Jul 30, 2022

How to Talk About Money When You are Married

One of the most vital aspects of married life is money management. The key is to have a discussion and create ground rules for handling your money. This will establish the organization and tempo. Here are some tips!

Your Money Wise Marriage Guide

How to Talk About Money When You are Married

Married couples fight about money, this should not come as a surprise to anybody. Did you know that, on average, 86% of marriages begin with debt? Therefore, 86% of married couples have debt when they first get married and it ranks among the main reasons for divorce. Additionally, a lot of people aren't ready to combine their finances. But, if you take the appropriate steps, it's something you can easily get through. Even if talking about money isn't particularly romantic, it's essential for any serious relationship! It's important to have regular money conversations whether you're dating, engaged, married, in a domestic partnership, or pretty sure you're in it for the long haul. One of the MOST important investments you will ever make in your life might be your marriage.

Having said that, a happy, stable house develops happy, stable kids and makes the perfect setting for a happy, successful marriage, both of which can lay the groundwork for your future financial security. Even though talking about money with your partner might be challenging, it's important to plan how you'll handle your finances together to avoid heated conflicts and put your relationship on a good financial path. Agreed? Relationship tension is often caused by money problems, but these problems are solvable!  Determining your joint financial goals is therefore one of the first things you should undertake, ideally very early in your marriage. Ask yourselves: What do you hope to achieve? Are you saving for a second house, your children's college education, or an early retirement? So, here are some suggestions to help you navigate your marriage and successfully talk about your finances as a team!

Tip #1: Have “Money Talk” Dates

Even though talking about money is an important topic, it doesn't have to be a dreary one. You should set aside time with your spouse to examine your financial goals, such as your budget, savings, and retirement. Try to think of this as a "break" from your everyday routine rather than seeing it as another task to add to your already full calendar. Meet at your favorite coffee shop (because coffee makes everything better) together and talk through your financial short and long term goals.

Be open about what you are doing to ensure that you are both working and helping each other. Walk with your laptop, notes, your favorite coffee order in mind and get to work! Take things slowly and work on developing a realistic budget based on the future you both envision.

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Tip #2: Communicate as Team Members

Instead of "me" and "you," use the terms "we" and "us" when writing the plan. Remember marriage is a partnership. You are on the same team as each other. If you're the saver in a spender/saver relationship, be understanding. Making allegations is unproductive since it just serves to put people on the defensive. Your goal should be to address the root causes of your challenges rather than trying to demonstrate that you are better with money. If you are confident in your ability to save money, impart some of your knowledge and encourage your partner to do the same to make life easier for both of you. Remember, it’s you and your partner against the problem not each other!

Questions to ask:

  • What’s important to us? Do we want to travel, buy a home, launch a business, or start a family? What will that take?
  • What will retirement look like for us?
  • If money was unlimited, what would we do?
  • Do we have a sufficient emergency fund?
  • What can we do to improve our financial literacy together?

Tip #3: Assign Each Partner a Particular Set of Duties

Each partner should be assigned specific responsibilities. Is one of you better than the other at keeping track of your receipts for tax season or budgeting your expenses? Assign tasks that each partner is most comfortable with, but don't let one partner do everything! Educate each other on how to make your money work for you! By working in tandem, you likely will achieve your goals faster. When you both want the same thing and are both “in the know” on how to get there.

Financial Advice Couples Should Not Ignore

Tip #4 Keep Your Emotions in Check

Discuss any concerns your partner may have if a certain figure is brought up, such as "how much to save or invest each month." Do they want to use that money to pay off debt or school loans, or are there other goals in mind? To have money for travel or something else.

Listen to what your partner has to say and decide if there is a workable compromise. Or in an instance where your partner goes overboard with their budgetary allocation. Don't assign blame when this happens. Instead, remember we’re all humans that make mistakes. Consider how to prevent it from happening again.  As a starting point for the discussion, discover why your partner overspent, but avoid passing judgment. Only when all parties accept a budget can it be effective. Financial hardships can occasionally be crippling. For instance, one or both of you may have significant debt. These circumstances are prone to emotional intensity. If you and your spouse are both in debt, creating a written game plan is your best bet.

GRAB a copy of Vincere Wealth's “Money-Wise Marriage Guide” here!

When debt is ignored, it usually causes anxiety. Additionally, debt typically leads to humiliation, which makes anxiety worse. Together, we must learn to effectively control our emotions and stress in order to build a strong financial future.

Tip #5:  Don't Forget to Discuss Your “Future You” Money

The most valuable resource you have while investing for retirement is time. Early savings are always advantageous since they give your money more time to earn compound interest. You should talk about your intentions with your spouse, as well as your assets (both present and future) and preferred retirement age.

