The big decision has been made. You are taking the next step to merge households−everything together under one roof. While not as exciting, your next big decision should be about managing finances. You will be sharing the same space, so do you combine your bank accounts or do you use a 3-pronged “yours, mine and ours” approach? One of the biggest strains on a relationship is money. It also happens to be one of the hardest to resolve. Now is the time to have the “money talk”.
Discuss Your Finances Openly
First, for husbands and wives to-be, you need to have a heart-to-heart about your complete financial picture. It may be scary to put all your cards on the table but being open about finances is critical when beginning your lives together. Openly communicating about income, debts and obligations like child support or alimony puts your relationship ahead of those who don’t have the conversation.
Full disclosure is also necessary to plan for day-to-day expenses and budget for the future. When it comes to successfully co-managing household finances, sitting down to discuss the state of your financial union is critical.
Choose How You Will Structure Your Finances
After full disclosure of your finances, the next decision is to combine your money into one shared account or keep separate accounts. Another option is to have three accounts−two individual accounts and one shared. In this scenario, each person contributes funds to the shared account while a set amount is deposited into each individual account. Typical expenses covered by the shared account include houses, cars, child care, utilities, groceries, etc. Agree upon the amount each partner will contribute to the shared account. One suggestion is to take the same percentage from each individual’s pay check to keep the contributions proportionate.
How each of you manages your separate accounts is of equal importance. Good money management demonstrates you can be trusted to contribute responsibly to your financial life. Control over your money develops self-confidence which is essential to building a healthy marriage or partnership based on trust.
Create a Budget Together
The next step to managing the household finances is to create a budget together. There are several resources available, such as Mint, Quicken or LearnVest’s free budgeting tool. Set aside time to review your options and decide together on the program that fits. Here are a few things to consider when preparing to work on your budget.
- Examine bills and bank statements together.
- Know exactly how much money each of you contributes to the household budget.
- Be aware of what it takes to run your household each month−have the complete picture. You may need to talk about how much you want to spend on groceries, entertainment, etc. and make adjustments.
- Determine how much money to put into an emergency fund.
- Set aside time to review your budget periodically. Good times to do this are after getting a raise or making a large purchase, or after an event that reduces your household income.
The hardest part of merging household finances and establishing a budget is getting the conversation started and disclosing the details of your financial situation. Just remember it takes communication and honesty to build trust and get on the same page financially, but once you get there your future will be more secure.
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