In years past, combining finances was a no-brainer for most couples. But more and more, partners are choosing to manage their money in other ways. Here, we examine your options and offer budgeting tips so you can get your financial relationship off on the right track.
Options for setting up a joint account
1. Combine everything
In this method, one person adds the other to his or her bank account(s), or a couple opens a new account together. Joint bank accounts can simplify money management since funds go into and out of one place. All spending can be easily tracked by both people, though there can be pressure to “justify” purchases made from a joint account.
2. Keep finances separate
Some couples prefer segregating their finances. This can be for a host of reasons, such as established finances and habits, personal preferences or exceptional circumstances for one or both spouses. In these cases, determine how you’ll split monthly expenses (more on that below) and set up a system to keep one partner from frequently “owing” the other. Bill-paying and banking apps can automate transfers making it easy to track spending. If you need help establishing a budget, there’s an app for that.
3. Maintain joint and individual accounts
More and more, couples are deciding to keep a joint bank account for shared expenses and separate accounts for individual purchases. Each person transfers money to the joint account each month to pay bills or add to household savings, but they largely manage their own assets. With this setup, joint expenses are easy to track and pay. Each person maintains control over his or her own spending money.
After you and your spouse agree on a method, it’s wise to set a budget to keep you on track. These budgeting tips will help get you started.
Start your budget discussion by outlining all shared expenses: rent, electric, gas, internet and cable, healthcare, joint loan payments and so on. Next, determine how to divvy up any debt incurred before the relationship began. Do you pay your student loan payments alone or do you split the payment? What about credit card debt?
Even things out
In many relationships, salaries vary. If this is the case, splitting bills down the middle may not make sense. To keep things fair, divide expenses like rent or mortgage and household utilities by percentage. Figure out what proportion of the expenses each partner should pay based on income. If one spouse makes $75,000 and the other makes $25,000, you may want to split the $1,000 rent payment as $750 and $250, respectively. Make sure to discuss this strategy ahead of time to make sure one person won’t feel overly burdened by taking a greater financial load.
Talk it out
In most relationships with at least some shared finances, one person acts as the “money manager.” That doesn’t mean the other should stay out of the equation. Talk regularly to ensure that you are both on the same page.
Schedule regular times to discuss the financial state of your household, plan for the future, discuss your budget and get on the same page.
Consider your credit
Marriage itself will not impact your credit. Your credit history includes information reported in your name. If your name changes through marriage, your new history going forward will be added to your existing credit report.
But what if your partner comes into the marriage after bankruptcy or with outstanding debt? It will impact you only if he or she is added as a joint account holder on unhealthy accounts. On the flip side, adding your spouse as a joint account holder to an established, healthy account could help his or her credit score.
This can come in handy if you plan on making a large purchase, like a vehicle or home, and need both incomes and credit histories to qualify.
What about debt taken on during marriage?
Joint finances or not, you may share legal ownership of savings and debts accrued by your spouse if you live in a community property state: Arizona, California, Idaho, Louisiana, New Mexico, Nevada, Texas, Washington or Wisconsin. In Alaska, South Dakota or Tennessee, you can opt in to a community-property system.
With some exceptions, the money spouses earn, debts you accrue and things you purchase are considered assets and/or liabilities for both people. If one spouse takes out a loan for which the other did not co-sign, they will still share responsibility for it.
Discussing your financial future may not be an easy conversation to have, but it’s necessary. Your local Farm Bureau agent is here to help the conversation get off on the right foot with budgeting tips and advice, as well as a host of financial services designed to help your house run smoothly.