Summer wedding season is in full swing! Many couples will be sharing much more than a last name; they’ll also share a bank account. Sharing finances in marriage can be tricky. Money is not always the most romantic conversation. When you add in varying financial situations, family history, and money personalities, it’s easy to see how money is a common issue for married couples.
However, with open communication and a plan for managing money together, couples can avoid unnecessary conflict. To help newlyweds start their journey on the right foot, Peoples Bank is sharing our five tips for budgeting as newlyweds.
Have the Money Talk
First things first, make time to sit down and lay everything out on the table. Discuss each person’s current financial status, including salary, debt, retirement savings, and healthcare expenses. Avoid hiding things from your partner. And try to understand the other person’s spending habits as they relate to their financial personality. Sharing this information openly and honestly will help you stay on track as you start to manage money together.
Next, take time to discuss your future goals, such as buying a home, having kids, or traveling. Having a clear picture of where you are now and where you would like to be as a couple in the next one to twenty years will empower you to make smart financial decisions that will positively impact you in the future.
Establish a Budget
When it comes to starting a budget, there is no time like the present. Once you’ve had the initial money talk, put pen to paper and establish a monthly budget for your new, expanded household. A budget will give you both a realistic perspective on your financial status and help you identify areas where you could spend less and save more. From small wins, like combining your Netflix subscriptions, to larger things like finding a quicker way to pay down debt, a budget will give you the insight you need to manage money effectively.
Agree on a Spending Threshold
While you’re creating your newlywed budget, it’s a good idea to agree on a spending threshold. This is a set dollar amount that you both agree to discuss with the other person before spending. There is no right or wrong amount here, it’s a decision you should make together. Of course, you can adjust this amount when you revisit your budget in the future.
Think about it this way: If you both spent the same amount of money on a single purchase without discussing it, would it negatively impact your income to expenses ratio? Your spending threshold should teter around that amount.
Opening Joint Accounts
Now that you have an idea of how you’ll manage a monthly budget, it’s time to decide where you will keep your money. There are several different ways that couples can set up and manage checking accounts.
The first option is to have a single joint checking account. Each person contributes income and deducts expenses from this account.
Joint Account + Spending Accounts
Another option is to have one joint checking account where each of you contribute a portion of your income. The funds in this account are used to pay shared expenses, such as rent or a mortgage, internet, phone, etc. In addition to the joint account, each person has their own personal checking account. A portion of each person’s monthly income is deposited here for discretionary spending. For instance, dining out, gym memberships, personal appointments, and even surprise gifts for the other spouse.
The third option is to maintain completely separate savings and checking accounts.
Peoples Bank makes it easy for couples to manage checking accounts. From Simply Free Checking to Premium Interest Checking, there’s an account that is right for you. And with free services like online and mobile banking, managing your family’s checking accounts is seamless.
Save for Emergencies
If and when life hands you lemons, an emergency fund can help you get through. Emergency funds exist to help you cover large or unexpected expenses that come up in life. If you and your new spouse are coming into marriage with your own emergency funds, now is the time to reevaluate your needs and combine your resources. If you don’t have one, add it to your budget. Building your emergency fund is non-negotiable.
Taking steps to build a strong financial foundation can lead to a happy, healthy relationship in the long run. From all of us at Peoples Bank, congratulations and blessings on your new marriage! Remember that the People That You Know are here to help you reach all of your financial goals and you can reach out or come visit us anytime.