When making a commitment like marriage, you’re sharing your lives and resources. If you’ve found a person who will stick with you – and those delightful quirks like reciting lines with the movie and drinking straight from the juice jug – then you owe it to them to be straight about your money habits for your best chance at being financially awesome together.
Honesty is the best policy
Sure, it may seem trite, but honesty is critical when talking about money. Before merging finances, start with a clear picture of what you bring to the table individually – assets and liabilities. Be upfront about your income, savings, investments and any property. Disclose any debt you may have, whether from student loans, credit cards or other personal loans.
“This is a great time to bring up your credit score and explain any anomalies,” adds Todd Chestnut, the branch manager of Washington Trust’s Nampa Branch. “Your score is a factor in what kinds of loans and terms you can expect, such as when you’re ready to buy a first home together.”
This is a great time to bring up your credit score and explain any anomalies. Your score is a factor in what kinds of loans and terms you can expect, such as when you’re ready to buy a first home together.
Where you see yourselves
Once you have a good idea of your combined financial standing, envision and talk about the future. Do you have emergency reserves? Do you see kids, a house or plenty of travel? Do you want to be debt free in 10 years or retire early with a comfortable nest egg?
If you can prioritize short- and long-term goals together, then it’s time to start creating a plan to achieve them.
Break out a budget
Develop a monthly budget to help track spending and saving. Start with your combined income and then list out all expenses, including rent, utilities, debt payments, food, clothing, entertainment, etc. Be sure to set aside some cash for a dedicated emergency fund (six months’ worth of expenses is the rule of thumb), and if you can swing it, start setting aside savings for some of your mutual goals.
Keep tabs on spending
With digital banking and countless apps, it should be easy to keep track of how you’re doing as a couple. “To tackle your common expenses, it may help to set up a joint checking account, which provides both parties access to funds and recordkeeping,” says Chestnut. “Joint accounts could be particularly important should one partner be incapacitated, as the other won’t have the added worry of gaining control of accounts to get the bills paid.”
Of course, sometimes you want to surprise your partner with a gift, so think about maintaining separate accounts for discretionary purchases.
You’re worthy, but is your credit?
Some couples opt to share a credit card, but it’s not always a clear choice. If your relationship was cemented on a mutual ability to rock bargain-basement finds and decorate with thrift store gems – in other words, you handle money similarly to maintain high credit scores – then a joint credit card shouldn’t cause problems.
But, if one’s weakness for Manolo Blahniks has already taken a toll on a credit score, then consider separate accounts. Of course, the individual with the higher score can add their partner as an authorized user, but with the understanding of each other’s spending patterns. The account holder is ultimately responsible and could take a hit from unexpected shopping sprees.