be a lot of unknowns that won't otherwise get noticed — until a big fight erupts.

If you have some big purchases coming up, a budget will help you set up a savings plan to pay for them. Try budgeting for a while, at least until you get into the habit of monitoring your cash flow.

Consider financial software

Many couples use one of the financial software products available. One of the many benefits of this software is that it can provide snapshots and forecasts of your financial state, which are useful for your financial planning. Do some research to get a sense of what each program offers.

Money mistakes young couples make

Too many money disasters are told over drinks to friends who offer plenty of support but can't do much to help with the problem. Often the couple in question have already split up and are older and wiser.

Sometimes they have learned their lesson and made a plan for better using their finances. Sometimes they haven't. Sometimes they repeat old mistakes over and over until death parts them from what little they have left.

Here are some common mistakes that couples have regarding their finances:

  • Not having "the talk" early on. Not communicating early can set up a pattern of avoidance that leads to problems down the line.

  • Not communicating regularly about money issues. Not communicating regularly is the downfall of a relationship in many ways. New concerns and conflicts arise naturally over time; if they are not addressed, they can turn into festering sores. Worse, they might get tackled via underhanded forms of manipulation.

  • Not having clear goals with clear methods of achieving them. Not having clear goals and an action plan can result in money getting wasted. It can also result in fights and misunderstandings. Having clear goals requires regularly communicating with each other.

  • Not having a budget. This is one of the most common mistakes. Not having a budget can lead to problems not just right away, but even years into the future.

  • Keeping money secrets. Money secrets include having plans that you do not share with your partner. They also include keeping hidden stashes of money and/or incurring expenses that you hide from your partner. There are often amazing rationales for these secrets, such as "What he doesn't know won't hurt him" or "Believe me, it'll prevent worse problems down the road." Perhaps. But money secrets violate the spirit of honesty, involve manipulation, and can blow up after years of guarded secrecy.

  • Playing control games. This isn't just about one person taking charge of the finances. That may have value as long as it is agreed upon and communicated well. Control games are an underhanded way of addressing perceived power imbalances in a relationship. They can include denying a partner money in subtle ways or keeping unspoken strings attached to small loans, for example.

  • Not planning for emergencies. You should acknowledge that emergencies will arise. If you are not prepared for them with a means of paying, they can cause major strain, on top of the usual emotional and monetary stresses. Set up an emergency fund with up to six months' expenses. Add to it however you can until it is set up (a budget will help). Keep it in an account that will not lose its value.

Summary of how married couples should handle finances

As noted, whatever your financial situation, it's always better to be open and honest than to be taken by surprise in a moment of stress or crisis.

Finances are usually the biggest source of contention in a relationship. If not discussed early, they can fester over years and eventually destroy it. Use the checklists and suggestions in this tutorial as a guide to helping you stay open and honest about where your money goes.

This content was created in partnership with the Financial Fitness Group, a leading e-learning provider of FINRA compliant financial wellness solutions that help improve financial literacy.

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