For Love or Money? Home Budgeting for Couples
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When it comes to relationships, money isn't usually the best topic for a first date. But, as things get more serious, couples eventually need to decide when and how to merge their finances after marriage. In fact, many couples start planning their joint financial future before they say, “I do.”
Although there’s no one best solution for everyone, Quicken’s suite of personal finance management solutions makes it easy to combine your finances no matter how you decide to do it—even if you’re not merging them at all.
For Love or Money: Should You Combine Your Finances?
When Should You Talk About Combining Your Finances?
It's a good idea to talk about merging finances before you make a lifetime commitment. While there's no magic moment when couples must discuss the matter, many financial advisers agree that a conversation should take place well before the actual wedding.
According to Erik Klumpp, a certified financial planner and founder of Chessie Advisors, LLC, “Once a couple is engaged, it's a good time to begin discussing how to handle their finances together.” According to Eric Roberge, a certified financial planner in Boston, “The short answer is: before they have to make the decision of whether or not to combine them. In most cases, finances are the last thing couples talk about. Unfortunately, it’s usually after they get married. Personally, I recommend bringing up the subject before getting engaged. It’s important to understand the impact of marriage on your finances.”
Combining or Separating Your Spending
There's no right or wrong answer for how any given couple should manage their financial lives, but Roberge suggests at least discussing how you’ll pay for expenses, including how to divide those expenses if you have significantly different incomes. If nothing else, knowing what to expect ahead of time will make things easier as you start your new life together.
On the plus side, merging your money into a joint account can make life simpler, with fewer accounts to manage and more transparency. “Both spouses can know exactly where they stand financially since both have access to the accounts,” says Klumpp. “Combining expenses also provides a reason to communicate and hold one another accountable for their spending,” adds Roberge. “It’s very much a team approach.”
But there’s also a downside: Each partner can scrutinize every purchase made by the other. Klumpp also cautions that “it's easy to take the money and run. Since both spouses have equal access to the money, in many cases, they can withdraw the money with just one signature.”
Deciding to merge your accounts into joint accounts when you’re not married (or before you’re married) also comes with tax implications you might not have planned for.
On the other hand, keeping things separate gives you both more independence. “But,” adds Klumpp, “if not carefully managed, this freedom could cause concern for the other spouse.” Roberge agrees. “One spouse might always question what the other does with his or her money,” he says, “adding additional stress to the relationship if these concerns are not communicated.”
Consider a Hybrid Option
Fortunately, combining your finances doesn't have to be an all-or-nothing approach. “I suggest that my clients create a joint checking account and add a certain dollar amount into that account each month from their personal checking, or vice versa,” says Roberge. “You can then use this joint account to cover all shared expenses.”
For many couples, a hybrid approach is the best of both worlds. You can take care of your expenses together while still enjoying enough independence to surprise each other for Valentine’s Day. It can also help keep the spark of dating alive by creating a way to give each other gifts that don’t feel like you’re just spending your joint money.
Whichever direction you choose, a joint savings account for married couples can help you work together toward your long-term goals.
Discussing Your Long-term Financial Goals
Even if you're both smart with money management, you still might disagree, at least at first, when it comes to your long-term priorities. For example, one of you might consider buying a house to be a higher priority than saving for retirement. The other might feel the opposite.
Certified financial planner Craig Schmith says typical goals you might need to work out together include saving for college and retirement, buying a new house, or changing careers.
Talking about money can feel awkward, but it doesn’t have to be that way. Consider it just another aspect of getting to know each other. One way to start the conversation is for each of you to draw up a list of short and long-term goals, then compare your lists.
Talking about why you each feel the way you do can help you get to know each other on a deeper level. Did your parents struggle to go to college? Did you spend your childhood in urban apartments, wishing you had a home with a yard to play in? As you discover the feelings behind each other’s reasons, you can decide together which items to prioritize.
Usually it's not a matter of choosing one or the other—say, house or retirement—but how much you can and want to spend on each. Schmith says he often gives clients a matrix with more than a dozen options.
If the breadwinner is looking at a job change that cuts her salary, for example, the matrix can show the consequences of a 10 percent, 20 percent, or 50 percent cut. Multiple options give you more flexibility in negotiating a plan you can both live with.
Once you set your mutual goals, try scheduling regular meetings to talk about your progress. If problems crop up, it's usually better to talk about them than hide them. “I encourage people to be on the same page” when planning, Schmith says.
Figuring Out How to Get There with Quicken or Simplifi
No matter how you decide to handle your finances, says Schmith, “Ultimately you need to be in it together.”
Fortunately, both Quicken and Simplifi make it easy to manage your finances together no matter how you decide to split things up. How? By connecting only the accounts you want to and making sure you both have access to them.
If you want to merge everything, you can manage it all together in one place—from your joint bank account and credit cards to your individual 401(k)s.
If you want to merge some accounts but not others, connect your joint accounts to Quicken or Simplifi to manage your joint financial life together (including those retirement plans), while keeping your individual accounts separate so you each have your own spending money.
You can even merge your finances without ever merging your underlying accounts. Just connect your separate accounts to the same Quicken or Simplifi account, and you can both see all your finances in one place without having to change anything at all.
Once your finances are connected, you can decide together how to save up for your long-term goals, whatever they may be. Quicken and Simplifi can’t help you decide where to retire, but they can help you get there with confidence, living a healthy financial life along the way.
Want to learn more about using Quicken to combine your finances? Read our new guide: How do I combine my Quicken finances with a spouse or partner?