Traditionally, couples begin merging their finances along with their lives upon the start of their marriage. For instance, taking shared responsibility for bearing utility costs, day-to-day bills, and developing joint savings goals. This can also include combining their salaries or other recurring earnings, like cash gifts from the wedding and tax refunds, into a single joint bank account which is also known as the ultimate union of their marriage finances.
There is No Unique Approach with ‘One Size Fits All’
Combining bank accounts may not be an ideal system that will work best for all couples. Every relationship is different, so are married couples’ financial matters. In fact, holding either separate accounts, joint bank accounts, or a consolidation of the two concepts is a largely personal and emotional subject and tends to result in some serious discussions.
How a couple manages their finances depends on their individual attitudes towards money. They might find some areas where sharing the responsibility is sensible, while others make compromises. Understanding an individual approach and attitude towards money is the first step to figuring out the areas where you agree – and disagree – so that you can locate significant issues before they occur.
Be Clear about your Financial Goals
Without having clarity of your destination, it is very hard to map out your journey. Consequently, you must have clear financial goals in order to develop a fine plan to accomplish them. A prudent couple normally begins their lives by paying off debt one or both of them has acquired, save money for a home, car and/or children’s education, develop an emergency fund, and save funds for retirement. As time passes, the couple is likely to modify old goals or develop a few new ones such as relocation to a new home, occasional tourism or buying a big ticket item for their enjoyment.
Low Credit Score Can Impact Joint Finances
Being married to someone with bad creditworthiness will not affect you. However, as soon as you take out a home mortgage together or open up a joint account, your credit score could be gravely harmed. For instance, ‘co-scoring’ occurs when two people are jointly applying for credit. Thus, it is good for both of you to assess your credit rating before you combine your finances.
Trust and Fairness
Opening a joint bank account affirms that you will both be responsible for any loans or overdrafts. Thus, it is crucial that individuals of a couple trust each other just as much as business owners trust their bookkeepers with their finances. Also, you have to be clear on what is a fair contribution and be resilient to it.
Be Clear on Independence while Setting Boundaries
Start with being clear about your expectations and spending limits. Thus, anything over that amount will eventually have to be purchased only upon a joint decision.
Ensure your Equal Partnership
Avoid circumstances where only one person among you understands your finances. Irrespective of how disinterested any of you could be in managing your finances, allowing only one partner to have control over all the joint finances is evidently bad for both of you.
Keeping your Money Separate
In the absence of a joint account, you have to plan everything, communicate regularly, decide how to split the utility bills, and think of your partner whenever making a spending decision.
Share Everything in a Joint Account
In a joint account, you combine all of your earnings and income into a joint account for all shared expenses from small, daily items to paying the mortgage, rent and other utilities and bills. This makes budgeting a lot easier, giving both of you equal control over your finances and awareness of the other person’s spending. Sharing everything works well for a couple when:
- Both of you have similar spending patterns and behaviors
- Have an agreed spending threshold between each of you
Sharing and Dividing Responsibilities
Sharing financial responsibilities is a good step to begin with a compromise. Consequently, open a joint account to pay off your shared bills, while maintaining your accounts separately to pay for individual wants. It ensures great budgeting, while keeping some privacy and independence. Consider the following things when deciding on shared responsibilities:
- Sort out the bills to be paid from the joint account
- Consider your spending habits and agree what is mutually acceptable to avoid arguments and disagreements over money matters
- Settle on a specific contribution to be paid into the joint account every month, whether it is per your income size or 50/50
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