Getting married is a major life event that takes a lot of planning and coordination, but not many couples work together to coordinate their financial lives before getting hitched. A marriage in the United States, however, means that both partners are accepting some financial obligations and responsibilities with each other, making it a necessity to coordinate finances, even if both partners will have separate accounts.
While discussing money can be a hard subject for many couples, it will be necessary to sit down and get on the same page before combining households and finances. To start, each partner should make a sheet listing all of their assets and debts, as well as their current income. Look at these sheets together, and use them as a starting point for a discussion.
Many couples find it easiest to start with the assets. Partners who own real estate or other duplicate and sellable assets will want to have a serious discussion concerning which of these assets should be sold and how the proceeds from the sale should be invested. So-called “cash assets” such as bank and investment accounts might need to be combined into a single account at one bank in order to make management easier. In other cases, however, couples may have good reasons for wanting to keep these assets separate and under their individual names.
Next, look at the debts that each person is bringing into the marriage. Today, it is very common for newlyweds to bring in student loan debt, credit card debt, car loans, and mortgages into a marriage. The sum total of all of these debts between two people can be a staggering figure. For this reason, many newlyweds choose to look into their options with debt relief and credit counseling. Debt relief programs often have trained financial counselors who can assess a couple’s debt and come up with a plan to refinance debt, lower interest rates, and/or make a manageable payment schedule so that a couple can pay off their debts quicker.
After looking at the assets and debts that the marriage will start with, it’s time to make up a new budget. This budget should be set up for the new household, and include payments for all of the debt that has been brought into the marriage. Many couples find it easiest to start by listing the set, recurring expenses, such as rent, utilities, and minimum debt payments. From this list, it will be possible to know how much money will be left over that can go towards investments, additional debt repayments, and other variable expenses such as entertainment.
Many couples also have trouble agreeing on how much money should go towards debt repayment and investments, and there are certainly a lot of disagreements regarding how the money should be invested and which debts should be paid off first. While there are a variety of formulas that can be used to determine how much should be allocated to each of these areas, each couple will need to decide on their own which allocation will work the best for them. Some couples choose to avoid this issue by handling investments on their own, under accounts that they keep in their own individual names.
Finally, set a time when you and your new spouse will review the budget and make adjustments. Many people find that they need to change their budget whenever their income changes, they pay off a debt, or take on a new bill. As your marriage goes through changes over the years and your family changes, you and your spouse will need to make many changes to your family’s budget.