Marriage is a beautiful journey, but it comes with its fair share of financial challenges. Almost 3 in 4 married or cohabiting Americans cite financial decisions as a source of tension in their relationship, with 1 in 5 couples stating that money is the biggest challenge in their relationship. But fear not! With the right approach and a bit of financial finesse, you will navigate the money maze of marriage and build a solid foundation for a lifetime of love and prosperity.
Understand your financial compatibility and money personality
Most couples enter love marriages based on personal compatibility. However, financial compatibility is often much further down the list of priorities. So what is it, and why does it matter?
- Financial compatibility defined: Financial compatibility means you and your partner are on the same page when it comes to spending habits, saving, dealing with debt, and planning for your financial future.
- What is your money personality?: Money personalities may vary between partners, with one being a saver and the other a spender. The key is to recognize your similarities and differences so you can find common ground.
- Discuss your compatibility and personality: Open communication about finances and future plans is crucial. Schedule regular money dates to discuss financial goals, budgets, and concerns to ensure you’re always on the same page.
- Why it matters: Understanding if you are financially compatible and what both of your money personalities are can help prevent future marital conflict and ensure you two have a shared future vision for marital bliss.
Prioritize getting on the same page about money from the beginning. Creating a relationship of honesty and communication are the cornerstones of financial compatibility in marriage. Embrace your differences but work together to build a solid financial future of collaboration too.
Managing your finances: Which approach should you take?
Once you and your partner are on the same page financially, the next milestone is to decide whether to merge your finances, keep them separate, or adopt a hybrid approach. Let’s look at each before we explore the pros and cons.
- Merge your finances: This is where you and your partner 100% merge your finances and keep one shared, joint account to manage all incoming and outgoing funds.
- Keep them separate: On the opposite end of the spectrum, keeping them separate means you do not merge your finances or accounts. Instead, you maintain complete financial autonomy.
- Hybrid approach: This approach enables couples to have a joint account to manage shared expenses but still provides the freedom and flexibility to maintain separate accounts for personal expenditures.
Deciding on which approach works best for you is a personal decision, as each comes with its unique pros and cons. Personal finance is personal, so after all, there’s no right or wrong decision; it’s just the decision that works best for you both.
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The benefits and drawbacks of each marital finance approach
To determine which type of approach is best for you (merging your finances, keeping them separate, or using a hybrid approach), we’re going to explore the benefits and drawbacks of each.
Merging all finances
- Pros: Merging your finances together can create a greater sense of trust in your relationship, and studies show that it can even increase relationship satisfaction. Joint accounts also force the conversation around money to happen at an earlier stage, which can help align your values and goals both personally and financially.
- Cons: On the flip side, it can highlight different financial habits and priorities, which could lead to increased conflict if not managed with finesse. The other obvious challenge is giving up financial autonomy. If the happily ever after doesn’t work out as intended, it will also become more difficult to untangle joint finances and accounts.
Separate accounts
- Pros: Keeping separate accounts removes the need to discuss or negotiate personal purchases, makes managing premarital financial responsibilities much easier too, and reduces the risk of financial control or abuse. There’s an increasing trend towards this separate approach, with 10-15% of couples opting to keep it separate.
- Cons: On the other hand, it can complicate family budgeting when children are involved, opening the door for greater secrecy and increasing the risk of financial infidelity where one partner starts lying about money.
The hybrid approach
- Pros: This approach can give couples the best of both worlds, providing greater financial transparency and trust while still maintaining a degree of personal autonomy over personal spending. It can also better align couples on financial goals and simplify family budgeting.
- Cons: The downside is it may add an extra layer of complexity when deciding what to merge and what to keep separate, and there still remains some element of secrecy, so one partner may never fully understand the other’s financial situation. It may also lead to unequal contribution into the shared account if one partner earns significantly more than the other, which could lead to resentment if not dealt with early.
Each approach has its benefits and drawbacks, so the key factor is knowing you and your partner well enough to decide what will work best for you both. By working together and setting clear boundaries, you can achieve financial harmony in your marriage.
Planning for the future
Once you’re both on the same page and decide how to manage your finances best, the next step is to look ahead to planning for your future. So, how do you approach this important topic?
- Discuss long-term goals: Such as buying a home, starting a family, or perhaps leaving your job to start a business. Whatever your goals are, being open and honest with each other will clarify whether you have your partner’s support or not.
- Set up the emergency fund: Once you know what direction you’re heading together, it’s time to start taking the steps to get there. Milestone one is always to create an emergency fund. This is a savings fund set up to cover unexpected expenses and ensure your financial stability during challenging times.
- Tackle debt: The next step is to tackle any debt you have before investing your money to fund your future goals and retirement plans together.
Planning for the future is key to financial security in marriage. By setting goals, creating a safety net, and investing for your future, you can navigate life’s uncertainties with confidence.
Navigating financial challenges
As much of a miracle life itself is, it’s also filled with ups and downs. Being financially prepared won’t eliminate life’s challenges, but it will make it much easier to navigate together. So, how do you set yourself up for success?
- Prioritize the emergency fund: As mentioned above, milestone one is being prepared for unexpected expenses by building an emergency fund that covers three to six months’ worth of essential living expenses.
- Plan debt repayment: Your next step as a couple is to prioritize debt repayment to reduce financial stress and free up funds to direct towards your future goals.
- Seek support: If during your money dates, you can’t get on the same financial page as your partner, seek support from a financial counselor or therapist to avoid financial disagreements becoming too destructive or overwhelming.
Preparation and mutual support are essential when facing personal and financial challenges in marriage. By approaching each milestone one at a time and seeking support when needed, you can overcome any obstacles together.
The bottom line on marriage and your finances
Marriage is a journey filled with love, laughter, and, yes, financial challenges. Whether you are opting for merging your finances completely, separate accounts, or a bit of a hybrid solution, there is a financial plan for every money personality! With open communication, mutual respect, and a solid financial plan, you can navigate the ups and downs of married life with confidence.
Frequently Asked Questions (FAQs) about finances and your marriage
Let’s discuss some more frequently asked questions on the topic of finances and your marriage.
Q: Should we combine our finances or keep them separate?
A: It depends on your individual preferences and circumstances. Some couples find it beneficial to combine all finances, while others prefer to maintain separate accounts for personal spending. Personal finances are personal, after all.
Q: How do we handle debt accrued before marriage?
A: Be transparent about your pre-marital debts and work together to create a plan for repayment. Consider consulting a financial advisor for guidance on debt management strategies if necessary.
Q: What if we have different financial priorities?
A: Compromise is key. Discuss your priorities openly and find common ground. You may need to prioritize certain goals while postponing others until you can reach a consensus.
Laura Tynan is the founder of The Witch of Wall Street, a personal finance and investing community, where women are shown how to manage, multiply and manifest money, using simple strategies. Laura holds a BSc Hons in Finance, is a Chartered Accountant, and is certified in EFT Tapping, Breathwork, and RRT. She has been recognized by the Financial Times as a Top 20 Future Female Leader and by Yahoo! Finance as a Global Champion of Women in Business. She is a multi-award-winning speaker who has spoken at, and been featured in, Forbes. Laura hosts The Witch of Wall Street podcast and is the author of the personal finance and investing book for women, by the same name, which is available now on Amazon.
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