Making a marriage work is tough enough without financial problems making things more difficult. Yet, one the most common causes of friction in marriages is money.
Below you’ll find a list of tips to help you plan your finances before and after marriage. They’re in no particular order, but all are just as important. Let’s begin!
1. Pay off your debts
Both you and your spouse would do well to pay off all revolving credit such as credit cards, personal loans and so on. Bringing debt into a marriage can make it financially stressful.
2. Discuss money matters prior to marriage
Before even getting married, it’s an excellent idea for both parties to discuss their money history and be honest about it. Different people have different money scripts, and while some believe in saving, others may prefer to spend and enjoy life.
What matters is that you reach a consensus on the money issues before marriage. If you’re already married, it’ll still help to talk about money.
3. Have health insurance
There’s no need to even think twice about this. With exorbitant health costs, both partners must have solid health insurance that has good coverage.
4. Save up an emergency fund
You’ll want to save up 3-6 months’ worth of income to tide you through any rainy days in future. Some people choose to save 3-6 months’ worth of expenses, but it’s better to save in terms of income (before taxes) so that you have more money on hand. After all, the cost of living keeps going up.
5. Discuss financial goals
You’ll want to be on the same page when it comes to buying a house, getting a car, sending your children to college and so on. Usually, the big expenses must be planned for beforehand.
6. Keep accounts separate
After both partners have contributed their share into a joint account for the bills, household expenses and so on (and also saved a bit for retirement), they should have separate bank accounts for their own discretionary spending.
This will give them a sense of independence and they can buy what they want without worrying about being judged or blamed.
7. Organize your expenses
Keep file folders for the different bills and financial matters you’re managing (E.g. investments, insurance, debt, etc.)
8. Calculate your household income
Spend time with your partner and add up the total household income after taxes. This number is calculated by adding your disposable income (take home pay) and your partner’s disposable income (if your spouse is working too).
Once you have a total, you should add up all your monthly household expenses and see how it stacks up against the household income.
If your expenses are very close to your income, that means your budget is being stretched. You may wish to trim your expenses or even downsize to free up more money for saving and investing.
Alternatively, you may wish to find ways to increase your income. Either way, what matters most is knowing where you stand financially.
9. Create a 20-30 year plan
Sit with your spouse and discuss how you want your retirement to look like. If both of you would like to go on vacations, etc. you may need more funds in retirement. You’ll need to plan for it accordingly.
On the other hand, if both decide to sell and move to a smaller house in a warmer place, that needs planning too. Whatever your retirement goals are, you’ll need to plan for them well in advance.
10. Keep track
Pay attention to your expenses, savings, debt, interest rates and so on. If you don’t measure things, you can’t improve them. Be diligent and watch your finances closely so that they don’t slip out of your control.
At the end of the day, managing finances as a couple is a shared responsibility. Even if one person is the breadwinner, effective money management will depend on both partners. Work as a team and make your money work for you.