New relationships require new strategies
When you’re just starting a relationship, it’s easy to think that money will never come between you. But, money is one of the top three things couples fight about. So, it’s critical to start out on the right foot. But how do you do that? It might be easier than you think.
Things to do right away
Identify your financial personalities
The first thing you should do is discuss your attitudes toward money. It’s worth identifying your financial personality—saver or spender—and knowing if you’re on the same page or not. Discuss what you each think is important to spend money on and what isn’t, what you’re willing to do without and what you must have now.
It’s important for each of you to understand your existing financial responsibilities. You may have debt you’re paying off, obligations to family or from previous relationships, or any number of things that you each have to pay. Be open and honest about your commitments and try to make sure your partner is as well.
Put your accounts in order
You may each have a number of bills that you prefer to keep separate, but it is important to have both names on things like utilities. Without that, only one of you can make changes, if they are needed.
Chances are you will undoubtedly have some joint expenses. So, it’s important to think about how you want to set up your banking.
- Some couples choose to completely integrate bank accounts and elect one partner to be in charge of the finances.
- Others may opt to maintain separate checking or cash management accounts—dividing up the expenses and assigning each partner specific financial responsibilities.
- Some couples choose to start with three accounts: yours, mine and ours. In this scenario, each of you keeps an account to pay your own obligations and you have a joint account from which you pay the bills you share.
Things that can wait
Regardless of how you choose to handle day to day expenses, you need to create savings goals and budgets together and set aside time to review them regularly.
When you get married, you need to review the beneficiary designations on any life insurance or retirement accounts. According to federal law, your spouse is automatically the beneficiary on your 401(k), so if, for any reason, you do not wish for your spouse to become your beneficiary, they will need to sign a waiver and have it notarized.
Set long-term goals
When you’re a team, you probably have new priorities. Whether those goals include children and college, a new house, travel or support for the causes you care about, you need to develop a plan to help you reach these objectives. The right investment strategies will depend on how you view risk and your time frame. For example, how you might save and invest for a vacation will be quite different from how you save for your child to go to medical school.
Couples often have preexisting notions about when they need to buy a home, have children, retire and more. But things may not always happen on schedule. The key is to:
Set and plan for your goals
- Be realistic about timing (taking a little longer may be better than stressing yourselves too much)
- Check your progress at regular intervals
And remember that life happens. Your priorities and financial situation can change quickly, but that’s okay. You can still work toward these or new goals using the same tools.