“For better or for worse… For richer or for poorer.” This is what most of us promise to our spouse when we pledge ourselves in marriage. But unfortunately, many couples today can’t seem to survive either richer or poorer due to poor money management skills.
Some couples stick with their own individual way of managing money, which may or may not mesh with their spouse’s. Others may take the responsibility all on their own shoulders or shove it onto their spouse instead. Some spouses even lie, cheat, and overspend, and cause all trust within the relationship to be a distant memory. As a newly married couple, how can you prevent these tragedies from happening in your own marriage?
There is definitely hope, but you need to act early. In fact, money management can actually be a rewarding way to bond with your loved one. Here are steps to take and tips to make sure you get on the right track for a lifetime of properly managing your joint finances.
Money Management Steps for Newlyweds
Managing your own money can be challenging enough. But incorporating your spouse’s finances can be overwhelming. In other words, don’t expect to be an expert right away. The two of you have some things to work out and should take plenty of time to do so. Follow these nine steps one step at a time so you and your spouse can easily get accustomed to healthy financial habits.
1. Start Talking About Finances
It’s best to do this before you get married, but if you have not, discuss finances with your new spouse as soon as possible. You’ll need to go over what accounts you have and how much debt you carry. You’ll also want to be clear on how you expect money to be handled.
For example, let your spouse know if you expect him or her to discuss purchases over $100 with you first. Make sure each person has a good understanding of where you stand financially as a couple and the expectations that the other holds.
2. Write Down Goals
After you have determined your baseline financial status, discuss your long-term financial goals in-depth. For example, do you plan to retire at a certain age? Do you want to get out of debt and become a millionaire?
My husband and I agreed on goals that included sticking to a budget each month and becoming a one-income family, so that I could be a stay-at-home mom. Make sure to write all of your goals down and review them periodically. You’ll have a much better chance at success if you do.
3. Discuss Bank Accounts
There are both pros and cons to opening a joint bank account or to maintaining your individual accounts after you’re married. You can even do both. Combining accounts can simplify your finances and may help breed trust in a marriage. Moreover, it may be especially valuable when one spouse chooses to take on more household or child-rearing duties than the other and as a result there is inequality in income.
That said, some level of independence may be preferable to you both, though it can also make it easy for you or your spouse to hide certain purchases or spending habits. Plus, given the high divorce rate, keeping separate bank accounts can provide you some measure of protection should your spouse decide to “take the money and run.” Discuss this at length with your spouse to make sure you’re both comfortable with whatever you decide.
4. Build an Emergency Fund
If you don’t already have an emergency fund, consider making this a top priority. An emergency fund is money that is set aside in case something expensive happens unexpectedly, such as a lost job, family illness, natural disaster, or a major home repair. Aim to save about 6 months’ worth of your household expenses in case the emergency is that you have no income. Building an emergency fund should be a priority because it will bring financial security and protect your relationship in case disaster strikes.
5. Design a Budget
As I mentioned, one of my goals with my husband is to ensure that we are within budget each month. So we don’t go into debt, we limit how much we’re allowed to spend in certain monthly budget categories, such as food, dining out, and entertainment.
Start by reviewing your joint expenses over the last few months to determine how much you’ve been spending and if you need to bring that amount down. Then, establish dollar limits per category that you create according to your after-tax income. Don’t forget to allocate for unexpected or irregular expenses, such as routine car maintenance or doctor’s appointments. Your budget may be a work in progress, so don’t worry if you have to make adjustments, especially over the first few months.
6. Track Your Budget
It’s not enough to just make a budget. You need to make sure you stay within your spending allotment and adjust accordingly as your situation, expenses, or income changes. One very effective way to stick to your budget is to use the envelope budgeting system. This is perfect for young couples who typically have lower incomes and must be careful not to overspend.
Another approach is to design a spreadsheet that tracks all your spending and totals it up at the end of the month. You can also make use of certain debit and credit card tools that will breakdown your expenses per category. Just make sure you’re paying off your credit card charges each month. Try out a few different methods and do whatever works best for you and your spouse.
7. Have Weekly Money Meetings
One thing that has really helped me and my husband stay on track is our weekly money meetings. During meetings, we discuss how our budget looks for the month, if we have any upcoming bills to pay, how we are doing with our financial goals, and anything else that is related to money. These meetings are great because they strengthen the communication in our marriage as well as our level of trust. We always know where we stand financially and that we’re both doing our best to keep that on solid ground. Setting aside time to talk also helps us to stop worrying about money because we know that money matters will be dealt with.
8. Save for Retirement
Whether you’re married or not, you need to make sure you are set financially for the long haul. This means you need to save for retirement now. If you work for a company that offers a 401k plan, put in the maximum amount allowed to take advantage of any company matching, or at least contribute as much as you can afford. If you have a Roth IRA, put in the maximum amount every year if at all possible.
