Couples Finance – The Money Boss Take
Since I am getting married on Sunday, and this is the month of love, I thought a post on couples finance is timely. One thing I’ve learned over the years and talking to many people about how they organize the finances in their relationship: there is no one way to do it. There are some essential aspects to consider and address, however.
Money Essentials Before Marriage
By marriage, I mean any partnership or co-habitation where your finances and benefits are joined. In a business venture, all of this is spelled out in an agreement such as the Articles of Incorporation, or other partnership agreement. It should be a requirement in marriage or co-habitation as well. In common law states, even if not married, you are recognized as ‘married’ under certain criteria and can be entitled to support or shared assets upon separating.
Pre-numptial Agreement: As hard as it may be to talk about the dissolution of an arrangement you expect to last forever, in case it doesn’t, make sure you have a plan. Having a pre-nuptial agreement in place is the ultimate display of self-respect and self-love. It is not the best time to negotiate an arrangement, obviously, when you are unable to resolve differences and hard feelings are involved. Just like preparing for a natural disaster or emergency, having a plan just in case you need it is a good idea! Then, you can hope you will never need it.
Consequences: Realize that getting into marriage involves entering into legal and financial ties. If you do not agree on how to dissolve things financially if the time comes, a judge will decide for you. Not to mention the outrageous amount of money spent on lawyers to help you negotiate your way through your financial split. I used a mediator, which was much more pleasant and efficient, but it was still costly. In addition, I did not end up satisfied with the compromises I had to make to come to an agreement with my ex. Without a plan in place ahead of time, the financial consequences of your split could be painful on top of it all.
Specifics on Where To Start
If you have never had a child, you can’t possibly relate to what it is like giving birth until you do so. Same goes for consideration of this forethought about marriage dissolution. Some things to consider if you really have no idea what to consider and discuss:
- Assets owned prior to marriage (that may become shared are or have shared contributions during marriage). For example, retirement accounts. It’s complicated and expensive to figure out what percentage of the contributions and dividends belong to who during an exact time period. You could agree to keep all of these separate and individually owned, contributing equally to each individual account.
- Inheritances received during marriage: How will this be split if there are funds or assets resulting from an inheritance? Do you want half of those funds to go to your ex if there is cash, investments or assets on hand when you split? Perhaps yes, perhaps you decide beforehand those will go to a fund for the kids, perhaps you keep it separate from the joint finances.
- Spousal Support: There is a tool to calculate spousal support, or alimony, owed to one party from the other. It bases the calculations on current and prior income, not future earnings. Case in point, I was the bread-winner, my spouse stayed home with the kids. After divorce, he was perfectly capable of working, and even had no custody of our young children. I still ended up paying alimony because he had no recent history of income! Although the figures can be re-visited and revised, it also requires legal interjection. You may pay a LOT more than you think is fair or reasonable in the meantime.
Find What Works For You
Keep in mind that there is no one way to organize your combined finances. Be open to finding what works for the both of you. Money is one of the most contentious topics in marriage. Individuals come into a partnership with different money stories and values.
If you cannot agree to agree, keep an open mind to the fact that it doesn’t have to look like what you have always been told or modeled is “the way” to organize your finances. I’ve seen very successful marriages utilizing different approaches. Having separate finances does not mean you love each other any less. Having separate finances does not mean you are any less partnered than if you have completely shared finances.
You’ve Got Options
Completely Shared Finances: Many people grow up thinking this is the way, and only way, there is to marry your finances. It works great for some people. Just ensure you clearly determine who plays certain roles: paying bills, managing investments, budgeting. Make the conversation about big decisions is mutual. Some partners, especially those that do not want to deal with finances, willingly hand over all control of the money. If that works for you both, great. Just ensure that spouse is not ‘blind’ should they ever need to take over for any reason.
- Separate Accounts: I have good friends happily married and they have all separate finances. Their own bills, checking, savings, investments. They have divided the responsibility for shared bills between them. They are both money savvy and rarely if ever, argue about money. Brilliant.
- Separate and Joint: Have one household checking account for expenses. Have one household savings account for emergencies and joint vacations. Each partner contributes equally, or a percentage equitable to their income. That’s negotiable! Maintain independent accounts are for each partner, individual expenses and discretionary spending.
Whatever arrangement you come to, it can always revise and change it as circumstances change. However, staying open to different arrangement could potentially be THE factor that saves your marriage.
Don’t forget, a marriage counselor or money coach may be able to help with your couples money conversation as well.
What successful arrangements have you seen in couples finance? Please comment below!