Managing your own money can be challenging enough. But incorporating your new spouse’s finances can be overwhelming. In other words, don’t expect to be an expert right away. Follow these 8 steps together and you will easily get accustomed to healthy financial habits.
Talk about finances with each other
It’s best to do this before you get married, but if you have not, discuss finances with your new spouse as soon as possible. Go over what accounts and debt you each have, and be clear on how you both expect money to be handled.
Write down financial goals
After you have determined your baseline financial status, discuss your long-term financial goals with each other. For example, do you plan to retire at a certain age? Will both of you work full-time? Do you want to buy a new home or start a family and if so, when?
Discuss bank accounts
There are both pros and cons to opening a joint bank account or to maintaining your individual accounts after you’re married. You can even do both. Combining accounts can simplify your finances. Moreover, it may be especially valuable if one spouse chooses to stay home and raise children while the other works.
That said, some level of independence may be preferable to you both. Have an open discussion and do what’s right for your specific situation.
Build an emergency fund
If you don’t already have an emergency fund, make it a top priority. An emergency fund is money that is set aside in case something expensive happens unexpectedly, such as a lost job, family illness, natural disaster, or a major home repair. You should aim to save about 6 months’ worth of your household expenses in case the emergency.
Design a budget and track it
Start by reviewing your joint expenses over the last few months to determine how much you’ve been spending and if you need to make any spending adjustments. Then, establish dollar limits per category that you create according to your after-tax income. Don’t forget to allocate for unexpected or irregular expenses, such as routine car maintenance or doctor’s appointments. Your budget may be a work in progress, so don’t worry if you have to make adjustments.
It’s not enough to just make a budget. You need to make sure you follow it and stay within your spending allotment and adjust accordingly. Design a spreadsheet that tracks your spending. Our Monthly Budget calculator
Have monthly or weekly money meetings
Setting aside time to discuss how your budget looks for the month, will help needless worrying about money because you’ll both know where you stand. These meetings strengthen communication in a marriage as well as the level of trust.
Save for retirement
Whether you’re married or not, it’s important to be set financially for the long haul. This means you need to save for retirement now. If you work for a company that offers a 401k plan, put in the maximum amount allowed to take advantage of any company matching, or at least contribute as much as you can afford. If you have a Roth IRA, put in the maximum amount every year if at all possible. But even if you can’t max out these accounts, even putting $50 in a month will help you over the long term. Because of compounding interest, time is just as important as money when it comes to growing your retirement fund so don’t delay.
Get out of debt and stay out of debt
Debt can be damaging to any one person, but it is a double threat when you’re married because two people are responsible for paying the money back. Start out right by discussing your current level of debt and plan to manage it. Some level of debt can be expected – especially if you’ve purchased or are planning to purchase a home. However, you should try to avoid racking up unnecessary debt. You could purchase a $10 lunch or $30 shirt on a credit card and still be paying for it three month from now. Choose and spend wisely. Work out a plan with your spouse so that you have an understanding of what you will purchase and how. Establishing a set purchase limit that requires a prior discussion can help.
Marriage and money can be tricky, but the best thing you can do is be open and honest. Start off on the right foot by talking about money management and coming up with a solid plan to deal with budgeting, spending, and investing. If you form good money management habits now, you’ll be able to work as a team through whatever life throws at you down the road.