Let’s face it—marriage is a huge step.
There is a lot that goes into making a relationship work, and finances can often bog a couple down.
That’s why it is important to be up-front about money matter.
To many, managing finances separately seems to be the most logical choice in skirting stress, but in fact, it can irritate the issue.
Making any and all financial decisions together is the key to avoiding any mishaps, personal or financial.
1| Have the Money Talk
The first conversation newlyweds should have (financially—the rest is not really my business) should be regarding personal accounts and any debt you have. When you apply for a mortgage, the bank runs a credit report on both of you, so if one spouse has bad credit, it will negatively affect the loan.
This information is particularly important, because it will serve as the foundation upon which you will set your financial goals. And while it may not be the most fun or pleasant, you should list assets like checking and savings accounts, 401(k)s, stock or bond investments, real estate, jewelry and other valuables in their portfolios.
If you can, get a financial professional to manage this portfolio, because it is important that you lay out where you stand financially as a couple, and what your expectations for each other are, and what your mutual goals are for the next ten years.
For example, start discussing how your finances will factor into your personal goals. Do you want to retire by a certain age, or go back to school? Do you want to take care of your debt immediately? Make a plan about these goals and prioritize. Making a budget or hiring a financial planner is a good way to help you reach these financial goals.
2|Factor in expenses.
What do you need, and what can you do without for now?
Vehicles, houses, and entertainment expenses tend to drain savings the most.
Cars are essentially a money pit—they constantly decrease in value, require money for maintenance, and let’s not forget funds for fuel.
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If you and your spouse can do without a vehicle (or two if you both have one), maybe it’s time to sell and look into options such as public transportation or carpooling.
If this is not a realistic option, perhaps the two of you can share a vehicle.
Either way, this will help cut down on your costs, and allow you to save some money.
Below is a sample calculator that newlyweds can use to better determine their household expenses.
In addition, couples often lose money by going out too often. If you find yourselves trying to “keep up with the Joneses,” so to speak, really assess how much of your funds you’re utilizing. If you’re going out to eat twice a week or more, chances are you are wasting a good portion of your potential savings. Instead, little things like preparing more meals at home or having a movie night at home rather than going out can make a big difference.
Finally, there is no harm in starting small when you are looking for a home. Be modest in your search; a little elbow grease is nothing compared to a staggering mortgage payment.
3| Managing it Together
Now it’s time to start talking about how to manage all of your new savings. For example, will you have a joint checking account? Two savings accounts and a joint checking? Questions like this need to be asked and openly discussed, without procrastinating. On one hand, a joint bank account keeps managing all of your money convenient. There is no question where your money is, and can each pay bills as they come, without necessarily assigning specific bills to one another.
On the other hand, this can lead to miscommunication, and a bill can go unpaid. A joint bank account requires complete trust and cooperation, with both parties willing to check in occasionally with common expenses. Make sure you are ready for this, but remember, there are other options.
Finding a combination that works best for you and your partner is all part of the newlywed game, so be patient, and know that getting financially efficient and settled takes time.
Just remember, the key to success is cooperation, and both parties need to come to a comfortable understanding of budgets, responsibilities, and future goals. Whether this requires a weekly meeting, or simply a mutual promise to contribute and help out, it is important that both people are on board. Money is often a sensitive subject for married couples, but it doesn’t have to be, and creating the kind of environment where each partner can converse is step one.
Angie Picardo is a staff writer for NerdWallet, a personal finance website dedicated to helping newlyweds find the best credit cards to finance their happily ever after.