Marriage and Money – Yours, Mine and Ours

Wednesday, August 21 at 10:10 AM
Category: Personal Finance

If you are newly married, or planning on getting married soon, be sure to allocate some time to considering some of the financial aspects of marriage. Marriage will change how you handle your finances, and it can also be the source of anguish in a marriage. Here are some things you may want to consider:

Some discussions before your wedding day
After you are married, you and your spouse will be financially responsible for each other and to each other. This responsibility includes legal things like being liable for joint debts and filing a joint income tax return and physical things like putting food on the table and paying the rent.

But, it also has an emotional aspect. You owe each other openness and honesty about discussing your finances. Chances are you and your spouse bring different financial backgrounds to your marriage.

Over time, the financial tendencies you bring to your marriage will probably be blended into a financial lifestyle both of you are comfortable with. To help the blending process, consider spending some time, perhaps an evening alone, where you discuss your finances and perhaps even agree on some financial policies.

  • Are you going to have individual checking accounts or a joint one?
  • How much of each of your incomes is going to be used for normal household expenses? 
  • Who is going to be responsible for actually paying the monthly bills?
  • How are you going to approach things like: how often to buy cars, when to use credit cards, how expensive of a vacation to take or how much risk you want to take with your investments?

Issues to consider
There may not be perfect answers for these questions, but the discussion will be valuable. Here are some ideas that may make some of the conversation easier.

How many checking, savings and credit card accounts are you going to have?
Even though you will be married, each of you will have your own credit report. Consider continuing to have your wages deposited into your individual accounts and then transferring funds monthly into a joint account used for your monthly expenses. If you have different credit card habits, then you may want to pay your credit card bills from your individual accounts.

Whose income will be used for household expenses?
Each of you will have different levels of income.  While it may sound attractive for one income to pay the bills while the other income is dedicated to saving, this can often lead to hard feelings. Consider splitting the financial responsibility for monthly bills in the same ratio as your incomes so each of you is contributing to expenses and savings each month.

Who is going to pay the monthly bills?
Paying bills each month is necessary. Consider switching responsibility a couple of times a year so it does not become too much of a burden on either of you. Even if one of you has the actual check writing duty, be sure to discuss your bills each month. It is important each of you know what is happening financially.

What about a prenuptial agreement?
A prenuptial agreement is a legal contract that specifies how a couple’s assets would be divided in case of a divorce. In general, assets brought to a marriage and stay in an individual’s name remain the property of that individual. Assets that come to the marriage after the wedding day are usually considered jointly owned assets. As a practical matter, over time the source of assets usually becomes blurred and can be an issue in a divorce.

If one of you has considerably more assets than the other, or if there is an expectation of a significant inheritance, then you may want to consider a prenuptial agreement. If you do, then each of you will probably need an attorney because the rules can be complex and different states treat these agreements differently.

Conclusion
Getting married is a big step in your personal life. It is also a big step in your financial life. Get to know your partner financially before you are married, discuss your finances often and you may find these financial discussions will bring you even closer together as you dream of your future.

Tags: Cash Management, Financial Education
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