Strategy
Every married couple has to decide how to make their household work. It can be challenging enough to figure out the small details like who will be in charge of laundry and dishes or who cares for the lawn and garden. But what about money? That’s where things get interesting. Many couples combine their finances and pay all bills and expenses out of joint accounts. Others keep separate finances or take on a hybrid approach. But is that the best way?
According to research referenced in Bloomberg View, couples who pool all their resources report a higher level of happiness within their relationship than those who don’t. Couples who pooled most of their money were happier as well. For example, couples who pooled 80 percent of their money were happier than those who pooled 70 percent, and so on. It’s hard to say why this is the case, but some experts believe couples who share their finances just have less to argue about.
Say ‘I Don’t’ to Toxic Money Arguments
If having joint finances means adding less fuel to the fire, then most people would say that’s a good thing. This is especially true when you consider the growing body of research that shows money arguments can be lethal to a marriage. For example, arguments about money are the top predictor of divorce, according to a study last year by Sonya Britt, director of personal financial planning at Kansas State University.
“It’s not children, sex, in-laws or anything else. It’s money — for both men and women,” Britt wrote in a press release. The findings held up even when accounting for income and net worth, according to the study of more than 4,500 couples. And unfortunately, those money arguments die a slow death in most relationships, if they even die at all.
“You can measure people’s money arguments when they are very first married,” Britt said. “It doesn’t matter how long ago it was, but when they were first together and already arguing about money, there is a good chance they are going to have poor relationship satisfaction.”
4 Ways Joint Finances Can Improve Your Marriage
Research shows that money arguments get ugly — and stay ugly — more often than not. But, what if you could avoid these types of arguments altogether or at least limit them? If you’re on the fence about combining finances when you get married, consider these benefits:
- No haggling with each other. When you have separate accounts, you have to negotiate who is going to pay each bill or how to split them in a fair way. On the other hand, having joint accounts allows you to avoid the awkwardness of haggling with your spouse by handling all bills and expenses jointly.
- Dream together, save together. When you’ve committed your life to another person, you’ve committed to building a future, and perhaps even a family, with your one true love. Having joint finances means chasing down dreams together and pooling your resources to make those dreams come true.
- Joint finances build a sense of teamwork. You know the saying, there’s no “I” in “Team.” Well, nothing says you’re out for yourself more than keeping separate score cards from the get-go. But it doesn’t have to be that way. Having joint finances helps you grow as a team by forcing you to create joint goals and work together to achieve them.
- The beauty of complete transparency. Having joint finances means you truly have nothing to hide. When all money is in one pot, you are forced to be accountable to one another and compromise on any money issues that might arise.
Money issues can make or break a relationship, and it’s easy to see why pooling your money could lead to more happiness and contentment within your marriage. After all, marriage isn’t just about the union of two souls; it’s about becoming a family and sharing your joint goals and dreams. So, put away your separate checkbook, and bring your marriage to the next level by proving you’re a team in every sense of the word. Saying “I do” to joint finances is the perfect way to do just that.
How in control are you when it comes to your money? Are you making your money work for you, or is it a constant source of stress and worry you wish you never had to deal with?
Knowing something’s off is half the battle. Here are five clear signs that you’re not managing your money as well as you could be, and the steps you can take to start making things right.
1. You Panic Every Time an Unexpected Expense Crops Up
Your car starts making horrible noises. Your roof starts to leak. You get sick and need a pricey medical procedure. These things would stress anyone out, but if they send you into a tailspin of “How am I ever going to pay for this?,” it’s a sign your finances aren’t as healthy as they should be.
You should have a minimum of three to six months’ income saved up in an emergency fund to cover unexpected expenses like these. If you don’t, start finding ways to trim your budget or bring in some extra money (maybe by working a temporary second job) in order to get this fund to where it needs to be.
2. You Never Have Enough Left at the End of the Month
You start off each month with the best of intentions, but no matter how hard you try, you never seem to have enough money to get you through to the end of the month-or, what would be even better, to put aside extra money for savings or other goals.
You need to create a realistic working budget and dedicate yourself to sticking to it. The only way to make your money stretch as far as possible is to know exactly how much is coming in and going out each month. Sit down and start tracking how much you pay for things like groceries, rent/mortgage, utilities and medical bills. If your costs exceed your monthly income, find ways to cut back in certain areas.
Then, when the time comes to make a spur-of-the-moment decision — like whether you should go see that movie this weekend or stay home and watch a DVR’d show — you’ll have a measurable way to tell if you can afford it or not.
Another alternative is the anti-budget. This strategy involves pulling your savings from the top first, and then spending the rest. Initially, “the rest” goes towards bills, such as your mortgage or rent, utilities, money set aside for groceries, and so forth. At the end of the week or month, if there’s still anything leftover, you can treat yourself to a restaurant meal, movie, new shoes or any other discretionary purchase.
3. Your Credit Card Balances Never Go Down
You’re regularly making the minimum payments on your credit card accounts, and sometimes you even make more than the minimum. But you never seem to make any progress. It feels like you have this cloud of debt over your head that’s never going to go away.
Credit card debt is a huge drain on your finances, and if you ever want to have a secure financial future, you need to start getting proactive about paying it down. The debt snowball method is a popular strategy: determine which card has the smallest balance, and pay as much as you can each month towards that card. Once that card is paid down, move on to the next-smallest one on the list. If you need to slash your budget or take other measures to get this snowball rolling, do it.
And, of course, refrain from putting any new charges on your accounts from now on. Adding to a balance you’re trying to pay down is an exercise in futility.
4. The Thought of Retirement Freaks You Out
Some people think of retirement and envision long, relaxing days playing golf, catching up on hobbies and traveling the world. You think of retirement and immediately start to panic because you have no idea how on earth you’re going to cover your expenses when you’re no longer working.
No matter your age, you still have time to save up enough for a comfortable retirement. You just need to get clear on how much you’ll need and come up with a definite strategy for getting there. As a general rule-of-thumb, you should set aside between 15 to 18 percent of your income into retirement accounts like your 401k or IRA.
Don’t leave your retirement up to chance or think it’s far enough way that you can “worry about it later.” The sooner you start saving up, the more secure it will be.
5. Money Is Only a Source of Stress for You
You feel guilty every time you make a purchase or look at your bank balance. Any time you talk with your partner about money, it turns into a fight. Each month feels like a losing battle with forces beyond your control, whether it’s bills you can’t pay or goals you can’t afford to save up for.
It’s time to take control of your finances. Money is not the root of all evil, as it can sometimes seem when you’re in over your head. It’s merely a tool we can use to design the life we want to live. Realize that the way you spend your money is a direct reflection of your priorities in life, and resolve to bring your spending in line with those priorities.
Once you take a long, hard look at your money habits, you will start to see areas where improvement could make a big difference in your overall financial state. You have the power to determine how your money works for you, so do everything in that power to make it work the way you want it to.