My husband and I recently attended a beautiful wedding for some close friends. The bride was lovely, the groom was proud, and the cake was delicious. The wedding gift we ordered for them hasn’t arrived yet, so this column is my gift to them until the saucepan gets there. As they embark on their life together, I want to share the simple steps that can help them grow their bond and find success together financially:
1) Communicate openly and set your goals together
2) Find the system that works for you as a family
COMMUNICATE AND SET GOALS TOGETHER
Many personal finance writers will say that the most important thing to do about your finances in a marriage is to communicate. That can be difficult to do. Most people would probably rather talk about anything else than talk about money. But it’s necessary to know where each partner is coming from in order to be able to set your common goals. And money can be a huge factor in the success of a marriage. A 2006 survey of 189 financial planners conducted by USA Today and the Financial Planning Association found that nearly 40% of financial planners who have worked with divorcing couples say that money is frequently a "key factor" in couples' decisions to split up.
Being open with my husband K about finances hasn’t always been easy (we had very different upbringings which shaped the way we each think about where to splurge and where to save), but it’s always been helpful and it’s even brought us closer together (we both get a kick out of seeing our house fund grow each month through our regular deposits and interest, and we shared the pain when the interest rates changed and lowered the amount we accrued).
To talk about money openly and honestly, it’s important to set ground rules, pick a neutral time, and focus on your common goals. Some good topics to guide your discussions can be found here. Besides our dream house, K and I also both think about how much money we need to be putting away for retirement. We’ve each seen loved ones go through extended senior care and know how quickly that can eat away at savings. Through talking about what motivates us to save or spend we’ve renewed our commitment to saving for our future, together.
FIND THE SYSTEM THAT WORKS FOR YOU
With all of this openness about money, you’d probably think we combine all of our finances, but we don’t. We’ve instead come up with a system that works for us. We wanted to have “us” money, but also have the autonomy to save for and take care of our individual wants and needs. We set our budget for our “us” things (rent, groceries, meals out together, vacations, our “dream house”) and each month we put a set amount into our joint accounts to cover these expenses. The amount we each contribute is based on our salaries. As our situations change, we revisit our budget and the amount we put away toward our goals and adjust accordingly. We have one joint credit card paid for out of our joint funds, but we also each retain credit cards in our own names, and pay for those out of our separate checking and savings accounts.
So far it’s been working well, but we know our way isn’t the only way. The important thing is to find what works for you. Think about the goals you set together for your future—how will you reach them? There are online tools to help you set a realistic budget at http://www.practicalmoneyskills.com. And a thoughtful discussion about whether to go joint or separate can be found at: http://www.getrichslowly.org/blog/2007/04/25/which-
should-you-choose-joint-or-separate-finances/.
To R and S, and the countless other couples who will be tying the knot this wedding season, we wish you the best of luck, and happy saving. It’s not as exciting as planning the wedding, but planning your financial futures together will keep you on track to getting to your happily ever after.
CAAB’s Marriage Development Accounts are a savings program to help married and engaged couples eliminate debt, increase their savings, and build wealth through long-term investment. Married or engaged couples in DC with combined incomes of less than $50,000 may be eligible to receive a 3:1 match on their savings through an MDA. Call us at 202-419-1440 for more information. Send feedback on this column and your ideas for future topics to saving@caab.org.
