Financially Ever After
Posted by Susan Johnston on July 26, 2010 in Family, Living Well, Personal Finance
A Boston-based freelance writer, Susan Johnston hopes to put these tips to good use someday. She’s written for publications including Bankrate.com, Yahoo! HotJobs, and Young Money Magazine.
In the flurry of wedding and honeymoon planning, many couples forget to plan for their financial future. According to a PayPal survey conducted last year, at least 10 percent of the couples surveyed said they have ended a relationship at least in part due to money. The survey also found that money causes more arguments than sex or any other issue.
I talked to Manisha Thakor, personal finance expert and co-author of Get Financially Naked: How to Talk Money with Your Honey, about how to improve finances and achieve matrimonial money bliss:
1. Get Lovey-Dovey Over His & Her Paperwork
If the bride is changing her name, she’ll need to update her passport, Social Security card, driver’s license, and other documents. Thakor suggests doing this ASAP. “Early in your marriage is a great time to sit down and make a comprehensive list of all your assets, accounts, important papers, etc., – something both of you should do and share,” even if the bride is keeping her name. Start with the most important documents, then move on to routine items like magazine subscriptions and utility bills. Both newlyweds will also want to name new beneficiaries on their retirement plans in an effort to take control of finances.
2. Consider a (Financial) Three-Way
Some couples keep separate bank accounts, while others merge all their money. There’s also an intermediate option Thakor calls a “financial three-way,” which includes a separate bank account for each of you and one joint account, potentially requiring you to find a new bank. “I am increasingly seeing this as so many couples are marrying later in life and coming to marriages with income, assets, and habits that are fairly ingrained,” she explains. For whichever approach you choose, she says, communication is key.
Jennifer‘s note: my fiancé and I do this now. We have a joint account into which we put an equal percentage of our paychecks for household items and the occasional night out. That way no matter who makes what we’re both contributing equally, and I don’t have to feel guilty about splurging on a manicure when I have a little extra in my account.
3. Getting in the (IRS) Bed Together – Or Not
Not so fast – you don’t have to file taxes jointly. For instance, if one of you owns a business, the other may want to file separately in case any bookkeeping issues arise on the corporate level. The downside of separate returns is it lowers the ceiling for things like Roth IRA contributions and capital gains, which won’t help with budget issues. “This is definitely a discussion for you and your accountant.” says Thakor.
Did you get married recently or are you getting ready to get married? How are you and your betrothed handling finances? If you’ve been married a long time, what are your keys to successful financial communication in a marriage?
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Brette Sember
I would recommend using the SAME bank for the joint account. It is much easier and faster to transfer money within one financial institution than try to write a check from one bank to another.
Ruth Pennebaker
This is great advice about something critical — but so easily overlooked in the heat of the moment.
Alisa Bowman
My husband and I share all of our checking accounts — with the exceptions of the ones associated with our businesses. Then we have a discretionary amount of cash we budget for each other each week. He spends his however he wants. I spend mine however I want. No questions asked.
Jennifer Margulis
Remember the GROOM might change his name too. My husband did (we both changed our names) and so did my brother!
sarah henry
This is all really sound advice Susan. I don’t think there’s only one “right” way to figure this financial stuff out when you become a couple in the eyes of the law, but I do think it’s really important to have these conversations so both parties know what’s what.
And I think you should do a follow up post, down the track, about how both people need to stay on top of the financial details. It’s not a smart idea to make one person in charge of the joint finances, especially since (don’t mean to be a downer here, just realistic) 50 percent of marriages end up in folks, ah, splitting their funds and going their separate ways.
Alexandra
Great article! I like the idea of three bank accounts.
Donna Hull
I agree with Brette about the convenience of using the same bank for all of your accounts. Also, sitting down to discuss how you view money, is very important. How will you save? What items are spending musts? How do you view discretionary income, if there is any? Knowing the financial landscape beforehand will make adjusting to married life that much easier.
Kristen
You could also consider instead of separate bank accounts thinking of separate credit cards to keep track of different spending. My husband and I share all of our accounts–but he has one credit card that he uses just for business so those expenses are easily tracked–and reimbursed!
Susan Johnston
Thanks for the comments, everyone!
@Brette: Using the same bank sounds like a great idea as long as you don’t have so much money in one bank that it exceeds FDIC insurance limits (I’m guessing a lot of us don’t have that problem!).
@Jennifer: Good point! I didn’t realize that you and your husband had *both* changed your names. I do know a couple whose last names were only a few letters off of each other, so they created a new last name and both legally changed their names. Sounds like a great solution!
Jesaka
Fantastic and sound advice, Susan! I’m a big fan of the “financial three-way.” We’ve been taking care of our finances, individual and household, this way for nearly seven years and it’s been perfect, especially since we manage money very differently. Thanks for pulling of this together.
Christine
This is really helpful advice for anyone thinking of merging finances. It’s been so long since we did this; both of us changed our names so there was a lot of paperwork we had to complete and it’s good to set time aside for that. While we had separate accounts towards the beginning, after several years it all got merged.
Merr
So important to talk about finances and money before and during marriage.
Jennifer Scott
@Donna – You’re right about having that discussion beyond just the numbers. Talking about what’s important to you definitely helps to avoid arguments going forward. In fact, it was because I could talk to my then-boyfriend frankly about how and why I spent my money and how it aligned with my values that I knew he would become my now-fiance!
Stephanie - Wasabimon
I like the idea of having joint AND split accounts, like in option #2. We have split accounts not, but it would be nice to have a shared account without having to rely on it for personal expenses.
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