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You're marrying their money, too.
If you're a couple, you need to know how each of
you spends money and how you plan to pay your expenses. Here's help getting
started.
Most married couples will plan their wedding with
greater care than they plan their first year of financial interdependence.
Perhaps that's why surveys peg money problems as the No. 1 cause of divorce.
Fortunately, with only a moderate effort, newlyweds can find financial bliss, or
at least compatibility.
Newly married people face a whole new challenge: Not only must each spouse
manage his or her own expenses, but anticipate and plan for the expenses of the
partner. The first step is to understand where each of you are, financially
speaking. This isn’t always a fun discussion, but it’s better to know the
harsh truths before you get married rather than later.
For instance, does your future spouse have a bad credit record? Have either of
you filed for bankruptcy in the past? How much credit-card debt will either of
you be bringing into the marriage?
Here are some ways to start:
Track your
expenses for a month
You need to know how each of you spends and saves money. Consider creating a
budget by meticulously keeping track of your expenses for a couple of weeks or a
month. You’ll then know where your money is spent and where you may need to cut
back.
A budget may cause the two of you to realize that you have different goals and
spending habits. One of you may be a spender; the other a saver. Compromise, be
patient and create a wish list, all of which you will get to, in time. No matter
how wealthy you become in the future, you will need to prioritize wants all your
life, so you might as well get started now.
Estimate your
expenses for the next 12 months
Rent and utilities are relatively static and easily estimated, but food,
work-related expenses and discretionary spending require more investigation.
After making your expense list, create a "cash-flow calendar." This is a year's
calendar noting when sums of more than $500 will be spent (i.e., an insurance
bill) and will be received (i.e., an expected bonus.)
This is also the time to factor in luxuries and discretionary big-ticket items,
such as vacations and furniture. Set the amount you intend to spend. Be
realistic and specific.
Create an emergency fund
An emergency cash reserve can prevent a lot of disagreements. It can help with
those unexpected occurrences, like job loss, a new roof or a disabled car. A
safe amount would be enough to cover your expenses for three to six months.
Start a weekly financial meeting
Set aside a time and place to meet for half an hour each week to take care of
your financial business. Keep it up and you will find that you rarely ever
bounce a check or spend your leisure time together talking about money.
Turn this into a boardroom-type meeting, in which you establish an agenda for
issues like bills, investment options and new purchase issues. Then follow the
procedure each week. When you're finished, don’t let the meeting become a forum
for other non-financial issues. This is not a forum for disagreement or blame.
The point is to get things done or set a schedule for doing them.
Decide whether to have joint or separate accounts -- or both
The key goals of handling checking accounts, cash and credit cards are
efficiency, accuracy and good record-keeping.
Keep emotions out of it as best you can. Separate accounts are supposedly
symbolic of autonomy, and joint accounts supposedly foster feelings of unity.
Many financial advisers now recommend that couples create joint accounts for
pooled savings and investments and to cover all household expenses. They then
suggest that each partner might want to create separate checking accounts for
discretionary spending. This is particularly true for couples who have been
independent for many years. Separate accounts of small sums allow you to remain
"financially independent" without causing disruptions in your household plans.
To be efficient
and accurate, your No. 1 tool is the computer and a personal finance program,
such as Quicken or Microsoft’s Money. Money, for example, tells you each morning
if a bill is due, by flashing it on the screen. It allows you to experiment with
different credit-card payment programs to see how long it takes to be debt-free,
and how much total interest you pay under different payment plans. |
