Managing Finances for Couples
(Six-minute read time)
Navigating the financial side of life can be challenging, and it can become even more convoluted when attempting to manage finances as a couple. Approaching financial problems and goals as a pair can relieve certain stresses compared to embarking on a single personal finance journey. Still, it can also bring new considerations and complications into the mix. To put it simply, it’s overwhelming.
If you’re embarking on life with your chosen partner, that involves merging some aspects of your lifestyles – including finances. You have a series of big decisions ahead of you, but you also have a lot of freedom regarding how you choose to navigate those decisions. Let’s take a look at how to approach managing finances for couples so that you can begin your life together on the right foot and make your dreams come true.
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Set a Plan and Execute
The biggest key to financial success as a couple is to sit down and create a detailed plan for your finances moving forward. Discuss your debts, your career trajectories, your goals, and anything else that might influence your financial progress moving forward.
Finances can be messy. In fact, studies have shown that arguments about money are one of the top predictors of divorce. But don’t let that scare you – it simply means that open and continued communication about finances is the sign of a healthy relationship. Avoid issues by communicating early and forming a solid plan.
Merging Finances as a Couple
As you set out to merge your finances with a partner, you have complete control over how you do so. Discuss how you’d like to tackle bank accounts moving forward – do you share a joint account, or keep things separate? You could even combine the two approaches. Consider four accounts between you:
An everyday shared account for joint expenses
A shared savings account with regular, defined contributions
Two individual accounts for independent purchases
This is just an example, but it shows how much control you have when merging finances as a couple. Speak to your partner and find out what works for you.
It’s also important to discuss how you’ll approach expenses as you move forward as a couple. You have the option to split everything between you 50/50, or you could split expenses relative to your respective income. Whatever you choose to do, be sure to communicate clearly and set a plan from the start. This plan can always be altered as you progress through life and your situation changes, but a clear plan is essential for financial success.
A household budget is a strong tool to help you understand where you stand with your income streams and expenses, and help you create an informed plan (and stick to it) as you move forward.
Growing Wealth Together
Another big conversation is to discuss how you’d like to grow your wealth together. It’s possible that you’re not quite at this stage financially, and that’s okay. But hopefully, with a strong plan, you will be there in the future.
Sit down with your partner and discuss your individual saving philosophies, and how you can approach the matter in a way that you’re both comfortable with. People have different risk tolerances, and it’s important that you’re both on-board with your plan.
Discuss your projected income streams, and what you plan to do with any excess. Are you interested in investing? If so, how? Stocks and bonds? Using a do-it-yourself platform or with the guidance of a financial expert? Are you interested in exploring alternative assets? All of these details are important to iron out as you broach the subject of growing your wealth as a team.
Protecting Yourselves
Once you’ve established how you’ll make money, divvy expenses, and grow your wealth as a couple, it’s time to talk about how you’ll protect those finances.
You have options when it comes to insurance. Those options are vast, and they can be confusing, but they’re important to explore so that you can make the right decisions for your particular situation.
Home insurance, car insurance, business insurance, life insurance... all of these classes have options within them, and there’s a lot to consider. Protecting yourself in the case of an emergency is a very important aspect to a strong financial plan, and while you can research these options yourself, you’ll gain the most comprehensive understanding of your insurance options as they relate to your situation by working with a financial advisor who can guide you.
Discuss the Big Expenses Now
While life generally loves to throw us curveballs, there are also some large expenses which you can expect, and thus plan ahead for. Let’s take a look at some of these predictable expenses, and how you can factor them into your financial plan as a couple.
Wedding
If you plan to get married in the near or distant future, you should make sure that you and your partner are on the same page when it comes to a wedding budget.
Weddings can rack up an astronomical bill, but they don’t have to. It all comes down to how you imagine your big day and how you decide to allot your funds as a couple. It’s helpful to discuss certain expenses ahead of time – the venue and guest list, for example – to ensure that you’re on the same page when it comes to how much money you’d like to invest in your wedding, if any.
Whether you throw a big fancy bash or you sneak away and elope, planning ahead for the expense will help to smooth the process and allow you to focus on what’s important: tackling life as a team.
Family Planning
Another key discussion involves your stance on how family will impact your finances moving forward. Do you plan to have kids? How many? What happens when parents get older and require assistance?
Take a moment to discuss your potential dependents in the future and how you plan to navigate those expenses, and work that into your plan.
Education Planning
If you do choose to have children, how will you handle their financial planning? It’s generally always a good idea to start early. Be sure to talk about what you’d like to provide for your children, and what is within your means. Inform yourself on all things RESP, and don’t wait until your kids are applying to colleges – continued education can be a huge expense, and it’s crucial to discuss it early.
Education isn’t limited to children, either. If you or your partner have dreams of returning to school at some point in the future, now’s the time to bring that into the discussion as well.
Home
Another significant, predictable expense? Your home!
Most couples dream of owning a home together. In fact, purchasing a home is likely to be the most significant financial decision in a person’s life. Knowing this, you should plan accordingly.
Make sure you’re on the same page regarding how you’ll save for a home, what sort of home you’d like, and the financial decisions involved. What sort of a down payment are you looking at? What about mortgages? This is another part of financial planning where it can be especially helpful to enlist the expertise of a financial advisor as you navigate the complexities and prepare for one of the most significant financial decisions of your life.
Prepare and Conquer Together
This is a hugely exciting stage in your life! Young couples share all of the hopes and dreams of the couples who came before them, and they deserve to see their dreams become a reality.
Managing finances as a couple can be difficult, but there are resources to lessen the burden. Our Free Financial Organizer Template is designed to help you as you prepare for the life ahead of you, and set a plan that will allow you to live the life you’ve always imagined together.
Financial planning doesn’t have to be overwhelming. Being well-prepared for the adventures that lie ahead of you can help to make your time together all the more enjoyable!
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