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.
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Sound advice I very much wish I had read a couple of years ago. There is a saying, “love is blind”, but if you go into a marriage blind there is going to be a good chance another old saying will come into play, “when poverty comes through the door, love goes out the window”. I married a shopaholic, which was fine when she was employed and contributing to the household budget. But when she was laid off but did not lay off the shopping, I literally had no choice but to file for a divorce to safeguard my financial health and credit rating. So I totally agree, committed couples and newlyweds have to discuss financial matters and if one party doesn’t want to, it’s a good indication your relationship is steering towards rough seas.
This and the earlier part of the post are both excellent articles.
I’ve been engaged twice and broke it off both times. I’m not afraid of marriage and I truly loved both men . The problem was my view of marriage. I look at marriage as a contract between two people, and I want the details agreed to before I sign a marriage license. I have a significant inheritance coming to me one day and a very good income now. My insistence that there be a prenup killed the first relationship. Fine by me, it clarified his motive for asking me to be his wife.
The second abandoned engagement was not because of my insistence on a prenuptial, in fact it was mutually desired because he’s very well off and to get his family’s blessing it was required. The problem this time around was my intention to keep my last name and manage my own money, and deal with my own banking and such. I explained that I did not want to one day be a divorcee or widow and have no idea where I was at financially, and have no credit because everything was either in my husband’s name or in joint accounts. I learned then that my man was a dinosaur, and wasn’t going to have a wife who maintained her own financial independence. We’d never gotten to budgeting for education, joint holdings, household management or anything else and mutually agreed to stay friends, but that was all.
My point for bring this up is to recommend that in the 21st century entering into a marriage can not be starry eyes blinding couples to life’s harsh realities. The romance will wear off in time, but the marriage should live on. However, it’s unlikely to if once the honeymoon is over arguments about family expenses, who handles finances, etc. become an issue. Settled up front, a committed couple can work on maintaining their relationship as a happy, mutually gratifying union of two people who made each other a promise to be together until death parts them.
This is absolutely vital! My boyfriend and I are always discussing money and trying to work things out so that we can reach our goals. Without those discussions, we just would not be able to do the things we want or need to do. It’s a lot of work, but if you can’t work together as a team on something that is a part of your whole lives, you’re in trouble!
Great info. I actually have been married for 9 years to my husband and realized that I had never added him to my 401K from my previous employer (my mom was still the beneficiary). This is a great list to start out. Merging finances is tough when you get married. We choose to share a checking account, but we have friends that keep everything separate, too. Thanks again!
This is such good advice. Having been in a marriage where we not only didn’t discuss money, and only had fights about it, I will totally use this next time around.
I really wish my wife and I had had discussions like this before we got married. It’s good for any newlywed couple to look ahead and calmly discuss the financial issues that could risk becoming huge fights later. The one that really stuck out to me was the issue on gift giving, which seems to me to be something that most people wouldn’t think about. But, it does need to be talked about – my wife has a huge family, but they don’t really do much gift giving. My family on the other hand is very small, and I’m not really close with my extended family, so I give very expensive gifts to my parents and sibling. Recently, my wife has been giving me a hard time about it, and I have no idea why since I treat her with much greater generosity.
I agree with this post. It is always good to get things out in the air before marriage… hate to say it, but it is best to find out if you are not financially compatible BEFORE marriage rather than after!
Before we were married, I used to get nice tax refunds- but now tack on my husband’s six figure income and I now have to pay. My husband heavily contributes to our RRSP so he always gets a nice big refund. He feels that he shouldn’t have to pay my tax assessment and I’m on my own. Can you recommend a solution for this?
It sounds like you’re filing separate tax returns. I thought in Canada you could file jointly like in the US. Canada even allows common law couples to file jointly, I believe. Your RRSP is much like our IRA, which reduces taxable income, and he is allowed to make a spousal contribution for you. You might want to have a serious conversation with him.
This is all fine and good – except that discussion about children here is pretty minimal. When the kids come along, the wife is typically the one who stays home to nurture the kids – or in the very least, takes less-committed jobs in order to be flexible for the kids needs. So the whole idea of “equal contribution” becomes fuzzy. These articles and discussions are all assuming two very traditional professionals with solid jobs.
Very realistic and informative article. Husband and wife must be on the same page, as far as financial dealings are concerned. If they are not on the same page, conflicts can happen. Both husband and wife should create a realistic budget and stick to it.
Very helpful post for couples and I also think financial compatibility is a very important factor to be considered before getting married.
I graduated college with a little over $30k in debt. it sucks. My husband saved for college and paid it off in full (smart). I try explaining to him the idea of having to pay off my student loans for the next 10 years. I love how it’s a complete shock to him… but it’s the least of our big worries. 🙂
If Congress and the White House would get off their pompous butts and lower the rate on student loans to 4%, where they should be right now, your payments could stay the same, but have your loan repaid in half the time. Senator Kirsten Gilliand has proposed such a bill, and those morons are trying to tear it apart. The reason they don’t want the rate reduced is because the Federal Student loan program is forecast to earn $51 BILLION this year and I suppose they will have more funds for their enjoyment and egos. Probably will increase foreign aid to Saudia Arabia again!!
I always considered this to be one of the discussions couples should have before they’re even engaged (at least if they’re living together) since money often drives couples apart after marriage. If two people can’t get on the same page about this, it can become a real issue, and I’ve known couples to actually break up after the engagement because they discovered that they had completely different ideas of how to manage their money.
It’s becoming more and more necessary for couples to have money discussions before marriage. If it can’t be resolved then, it probably won’t.