- Discuss Money Before Marriage ➞
- See Where You Stand Financially ➞
- Create a Budget ➞
- Set Boundaries ➞
- Have Separate Bank Accounts ➞
- Eliminate Debt ➞
- Avoid Debt ➞
- Save Up an Emergency Fund ➞
- One Person Pays the Bills! ➞
- Decide on the Contribution Ratio ➞
- Set Financial Goals ➞
- Single Income or Double Income? ➞
- Trim the Expenses ➞
- Discuss Retirement ➞
- Make Big Financial Decisions Together ➞
- In Conclusion ➞
(Photo by krakenimages/Unsplash)
Making a marriage work is challenging enough. Trying to do so with financial stress is a Herculean task. However, with the right planning, many financial problems can be avoided. Here we will discuss 15 tips that will help you with your finances as a couple.
Discuss Money Before Marriage
This is without a doubt the most important tip of the lot. If you’re not married yet, speak to your partner about money.
Learn about each other’s money history. Is one person a saver while the other a spender?
Is one person bogged down with massive student loan debt while the other is debt-free?
Knowing your partner’s financial history and their spending habits will allow you to know what’s in store for you. Some people just have a ‘money script’ where they need to spend every cent they make.
Forewarned is forearmed. When the couple understands each other’s money history, there will be no rude surprises later.
If you’re already married and never discussed money prior to marriage, it’s NOT too late. You can still have a conversation with your spouse about money and how each of you feels about it.
See Where You Stand Financially
The next step to take will be to ascertain your finances. Add up your combined income (after taxes) so that you know what the monthly household income is. This is a very important number to know.
Next, add up all your bills, expenses, etc.
Now compare your combined income against your expenses. Are the numbers close?
If they are, you’ll be on a tight budget. For example, if the combined monthly income is 6K, but your household expenses is about 5.6K a month, that’s close.
If your car breaks down or one person loses their job, you’ll immediately end up financially stretched. The goal is to have a difference of 1K to 2K between your earnings and expenses.
In this way, you’ll have money to save and invest for the future.
Create a Budget
Once you know where you stand financially, you’ll need to create a budget with your partner. Discuss how much will go towards paying off debt, and how much will go towards your monthly household expenses and so on.
Once the budget is created, both parties will need to stick to the plan.
Set Boundaries
When it comes to spending, both partners must have boundaries. If one person is doing all the saving while the other spends with abandon, animosity will creep in. The sheer unfairness of the situation will lead to squabbles.
So, when creating the budget, it’s crucial that both parties agree upon a few boundaries when it comes to spending money.
Have Separate Bank Accounts
Generally, a couple should have 4 accounts:
- For him
- For her
- For household expenses
- For savings/retirement/investing
The goal here is to keep discretionary spending free from judgment and blame. When creating the budget, both parties will decide how much each partner will contribute to the ‘household expenses’ account. This will be a joint bank account.
They’ll also decide how much each contributes to the savings account – which can also be used for retirement planning or investing.
This will be the second joint account.
The other two bank accounts will be personal accounts for each partner.
What matters here is that once the budget is set and both parties are contributing their share, the rest of what they have should be kept in separate accounts.
This is their disposable income and for each individual’s spending.
This is a fundamental principle that MUST be followed. How your spouse chooses to spend their discretionary income is up to them. The husband may decide to buy a new car, and if he can afford it and sticks to the budget, he’s free to do that.
In the same vein, the wife may get a designer handbag with her discretionary money.
The husband may not understand why his wife’s bag costs so much… and the wife may not understand why her husband needs a new flashy car when the old one was working just fine.
But that doesn’t matter.
Each party is free to do what they want with their money. In this way, there is some degree of financial independence while both still contribute towards the household expenses and savings.
Eliminate Debt
If you’re in debt (credit cards, personal loans, etc), your goal should be to eliminate the debt first.
Save up about 1K-2K in an emergency fund, and after that, focus all your efforts on clearing the debt. Once you’re both debt-free, it’ll be easier to save and invest.
The debt here refers to revolving credit. Big debts such as your home loans, student loan debt, etc., can be settled over a longer period of time.
What you want to focus on is the debt on your credit cards and so on.
Avoid Debt
Once the debt has been paid off, the couple will need to avoid slipping back into debt. This can happen easily if you’re not alert.
ALWAYS pay your credit card bills on time and in full. If you can’t pay for it in cash, you can’t afford it.
Save Up an Emergency Fund
Life is unpredictable, so you must be prepared for unforeseen financial emergencies. As a couple, your goal will be to save up 6-12 months of expenses.
Once you manage to save up this amount, you may deposit the sum into a certificate of deposit (CD) or a money market account. In this way, your principal is protected, but you’ll still earn a slightly higher interest rate than what you’d get in a savings account.
One Person Pays the Bills!
When you’re living together, you can bet that there will be no end to the bills. Utilities, credit card bills, rent, car payments, etc., will need to be paid every month like clockwork.
If you forget payments or you’re late, you’ll not only incur late fees/penalties, but your credit score will be affected too.
