The wedding day is an exciting day for the newly wed to be couple. Its a start of something fresh, and a journey into the future together. The same day that the couple pledge them selves to marriage is also the day that most verbalize ten important words – “For better or for worse…For richer or for poorer.” But unfortunately, many couples today can’t seem to survive either richer or poorer due to poor money management skills.
Some couples stick with their own individual way of managing money, which may or may not mesh with their spouse’s. Others may take the responsibility all on their own shoulders. Other couples just choose to keep all their finances separate, and only share a joint account to use for bill payment.
Other times finances get quite out of control due to a partner lying, stealing, and making irresponsible purchases. In order to avoid a financial disaster, couples need to mutually agree on the way that they’ll manage their money.
Money management can actually be a rewarding way to bond with your loved one. Here are steps to take and tips to make sure you get on the right track for a lifetime of properly managing your joint finances. Managing your own money can be challenging enough. But incorporating your spouse’s finances can be overwhelming. In other words, don’t expect to be an expert right away.
Here are a few tips on how to properly manage money as a couple, and avoid all the negative pitfalls.
Talk Early & Often
In an ideal situation this is best to talk before you get married. Talking about your finances well ahead is absolutely necessary to discover your partner’s spending habits, their debt, and their future plans. You should also discuss how you want to handle banking accounts. Are you going joint or with separate bank accounts? Finally, you need to figure out how the money will be handled. Will you pool your money together or keep it separate?
Purchasing should also be discussed. Will you spend freely or will you consult each other before bigger purchases are made? Its important for both partner to fully understand where you are now, and where you want to be in the future. This will take time, so don’t rush each other, and allow ample time for consideration.
Build An Emergency Fund
Creating a joint emergency fund should be one of your top priorities. An emergency fund is money set aside in case an unplanned emergency occurs, this way you’re prepared, and don’t need to go digging into your savings or credit. Emergency funds typically cover unexpected such as emergency car repairs, home repairs or any other emergency that arises on your new journey. Ideally you should aim to save anywhere from three to six months worth of your household expenses in case of an emergency. Building an emergency fund should be a priority because it will bring financial security and protect your relationship in case disaster strikes.
Create A Budget
Start by reviewing your individual and home joint expenses for at least the last month (ideally 3 months) to determine how much you’re spending, how much is coming in, what are your fixed expenses, and what the variable expenses are. Once you determine your spending, variable and fixed expenses, its time to establish the maximum amount you’re willing to spend on a given category. Don’t forget to allocate for savings, and your emergency fund. One key piece of advice – The budget is always a work in progress, so be prepared to make adjustments, and allow space for trial and error.
Stick To Your Budget
Creating a budget is only the first part of budgeting. Sticking to your budget is the second part that requires your full attention at all times. You need to make sure you stay within your spending allotment and adjust accordingly as your situation, expenses, or income changes. One sure way to stick to your budget is trough a jar or envelope system. Essentially you set aside money into your jars or envelopes that you wrote down in your budget. So, for example if you set aside $200 for food this month, you’ll put $200 into the envelope, and only use that cash for any food purchases. In order for your budget to function properly, you must stick to using the cash (that’s what the envelope/jar system is for), and avoid using the debit and credit cards.
Set goals together, and work to accomplish them as a team. Work together to find solutions, and tackle problems together. Encouraging each other and building each other up is necessary. Recognize your own weaknesses and strengths, and play off the strengths of your spouse to bring synergy to what you are trying to accomplish.
One sure way to stay on track is to have weekly money meetings. During the meetings, you should discuss your budget for the month, upcoming bills to pay, short and long term financial goals, and anything else pertaining to money. These meetings are great because they strengthen the communication in your marriage, and your level of trust.
Save For Your Goals & Retirement
Whether you’re married or not, you need to make sure you are set financially for the long haul. This means you need to save for retirement now. Opening up a joint RRSP contribution, and a joint Tax Free Savings Account would be the ideal two ways to go. This way you’re saving for the long-haul, and you have the option to save for your investments/short term, while having the ability to take the money out without penalty from your TFSA.
Talking about money before you get married is essential, yet very few newly wed couples have talked about money before they got married. Recently, I spoke to a mutual friend, and we talked about a newly wed couple we both know that got married last summer. The extent of our conversation was how the husband discovered that his new wife has over $40k of debt, which consisted of credit cards and student loan debt. He was shocked to find out the debt, but I’m sure he’ll be even more in shock to find out that he’s one the hook for that debt as well. So, if you’re getting married, talk to your significant other about money, because you’ll be glad you did later on.
My married readers, how often do you talk about money with your significant other? Did you talk about money before you got married? What did you discover?
All the best!
Photo Credit- Aarongoodman