The Power of Compound Interest

If you or your partner work independently, you should discuss retirement planning. Encourage your partner to take advantage of their employer's retirement benefits to give you a boost (such as a 401k match). Or, if one spouse is unemployed, think about making a contribution on their behalf, perhaps through a Spousal Roth IRA. The IRS regulations that allow a spouse who does not work or earn an income to finance an individual retirement account are known as spousal IRAs.

The annual contribution limitations for spousal IRAs are the same as those for other IRAs: $6,000 per person in 2021 and 2022, or $7,000 for those who are 50 years of age or older. In accordance with the spousal IRA regulations, a marriage where only one spouse works is permitted to make annual contributions of up to $12,000, $13,000 if one spouse is 50 or older, or $14,000 if both are.

The yearly IRA contribution limitations for each individual are the maximum for each account. Find out from a professional what kind of plan would work best for both of your retirement plans. However, it's more crucial to ensure that you and your spouse share the same goals for your future than just the financial aspects. You can have issues if one person wants to travel and spend money on that, while the other wants to get a fishing boat. Set financial goals to help you reach your vision of what your retirement will look like.

Tip #6 Speak with an Advisor

It is always beneficial to have a professional assess your financial situation for optimal success. Speaking with an advisor would help you gain from business planning, insurance, tax counsel, or investing knowledge. It's also beneficial for couples to have a third party confirm their plan and of course, to settle bets between the two of you if need be.

Should You Have Separate or Joint Accounts? Or both?

Having Separate Accounts

Maintaining separate accounts may be a comfortable starting point for many couples, especially those who are accustomed to managing their own funds. Moving in together usually results in couples having a little pay difference as well as any debts they may have brought with them. A distinct accounting system can help to clarify differences in income, debt, and potential personality conflicts between spenders and savers.

Despite the autonomy, separate accounts actually lead to greater communication over who will be in charge of what payments. While some couples decide to divide expenses equally, others may feel more comfortable paying according to their income. Using a shared spreadsheet or a single credit card could be the most straightforward way to keep track of expenditures. You will still need to discuss long-term financial goals, retirement aspirations, and home expenditure budgeting.

But having many accounts provides you more control over how you handle your money. If you and your partner are both happy with how you've agreed to divide the shared costs, this money management method is the most "fair," and you may be less likely to argue over your spouse's spending habits.

Note: Financial management is now up to each individual. It may also be vital to communicate more effectively to make sure that no one loses sight of your shared goals. Ultimately, you want to avoid communication issues.

Having a Joint Account

One of the main advantages of having a joint bank account is that there is less chance of suffering financial "surprises" when all of the money goes into and comes out of one account that you both can see. Couples who have joint accounts may find it easier to manage their finances because all expenses are debited from one account. It also makes it harder to forget about account actions like withdrawals and payments, which makes it easier to balance the checkbook at the end of the month.

Sharing a bank account can help you manage your finances more effectively, but there are some potential drawbacks as well. For instance, if a couple has a shared bank account, some can feel like they are losing their financial freedom. Each partner can continue to enjoy their own level of financial independence thanks to separate accounts. In other words, since transactions are private rather than shared, there is no "checking up" from the other partner.

Having Both Individual and Joint Accounts

Even though it could be challenging, some couples might find that having separate and joint accounts is the best option.

This approach entails managing debt, retirement, and savings collectively and depositing all income into a single account or accounts. Typically, a predetermined sum is deposited each month into each person's personal checking account. This "personal money" can be used by each partner to cover any demands or needs they have that are not shared expenses as well as to purchase gifts for their spouse. The amount that goes into the personal accounts each month must be discussed and decided upon in order to avoid disagreements. The benefit of this situation is that you can pay your bills without worrying about salary differences, and joint accounts make keeping track of funds simpler.

While you are each free to make decisions regarding purchases without consulting the other, you also work together to develop a joint retirement plan. Although this technique is simple to keep track of, it necessitates opening and maintaining numerous bank accounts. Having money deposited into their personal accounts each month may feel like an allowance to some people.

Setting Financial Goals as a Couple

Again, you and your spouse will learn that it's critical to set financial objectives jointly in either situation, whether you decide to open a joint bank account or have separate bank accounts. Your financial plans and goals must be regularly discussed with your partner in order to decide what makes sense. It's crucial to evaluate that approach and make any necessary adjustments. By using this method, you and your partner could talk about money matters frequently and establish a stable financial future.

Wrapping Up

There is no one right way to handle money when you are a newlywed couple, but with little forethought, trust, and open communication, you and your partner might be able to minimize disagreements over money later in marriage. Remember that kindness and communication will go a long way as you embark on your shared financial adventure!

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