This is why it’s best for one partner to ensure that ALL the bills are paid up on time. Create a checklist with the due dates for each bill. Now all you need to do is ensure that each bill is paid up accordingly.
When one person does it, they’ll become very familiar with the process. If each person is taking care of their own personal bills, some bills such as the utilities might slip by unnoticed.
So, it’s best for just one person to focus on making sure all the bills are paid punctually.
Decide on the Contribution Ratio
There is often the sticky issue of how much each person should contribute. The partner who earns less may wish to contribute less towards rent.
This is a grey area and there are no right or wrong answers. The one who earns more may be willing to contribute more… or they may still expect their partner to pay their half.
The couple will need to discuss this and agree upon it.
Set Financial Goals
Once your emergency fund is saved up, the couple will need to spend some time discussing their financial goals.
- How much should be invested?
- Should we buy a rental property?
- Should one person upskill and get a better job that pays more?
- Are 3 vacations a year necessary or do we save the extra money?
- Will we be paying for our children’s college in the future?
These are just some of the many questions that couples will need to ask each other and discuss. The earlier you plan and set goals, the more financially secure you’ll be in future.
Good finances don’t happen by accident. You’ll have to plan and work towards it.
Single Income or Double Income?
We live in a day and age where the soaring prices of housing and other goods makes it increasingly difficult for a single-income household to survive easily.
As a result, both partners often need to work to pay the rent and bills. However, in some cases, one partner may be earning enough to support the family.
At times like these, they can offer their spouse the option of working or not. For example, if the wife prefers to stay home and look after the children, she’s free to do that.
However, the husband will still need to impute a value on her ‘housework’ and deposit a ‘salary’ into her personal bank account.
Remember what we said earlier about discretionary spending?
That’s exactly what is happening here. The wife needs to have her own money instead of always running to her husband when she needs to buy something for herself.
In this way, she’ll retain her independence and dignity, and not appear needy.
Trim the Expenses
A penny saved is a penny earned. Look for ways to reduce your household expenses. It doesn’t matter if you’re in debt or not. Just eliminating unnecessary expenses will free up more money which can be put to better use.
You might choose to cancel your cable if no one is watching it. Buy household items such as pet food, toilet paper, etc., in bulk and you’ll enjoy cost savings. Use coupons when you can. There’s no shame in it.
Use energy-saving lights in your home or motion-sensor lights so that you save on electricity. Cancel magazine subscriptions that you don’t use, and so on.
The goal should be to eliminate wasteful spending. You’ll definitely find ways to do it if you look for them proactively.
Discuss Retirement
Discussing retirement is an important step to preparing for the future. As a couple, you’ll need to understand what each person wants. If one person wants to travel, you’ll need more money saved up.
Maybe you’ll decide to downsize your home in the future and move to a cheaper state which has a warmer climate. Or maybe you even decide to retire in another country which has a low cost of living.
There are so many options here. Let’s not forget maxing out your retirement accounts such as your 401(k) and so on. If your spouse is not working, you may choose to contribute to his/her IRA account so that the minimum requirement is met.
The only way you’ll know what to do is to discuss retirement with your partner and plan for it well in advance.
Make Big Financial Decisions Together
There are some financial decisions that will have huge repercussions just because of the size of the investment. One good example is buying a home.
As a couple, you’ll need to spend time looking at the numbers and deciding if you should buy your own home or stick to renting. It will all depend on your situation and preferences.
If both of you don’t like the climate in the state you’re in, you might decide to rent. When it’s time to buy, you’ll move to another state you like and buy a home there.
Some couples may decide to rent where they currently live and still buy a rental property in their ‘future place’ so that they can create a side income stream now. If you have the means to do that, it’s an excellent way to build your wealth.
This is just one financial decision of the many that you’ll want to consider.
Another issue might be the number of cars you own. If you have two cars, you might choose to sell one… or if you only have one car, you might choose to buy another for added convenience.
Once again, you’ll have to discuss this with your spouse. Ideally, you should pay for a car with cash to avoid paying interest on car loans. Whatever the case, discussion is crucial.
In Conclusion…
There’s no denying the fact that money can be a tricky issue when tackling it as a couple. Your goal should always be to strive for consensus in most issues.
It will help to borrow a few books on financial planning from your local library and read through them. Financial literacy will help you make wiser decisions when managing your money.
You may also wish to start a side hustle such as an online business or taking on a second job to increase the household income. The more money you make, the more options you’ll have.
That said, you shouldn’t work yourself to the bone just to amass wealth.
Focus on eliminating debt as fast as you can. Then focus on increasing your income while trimming your expenses.
Whatever extra money you have should be made to work for you. Either save it and let it collect compound interest and/or invest it in stocks, funds, or other investment vehicles.
Always remember to keep a close eye on your finances by tracking your expenses weekly, especially if you’re on a tight budget.
Once you start clearing your debts and earning more, you’ll be able to breathe more easily. Financial stress can be avoided if both parties are prudent and plan well. So get started today and you’ll have a bright financial future ahead of you.