Congratulations to the newlyweds—your future looks bright. But what about your finances? What should you do with your money now that you're sharing it? Should you open a joint account?
There's no single right answer for everyone. Look at your assets, debt, income, spending styles, and financial priorities to determine which financial system is best for you as a married couple.
the money talk
Before you and your spouse discuss joint accounts, have a general financial discussion. Here are five steps to follow to determine your best money-management strategy:
- Become a financial team. This means being honest with each other about financial issues and deciding what to do with each partner's best interests in mind.
- Determine your desired lifestyle and financial priorities. What do you need to pay off first? What is important to you—a new car or house? Clothes? Paying off school loans?
- Discuss your assets and liabilities. What are you bringing into the marriage? What are your credit scores?
- Create a system. Decide who will pay which bills, and which paychecks you will use to pay them. Agree on how much you'll devote to savings, retirement, or other investments. Develop a way to manage your money that both of you are comfortable with.
- Ask yourselves these questions: What does your future look like? Are kids in it? Where do you want to be in five or 10 years?
- Help you become a financial team. When your paychecks are combined into one account, you're no longer making decisions just for yourself.
- Help you manage your "system." Many financial institutions offer online tools to help track spending. They easily allow you to see what you need to cut back on and what you might be able to splurge on, like that second honeymoon you're planning. When all of your money is merged into one account, you each can participate in managing your combined income.
- Allow you to see the bigger picture when all your finances are combined. Do you have enough money from your joint income to go for that loan on a house?
- Help you buy big-ticket items like that new house, since the outlook for loan approval is better when you have more money.
However, joint accounts may:
- Lead to arguments if you and your partner have completely different spending habits.
- Be a bad idea if one of you comes into the relationship with way more assets or debt than the other partner. Joint accounts also don't really protect you if you get divorced, since you've already combined your money.
- Not be the only answer. Having one joint account doesn't mean that you have to put all your money together. Many couples create one joint account for shared spending, like household items, but keep separate accounts for personal spending.
Keep in mind that:
- Both of you should be responsible. Try not to let one person handle all the bills and finances. If something happens to one of you, you don't want to be left in the dark when it comes to paying bills or managing a checkbook.
- You could consider keeping separate checking accounts for fun money or surprises such as holiday or birthday gifts for your spouse.
- If this is your second marriage and you're coming into it with more assets, or with children, you might need to start off with separate accounts and gradually merge some income with your spouse. This protects your assets and allows you to keep some of the money you have already made on your own, as well as make individual decisions for your children. In this case, you and your spouse each should have wills that explain exactly how assets should be divided if one of you dies.
- Money secrets can backfire. Even if you decide to have separate accounts, be honest with your spouse about what you're spending, since your personal financial decisions affect the marriage as a whole.
The key is to find a system that works for both of you. That might mean having one joint account for big expenses and individual accounts for everything else, or having one joint account for everything if you're similar spenders and money managers. The best advice is to talk to a financial coach or counselor at your credit union. He or she can help you determine which system will work for you and your partner.