Managing Money – Part 2
Newlyweds? – Make Managing Money Discussions a Priority
Very soon after becoming engaged, the couple mentioned in the previous post, sat down together and had their first managing money discussion. They listed everything they owned, plus all debts, along with credit card and bank statements, pay stubs, insurance policies, etc…This gave each spouse a detailed picture of their finances and made it so much easier to set up a budget.
This couple was having some difficulty in dealing with only numbers on a sheet. Their payroll was a direct deposit and all expenses were paid by check or credit card. They decided to keep the main expenses to be paid by check, but for everything else, hard cash. They would draw a certain fixed amount in cash at the beginning of the week and use that for all other expenses. Any funds left over went to an emergency account, and on occasion, they rewarded themselves with a small amount. This shows that there is no hard and fast method for everyone. Whatever method of managing money that you both agree on that works, is the one for you.
There are normally certain issues that crop up, but if both spouses are willing to discuss the matter of managing money and also compromise some, they can be worked out to mutual satisfaction. Even an issue on gift giving became a problem for one of the earlier couples. The husband had seven brothers and sisters, each with two or three children. Trying to set a limit on gifts with that large group was difficult at best. They discussed it and agreed on what they believed to be a fair amount and stuck with it. A good example of a managing money discussion.
It’s very important to keep detailed records for those couples who are using individual accounts. There are some expenses paid once a year, and by using a budget, they can be listed properly and each spouse will know what their share is.
Factoring in home ownership can be a little more difficult. When saving to buy a home for the individual account couple, they need to save for the down payment, settlement costs, and then after the purchase is made, comes the mortgage payment, real estate taxes, insurance, plus repairs and upkeep.
Sometimes, when expenses are rising and salaries are not, the couple may have to consider second jobs to make ends meet. Its best if they are both prepared for that and agree that one or both will do it. If there are children in the marriage, it can and should be a more serious discussion of managing money.
Sometimes, in the area of health insurance, it is best not to maintain separate policies if one of the spouses can be added to the better policy of the other. This should be carefully reviewed.
If both spouses are working, and have 401(k)’s or life insurance, be sure to add the other spouse as the beneficiary as soon as you are married. Also, if you happen to be a military couple, be sure you fully understand all of the benefits available, and take advantage of those that you are entitled to.
One more item to consider is your tax filing status. Those couples getting married late in the year, even in December, can file a joint return for the entire year. In most cases, this provides the lowest tax liability for the couple. However, be careful when filing a new W-4 with your employer. The current tax tables still penalize a married couple if both are working and drawing a salary.
The best way is to make up a sample return that will reflect your wages and also your spouses. If you itemize deductions, factor those in as well and calculate the tax liability. From that number, it is fairly easy to determine what each spouse should claim in exemptions.
Also be sure to notify Social Security if one spouse changes her name. Before the wedding, there is another matter of managing money to discuss that may be appropriate in your situation. This document rubs some individuals the wrong way, and it is called a prenuptial agreement.
There are certain situations where they should be used and it’s not always like the Hollywood stars with the high income. Sometimes one of the spouses is bringing a lot of debt into the marriage or perhaps one spouse will be working to pay for the education of the other spouse.
These and other issues are valid reasons to consider a prenup. They’re also frequently used for asset protection in managing money properly.
While we’re looking at legal issues, it’s also a good idea that each spouse should have a power of attorney to act on the other’s behalf if they become unable to act for themselves.
Now, with the budget all prepared and all paperwork in proper order, comes the 64 dollar question. Who will be handling the bookkeeping? The best answer is the one most qualified in managing money and willing to do it. Both spouses, however, need to stay in the loop and have access to all information, especially passwords and account numbers.
You should be having regular “managing money” discussions going forward and all of these matters can be reviewed or changed as needed. It may be that your finances are a little more complicated than most, or there may be some unresolved issues that need to be worked out. In these situations, it’s a good idea to meet with a financial planner and lay everything on the table, and get a fresh opinion as well as suggestions. A couple of hours spent with an experienced planner can make your marriage a lot happier and less stressful.
Gust Lenglet is the CEO of HBS Financial Group, Ltd., an accounting & tax preparation firm in Maryland. He has more than 25 years of experience in the banking and financial industry. Gust started his career as a loan officer at a major national bank, and then moved on to become controller of a major law firm. In recent years, he has written many financial articles that have been published on Ezine Articles and many websites.