Building a Financial Future Together: Essential Tips for Couples

As you and your partner bring your lives together, finances will play a key role. And while you may have successfully handled your finances while single, knowing how to manage them as a couple can help eliminate conflicts, support your relationship over the long-term, and make a significant difference for your shared financial future. To help you start off on the right foot, the following tips can help you manage your finances and set you both up for a more stress-free life together.

Start the financial conversation now

Whether you’re newly engaged or have been putting off a serious financial discussion for years, it can be hard to get started. To overcome initial stress or aversion, cast the conversation in a positive light. Before you even dig into what approach might work best, consider the start of the conversation as an opportunity to deepen your understanding of each other.

How would you describe your own attitudes toward money? What are your spouse’s highest financial priorities? Did either of your parents handle money in ways that you want to emulate or avoid? What are your financial fears and hopes?

This type of conversation can help you figure out how you are similar and, inevitably, how you are different—crucial information for figuring out how to troubleshoot possible conflicts around money. Doing this sooner rather than later can ensure you’re on same page about your financial future as a couple.

Pick your approach and process

You wouldn’t have married just anyone. You, your partner, and your relationship are all unique. Likewise, there is not just one “right” way to manage finances with a partner. Aim, instead, to find an approach to managing finances that fits your shared situation well.

Having an established system in place for when you talk about money and how you make decisions can lessen stress, guilt, or blame. Basically, decide how you want to make decisions, and create a safe framework for ongoing financial conversations.

Among my advisory clients, I’ve seen a wide variety of processes and routines for how couples handle aspects of their financial life, from day-to-day budgeting to long-term retirement goals. Having a plan is a great start but acting on it matters too. So, you need to be realistic about creating a system you and your partner can put into practice, building upon patterns and behaviors that already work for you both. In what circumstances have you communicated best as a couple? We’re all wired a bit differently, so maybe consider what has helped in either of your academic or professional lives, e.g. needing visual information, taking handwritten notes, leveraging technology, or plentiful real-time, in-person discussions.

One of my favorite examples is a monthly “The Business of Us” meeting. This common process schedules time on your calendars to discuss your household budget, your progress toward joint financial goals, and your division of responsibility for financial management.

It’s great to have the life-long support of a spouse, but the two of you aren’t in this alone! Just as couples may benefit and thrive from connections with friends, extended family members, colleagues, and clinical experts, a qualified financial advisor can play an important role in your financial life. They will make sure you are on track towards your financial goals and have strategic advice on how you might be able to reach those goals more quickly. Having a trusted outside view can provide more confidence that they are making responsible choices together as a team. For some couples, simply getting that appointment on the calendar will catalyze them to clarify those goals.

Keep in mind, situations change over time, and your approach to finances will likely need to adapt over the course of an enduring relationship. The transition to parenthood is a classic example of when a couple would need a revamp. If both partners were working and then one of them steps out of the workforce to focus on raising children, the couple could need to change tacks to adjust to the change in income and shifts in household responsibilities—along with the new costs and goals that come with the birth of a child.

Arrange an account structure

How to handle accounts is a central decision in your financial management approach. In most cases, accounts you owned prior to marriage should be kept separate for clarity. After getting married, base the decision on if you should have joint accounts or continue to keep finances separate depending on your situation and each of your preferences. Here is some basic guidance on the four main options:

• Separate accounts: Decide how much you will each contribute to your shared living expenses such as mortgage payments, utilities, and groceries. Some couples split expenses evenly, and others use a percentage based on the respective incomes.
• Joint accounts: Discuss the amount that each of you can spend without approval of the other so that you don’t inadvertently overdraw your accounts.
• Allowance system: When one partner is not working, you should decide what amount is appropriate to cover each of your personal needs, and revisit those amounts regularly.
• Combination of joint/separate accounts: Decide what you will each contribute to a joint account to cover living expenses or other shared goals. Then set the remainder of your monthly incomes to deposit into separate accounts to use for individual needs and wants.

Understand credit access and ratings

Candor and clarity about each of your debts, credit history, and spending habits is essential to building trust, and lays out key information for making strategic decisions that will protect your relationship and your shared financial future. Start by checking your individual credit scores and sharing them with each other if you have not yet done that.

Once you have an idea of where you both stand, consider if any of these scenarios might be relevant to your plans involving loans or lines of credit:

• Credit history: If one spouse has poor credit history stemming from a bankruptcy or foreclosure in their past, the couple might not even qualify at all for a joint loan—even if the other spouse has excellent credit.
• Credit score: If one partner has a poor credit score, being married won’t necessarily affect the other spouse. However, if you open joint accounts or apply for a loan, such as a mortgage, together, both partners’ credit scores may be considered. This could make a difference on the approved loan amount or interest rate you are offered.
• Credit card habits: If you have joint credit cards, and different spending habits, be aware that when adding a spouse as an authorized user on an existing individual credit card account, each cardholder is equally responsible for repaying the debt, just as they would be for a joint loan for a home or car. The entire amount borrowed and payment history are reported on both spouses’ credit reports and scores.

I also recommend learning how marital property law works in your state. If you reside in a “community property” state (Arizona, California, Idaho, Louisiana, New Mexico, Nevada, Texas, Washington, Wisconsin, and by option in Alaska), be aware that both spouses are equally responsible for all assets and debts acquired during the marriage. So even if you don’t know your spouse has racked up a large credit card balance while you are married, you would still be on the hook to make sure it got paid in full.

Manage together

Some of us are in our element looking at spreadsheets and talking about interest rates. Others get a knot in their stomach just opening a monthly bank statement. At least neither of you will have to do this alone! In fact, it’s important to manage finances together. One thing I’ve learned from working with couples is that allowing only one partner to make all the money decisions is a bad idea. No matter how uninterested one of you might be in finances, or how much more comfortable or skillful the other may be, you both need to be knowledgeable about your assets and debts. You don’t have to shoulder an equal amount of responsibility, but each of you should be involved enough so that if something happens to one of you, the other could confidently take over handling your finances.

Most of us have heard time and again that the health of a relationship relies on communication. That general advice very much applies to managing finances as a couple. Be clear with your expectations of each other. As you continue with your approach to managing finances, maintaining open, honest, and active communication can help make these conversations more effective and meaningful. For more information, contact your advisor. If you are not a client but would like to learn more, contact us.