Nearly two-thirds of marriages start off in debt, thanks to student loans, credit card debt, car loans, or a mortgage. The elephant is already in the room, yet many couples dread having “the talk” about finances. While money is just a resource, many of us come to marriage with the emotional baggage of any past financial mistakes we’ve made.
Know that you’re not alone. Also, know that building a strong financial foundation with your new spouse can be one of the most important things you do to build future marital happiness. Annoying habits like leaving dirty laundry on the floor can be ignored, but an overspending spouse can torpedo a relationship.
In this article, we’ll help you identify the money habits and attitudes each of you bring to the marriage, as well as specific assets and debts. Then we’ll walk you through the basic steps of joining your finances and looking to the future together. Need help? We are here to answer all your questions.
Identify your financial personality
Our habits, beliefs, past experience, and inborn temperament affect many of our actions and choices, including money behaviors. Here are some questions to help you figure out your financial personalities:
- What did you learn about money from your childhood? What, if any, financial lessons did your parents teach you?
- Are you more inclined to save or spend? What percentage of your monthly income goes to savings and retirement accounts?
- How do you feel about budgeting? Is there a system (app, spreadsheet, etc.) you’re already using?
- Do you know your current credit score? When was the last time you reviewed your credit report?
- What have your experiences with credit cards been like? How many/what kinds of cards do you have now? Do you pay off the balance each month?
- Do you have an investing philosophy or specific approach?
To keep the conversation as pleasant as possible, choose a location you both enjoy, such as a local coffee shop. Order your favorite pastry and settle in for a talk that may be uncomfortable at first, but will ultimately bring you closer together.
Be transparent about your financial situation
It’s important to be honest and discuss the debt you will each be bringing to the marriage. This way, you can decide if you’re going to tackle student loan or credit card balances individually or together, and plan for future goals accordingly.
Prepare a simple list of assets and debts including:
- Credit card balances
- Car loans
- Student loans
- Credit report and credit score
- Checking and Savings account balances
- Retirement and investment account balances
- Other property such as cars, homes, and valuables (jewelry, art, antiques)
Make a pact in advance not to criticize each other’s past financial decisions. Instead, try to analyze the data in front of you as objectively as possible and look for ways to build on each other’s strengths while minimizing weaknesses.
Make a decision about joint accounts
Now that you know what each of you is bringing into the marriage, you can make informed decisions about when and how to combine your finances. For example:
- Credit card accounts: You could maintain separate credit cards, add your spouse as an authorized user to one or all of your existing credit card accounts, or open a new joint credit card account together.
- Taxes: If one spouse is on an income-driven student loan repayment, it might make more sense to file your taxes as “married filing separately” instead of jointly. Of course, that decision may have other implications for your taxes, such as ineligibility for certain deductions. Speak with a tax professional for advice on these decisions as well as updating your W-4 withholding form at work.
- Bank accounts: You could maintain separate checking accounts, transition to a joint checking account, or some couples choose to do both. Open a joint account for household expenses and two separate accounts for discretionary spending. The same decision applies to savings accounts.
Keep in mind that if you maintain separate accounts, you’ll have to decide what percentage of each person’s salary goes toward joint expenses. If one spouse makes significantly more money than the other, you’ll have to figure out together what feels fair.
Update your budget
It's always a good time to hit the refresh button on your budget. Take the decisions/goals you’ve identified so far and incorporate them into your new budget. For example, if you’re trying to pay off debt together, look for areas of your budget where you could trim spending (such as dining out) and reallocate that money toward your debt payments. A helpful budgeting tool that Peoples Bank offers is called My Money Manager within Online and Mobile Banking. My Money Manager can help you stay on top of your bills, your cash flow and your entire financial picture, so you can set clear goals and achieve them.
Review your beneficiaries
If you have retirement accounts and/or life insurance, you need to name a beneficiary who will receive the asset after your death. Take time now to add your new spouse as a beneficiary on your accounts. It's also a good time to review your insurance coverage¹.
Discuss future financial goals
Whether it’s having kids, relocating to a new area, or buying a home, it’s best to decide on these goals early and re-evaluate your plan regularly to ensure that your goals are still aligned with your partner’s.
- Save for emergencies & retirement²
- Purchase your first home together
- Plan for the costs of having a child or children
- Go back to school and/or switch careers
- Start a new business
- Save for the holidays, specific large purchases, and/or a vacation
Ask for help when you need it
Sometimes financial problems and disagreements are too big to resolve on your own. If you need help, reach out sooner than later. A neutral party can provide a fresh and objective set of eyes on an old problem, which can be just what you need!
Do your banking Where Values Matter!
As a longtime community bank, we strive to enrich the families and communities we serve. Peoples Bank offers a complete menu of financial and banking services at any and every stage of life, from newlywed to retirement². Our Simply Free Checking Account³ is exactly what it sounds like: a FREE account for everyone with no minimum balance or monthly service charge. If you’re looking to make a fresh start with a joint checking account, we’ll even buy back your debit cards and unused checks from other financial institutions. We also offer savings accounts and home mortgages, as well as a variety of other products and services. Contact us today or visit your nearest bank location to learn more or open a new checking account today!