all about How To : 6 Tips to Manage Money as a New Couple

Best Money Management Tips for New Couples Alyssa says, “My boyfriend and I have been living together for 2 years and still can’t figure out the best way to manage money as a couple. We’re serious and think about our finances as one pot of money; however, one of us makes more than the other. Should we split everything 50/50 or by how much we make? And what’s the best way to handle credit cards and bank accounts?”

No matter if you’re in a serious relationship, like Alyssa, or have already tied the knot, managing money as a new couple can be tricky. Everyone’s situation and preferences are different, so there isn’t a one-size-fits-all system.

However, there are critical do's and don’ts that will help you avoid potential disagreements and create a great financial life. Keep reading for six money management tips that every new couple should follow.

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Tip #1: Know Where Your Relationship Stands

Since every relationship is different, my first tip is to be realistic about the status of yours. If you’re close to getting married, or are 100% committed and feel certain that your union will stand the test of time, my advice for managing money as a couple is very different than if you’re really not sure if you have a solid future.

If you’re a committed couple, then your money should follow. Leap in and merge every aspect of your finances!

Uniting money with joint accounts is the best way to work and succeed as a team. Steer your future as a couple by deciding how to budget, how much to save, whether to buy a home, and so on.

When you’re in a committed relationship all financial decisions should be discussed and shared equally—otherwise you’re just living two separate lives under one roof. It doesn’t matter if only one person works, one earns much more than the other, or one brings more debt into the relationship. Love doesn’t keep score when it comes to money.

When you’re in a committed relationship all financial decisions should be discussed and shared equally—otherwise you’re just living two separate lives under one roof.

This is how I recommend you manage money as a couple because it’s how my husband and I have managed our finances for a long time and it’s worked very well for us. Our vocabulary doesn’t even include the phrases my money and your money—it’s our money.

But as I mentioned, if you’re not 100% committed and certain that you will be with your partner forever, or you have any reservations about merging money, then please don’t.

You might feel sophisticated buying a house together or sharing a credit card, but it’s incredibly risky to share debt, bank accounts, or investments with someone you don’t fully trust. Untangling joint accounts after a break up can be a nightmare.

Co-signing a loan or credit card means that you’re responsible for the entire debt if the other person disappears or doesn’t pay. If you own it, you’re legally on the hook for every penny charged on it, even if you weren’t the person who bought anything. And having a joint bank account means that either party can drain it at any time.

So, it’s all about trust. You’re the only person who can make the call whether it’s in your best interest to mingle some or all of your money with another person.

Tip #2: Decide What’s Fair

Alyssa said she and her boyfriend view their money as ours, not mine or yours. But they’re not sure how to handle expenses because one earns more than the other.

You will always earn more or less than your partner or spouse, and you’ll also have different amounts of expenses and debt at different times. The financial give and take in a relationship is never even.

There have been years where my husband earned double or triple my income, while I also incurred big expenses like graduate school. Likewise, there have been years when I was the breadwinner.

When you’re in a relationship for the long haul, both of your incomes, expenses, debts, and savings are yours to manage as a couple. So all income and expenses should flow through the same joint account.

Yes, that’s a lot of transparency. That’s the point. When each of you knows the truth about your finances it builds trust, fosters communication, and allows you accomplish more together than you ever could alone.

When each of you knows the truth about your finances it builds trust, fosters communication, and allows you accomplish more together than you ever could alone.

However, I must repeat that if you’re not 100% committed, there’s no rush to merge money. You might choose to split household expenses—like rent, groceries, and utilities—down the middle, or to contribute proportionally based on your income or usage.

If you’re living more as roommates than as a life-long couple, you’re the only one who can decide what’s fair financially. There’s no right or wrong way to divvy expenses up. Just be clear about what you want so no resentments build up that could cause problems later on.

Free Resource: Online Bank Comparison Chart (PDF download)—find the best checking and savings accounts to open as a couple!

Tip #3: Use Good Financial Tools

No matter if you decide to merge your finances or not, there are some great financial tools that make managing money a breeze.

Try a free app like Mint that imports all your bank and credit card transactions into a dashboard. It’s perfect when you want to keep track of spending and simple goal setting on the go.

If you want a more robust product, I’m a big fan of Quicken desktop software. There are different versions, but the starter edition is just $40. It links to your financial accounts, imports transactions, and gives you much more functionality and reporting compared to Mint.

Expenses you need to split up can be assigned to a special account like “joint household expenses,” so they’re separated from your personal expenses. At the end of the month you can easily see the total and settle up.

If you need to reimburse your partner, PayPal is the most widely used, fee-free way to transfer money. You can each create your own PayPal.Me link so the payer simply clicks the link, enters the amount to pay, and the money is in your PayPal account in seconds. You can keep the money there or transfer it into your bank account.