But even if you can’t max out these accounts, even putting $50 in a month will help you over the long term. Because of compounding interest, time is just as important as money when it comes to growing your retirement fund, so don’t delay.
9. Get Out of Debt and Stay Out of Debt
Debt can be damaging to any one person, but it is a double threat when you’re married because two people are responsible for paying the money back. Start your marriage out right by eradicating debt and not racking it up again. Work out a plan with your spouse on how to get out and stay out of debt. I suggest reading The Total Money Makeover by Dave Ramsey. Living a debt-free life is not only healthy for you financially, but it is also healthy for your marriage.
Other Money Management Tips for Newlyweds
The following tips will not only help you manage your money like a pro team, but they will help you develop a strong marital foundation to withstand whatever life throws your way.
1. Share Responsibilities
Money management in a marriage is not about having a quick discussion with each other and then one person carrying the ball for the couple. It involves both parties working together and sharing responsibilities equally. For example, both husband and wife need to take part in decision-making, budgeting, and bill-paying.
Moreover, and I’ve seen this happen, if responsibilities aren’t divided and something happens to the “financial” spouse, the other spouse can be left clueless. Bills may go unpaid, debt may accumulate, and what once was a solid financial position can deteriorate rapidly. In the interest of preserving you and your spouse’s welfare, make sure each of you is aware of your entire financial picture and is in charge of managing a portion of it.
2. Bring Up Touchy Subjects with Love
When a sticky situation arises that makes you upset, don’t do anything rash that might damage your relationship. Bring up touchy subjects with care and out of love. For example, if you feel your spouse is overspending, don’t start yelling and accusing. Bring up the matter by pointing out how you’re jointly over budget this month and how you’d like to look at ways to get back on budget. View yourself as a team and look at what the team needs to do to improve.
For example, if your spouse is overspending, what can you do to support him or her in better habits? Whatever you do, don’t point the finger.
3. Find the Right Level of Risk as a Couple
When considering your investments and your overall lifestyle, it’s a lot easier if you’re both on the same page. If you are someone who likes to take on risk, you may find your spending and investing habits different from your risk-averse spouse.
For example, if you have a great idea for a business and are ready to liquidate your 401k to finance it, your safe-playing spouse may be the one who prevents you from doing so. Talk about this with your spouse, and find some middle ground when it comes to risk. Perhaps neither of you can be entirely in your comfort zone, but you don’t want to be too far out of it either. Risk-taking will need to be a compromise.
4. Work as a Team
To properly work as a team, you must have the same goals in mind. Work together to come up with and find ways to accomplish those goals. Always encourage each other and build each other up. Be aware of your own weaknesses and strengths, and play off the strengths of your spouse to bring synergy to what you are trying to accomplish.
5. Be Honest
Honesty is always the best policy, especially when it comes to money management in a marriage. If you mess up, or make a purchase you shouldn’t have, tell your spouse and own up to your mistake. Your spouse may be upset with you initially, but after he or she cools off will respect you and trust you because you were open and honest. Lying about money to your spouse has huge repercussions, including divorce, so don’t even think about going there if you want your marriage to last a lifetime.
6. Trust Your Spouse
Unless you determine that your spouse in indeed lying to you, trust your new spouse to handle money. Withholding responsibilities from your spouse or watching every move he or she makes is condescending and demeaning. Don’t ask how much money your spouse spent or made during the day. Learn to let go of the control and just trust. Combining bank accounts is a great way to practice this.
7. Learn from Each Other
Don’t think of yourself as the be-all and end-all of financial knowledge. There is a chance that your spouse knows more or is more experienced and disciplined when it comes to handling money. Even more likely, there will be some things you know more about and some things your spouse knows more about.
For example, I know more about making everyday purchases than my husband does, such as extreme couponing. On the other hand, my husband knows more about investing, so we are able to learn these things from each other.
8. Give 100% of Yourself
Put your full effort into the financial matters of your marriage. If you are giving excuses each time you go on a spending spree or are blowing off your budget, you are not giving 100% to your marriage or yourself, and that attitude will come back to haunt you.
9. Remember Your Vows
Ultimately, marriage comes down to the vows you made. If you vowed to love your spouse for richer or for poorer, then live like that. You will undoubtedly have difficult times, so try not to let money issues create or exacerbate them. Money trouble is not a reason to jump ship, but it’s something to work out with your spouse and can even be an opportunity to grow closer.
Marriage and money can be tricky, but the best thing you can do is be open and honest. Start off on the right foot by talking about money management and coming up with a solid plan to deal with budgeting, spending, and investing. The sooner you do this, the better. If you form good money management habits as a newly married couple, you’ll be able to work as a team through whatever life throws at you for many years to come.
How do you and your spouse manage money? What are some of the things that have worked best in your situation?