What do you do with money after marriage? Do you and your spouse merge your finances together? Planning carefully and communicating clearly are important, because the financial decisions that you make now can have a lasting impact on your future.
What are your financial goals as a couple?
The first thing to do preferably is to discuss openly to your spouse about financial goals as a family and as individuals. This can be done by dividing some targets into short term goals (such as paying off wedding costs, vacation, etc) and long-term goals (such as having children, getting a piece of property, etc). After these are made clear; both individuals will need to prioritize which should be achieved earlier or later and hence allocation of effort and energy to the plans accordingly.
Next, you should prepare a budget that lists all of your income and expenses over a certain time period (e.g., monthly, annually). You can designate one spouse to be in charge of managing the budget, or you can take turns keeping records and paying the bills. If both you and your spouse are going to be involved, make sure that you develop a record-keeping system that both of you understand. And remember to keep your records in a joint filing system so that both of you can easily locate important documents.
Begin by listing your sources of income (e.g., salaries and wages, interest, dividends). Then, list your expenses (it may be helpful to review several months of entries in your checkbook and credit card bills). Add them up and compare the two totals. Hopefully, you get a positive number, meaning that you spend less than you earn. If not, review your expenses and see where you can cut down on your spending.
Bank accounts—separate or joint?
At some point, you and your spouse will have to decide whether to combine your bank accounts or keep them separate. Maintaining a joint account does have advantages, such as easier record keeping and lower maintenance fees. However, it’s sometimes more difficult to keep track of how much money is in a joint account when two individuals have access to it. Of course, you could avoid this problem by making sure that you tell each other every time you write a check or withdraw funds from the account. Or, you could always decide to maintain separate accounts.
If you’re thinking about adding your name to your spouse’s credit card accounts, think again. When you and your spouse have joint credit, both of you will become responsible for 100 percent of the credit card debt. In addition, if one of you has poor credit, it will negatively impact the credit rating of the other.
If you or your spouse does not qualify for a card because of poor credit, and you are willing to give your spouse account privileges anyway, you can make your spouse an authorized user of your credit card. An authorized user is not a joint cardholder and is therefore not liable for any amounts charged to the account. Also, the account activity won’t show up on the authorized user’s credit record. But remember, you remain responsible for the account.
Another benefit of having joint credit account is also to maximize the potential benefits that could have been reaped out of accumulative effort on an credit plan. For example; certain cards may give travelling benefits which would be easier to achieve from the cumulative effort as a couple rather than as individual. In this respect, in the long run some savings can also potentially be reaped from these combined credit accounts.
If you and your spouse have separate health insurance coverage, you’ll want to do a cost/benefit analysis of each plan to see if you should continue to keep your health coverage separate. For example, if your spouse’s health plan has a higher deductible and/or co-payments or fewer benefits than those offered by your plan, he or she may want to join your health plan instead. You’ll also want to compare the rate for one family plan against the cost of two single plans.
It’s a good idea to examine your car insurance coverage, too. If you and your spouse own separate cars, you may have different auto insurance carriers. Consider pooling your auto insurance policies with one company; many insurance companies will give you a discount if you insure more than one car with them. If one of you has a poor driving record, however, make sure that changing companies won’t mean paying a higher premium.
As a couple; it is crucial to take into one another’s retirement plan too. You don’t want to miscalculate the part where one can afford to retire but the other can’t. This is not desirable as it can cause some disharmony in the golden years as a couple. Hence, start planning early as a couple and educate each other how to be creative on managing retirement funds as a couple. Be honest and keep a proper book to make sure small milestones are achieved along the way.