There are other apps that allow you to send and receive money—like Venmo, Google Wallet, and Square Cash—just be aware of the fees charged. Paying 3% might not sound like much, but it adds up over time. Weigh the convenience of these apps with the transactional cost.

Tip #4: Communicate About Money Early

Communication is the key to a successful relationship and it certainly includes a lof of discussion about money. How a partner handles money or opens up about it should be a major factor in whether you decide to get serious.

You’ve heard the saying that opposites attract in couples. Maybe you like the beach and he likes the mountains. Or you’re shy and she’s outgoing.

Financial behaviors and habits in couples can be very different as well. For instance, are you a compulsive spender or a strict saver? Do you swing for the fences or take a conservative approach with investments? Are you at ease with or terrified of debt?

A quirky financial tendency that endears you to your significant other in the beginning—like being a free-spirit who lives and spends money in the moment—may be a real source of irritation down the road.

So watch out for potential problems that may need to be addressed, like overspending, keeping money secrets, or refusing to create a budget. Be honest about both of your good and bad financial habits before merging your finances as a couple.

Even if you feel well-aligned financially and don’t see any potential problems, my best advice is to begin talking about money as early in your relationship as possible. Now, I don’t mean asking about someone’s credit score or net worth on a first or second date.

But by the time you have enough trust in a relationship to ponder collapsing two households into one, you should already be talking about your income, expenses, debt, and savings.

This is so important because being at odds about money is a leading cause of breakups. One study showed that the more frequently couples argue about money, the more likely they were to get divorced.

I feel fortunate that my husband and I are more alike than different in how we view life and our finances. But we had our share of fights about money in the early days that had to be ironed out.

Tip #5: Discuss Your Financial Goals

One aspect of good financial communication (and a prerequisite before merging money, in my opinion) is talking about your goals. This is the best way to truly know if you’re headed in the same direction as a couple.

For instance, if your idea of bliss is to make just enough money to live and work while traveling the U.S. in an RV, but your partner wouldn’t dream of leaving his hometown, you may be headed for trouble.

Or if your partner spares no expense because she believes life is short, but you want to live frugally, save a huge nest egg, and then retire early, you may have fundamental financial differences that are irreconcilable.

Discuss the specifics of what you want to achieve with your money in the short-term, like one to five years. And also talk about your long-term dreams for retirement. Some of your long-range plans may change over time, but having huge differences of opinion is something you need to address earlier rather than later.

Tip #6: Know Your Financial Histories

In addition to discussing your goals for the future, you should also understand what happened in the past.

Fortunately, if your partner has bad credit, it doesn’t affect yours. However, it may affect your ability to qualify for joint credit accounts like a credit card, auto loan, or mortgage.

If you’re not sure what your credit history looks like or how much debt exists in your name, simply pull your credit reports. You can get one report from each of the national bureaus (Equifax, Experian, and TransUnion) for free once a year at annualcreditreport.com.

You can also get some of your credit reports and credit scores for free as often as you like when you sign up at one of my favorite sites, Credit Karma.

When you already have credit accounts in just your name, it’s much better for your credit to maintain them as-is. Instead of closing a credit card, use one of these options to share a card with your partner:

Become joint account holders on a new card where co-signers share full financial responsibility and have the account reported on both of their credit reports.
Become an authorized user on a partner’s existing card where you have no financial responsibility to make payments and may have the account reported on your credit report.

Adding an authorized user to your card can be a good strategy to help a partner build or repair poor credit—but only if the card reports transactions to his or her credit report. Card companies vary in how they treat authorized users, so check with your issuer to find out their policy.

However, I don’t recommend being a joint account holder or adding a partner as an authorized credit card user unless you are 100% committed as a couple. Credit cards are easy to use and abuse, so they open you up to a huge amount of risk if a partner doesn’t use them responsibly.

How to Manage Money as a New Couple

If you managed your finances for many years before coupling up, you may want to maintain some amount of financial autonomy. As I mentioned, this isn’t how it works in my marriage, but I respect that every relationship is different. So what should you do if you're taking this approach?

You may want to keep a small checking or savings account in just your name for your eyes only. As long as you’re not using it to commit any financial infidelity, it could be a good solution if you need some leeway.

It’s also important to note that retirement accounts like 401ks and IRAs must be owned individually—you can’t own a retirement account jointly. So those will always be under your own control.

Also, debt that you bring into a marriage remains in your name and isn’t your spouse’s legal responsibility. However, I still recommend tackling all debt as a couple.

What’s best for the finances of your partnership or marriage begins with candid and respectful conversations about your beliefs, concerns, and goals. If that seems too difficult, you may need to speak with a counselor to help sort it out.

Arrange your coupled finances in a way that works best for you, but also be open-minded about setting new guidelines and changing tactics if how you manage money right now isn’t working.

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all about How To

Rabu, 17 Agustus 2016

6 Tips to Manage Money as a New Couple