Money and Marriage: Combining Lives Often Means Combining Finances

Marriage changes everything, especially finances.  Shared love, shared lives, and shared bank accounts can be the foundation of a prosperous life for newlyweds.  But, it can also be the source of many challenges and aggravations.  Clear communication and thoughtful planning are key ingredients to a healthy marriage with successful finances.  Without them, money can be a major source of conflict, especially in a new marriage. Newlyweds who start their married lives with planned joint money management can avoid common pitfalls, achieve shared financial goals, and build wealth.

Open communication is key. 
Both spouses should lay out their financial goals and work to understand each other’s perspectives.  A few common topics every married couple should discuss early on include desire for children and expectations for childcare, career goals, ideas for advanced education, entrepreneurial intentions, timelines for retirement, and home purchase plans.  The last item on this list is especially important for newly married couples to consider and reach consensus.

In addition to communicating about financial hopes and expectations, married couples should discuss their current financial status.  Both partners probably already have some assets and debts that they bring into the marriage.  Assets might include savings and investments, while debts commonly include student loans and credit card bills.  In a healthy marriage, both spouses should know upfront precisely what each brings into the marriage in terms of assets and debts, and should discuss the role these play in their relationship.  For instance, couples should consider whether existing student loans or credit card debt will be paid down by both spouses working together, or whether these liabilities are the responsibility of the spouse who brought them into the marriage.  Though most newlyweds shy away from the idea, a pre-nuptial agreement can be an effective way to make financial expectations clear in a marriage.  They are especially useful when one spouse brings substantially more assets or liabilities into a marriage than the other.

Combining finances is worth consideration.
In most cases, married couples benefit by combining their finances after saying “I do”.  Joint bank accounts are convenient.  They allow the couple to contribute to a shared pool of money and pay for common expenses without constantly worrying about splitting the expenses.  Open financial communication follows rather naturally when both spouses monitor a shared bank account.  Similarly, credit cards can often be set up to allow a joint credit account or to allow spouses to be authorized users of each other’s credit cards.

Other shared financial situations may require professional help.  While most couples choose to file taxes as married filing jointly, some may actually save money by filing as married filing separately.  Likewise, combined credit scores may now affect the married couple’s access to loans, such as new student loans and mortgages.  While combined credit is often a benefit, the situation can be difficult if one spouse has a high credit score and the other does not.  In these more complex financial situations, newlyweds are wise to seek the help of professionals such as a financial advisor, an accountant, or a credit counselor.

Married couples often consider purchasing a house as their first major financial act together.  The ideal of the American dream is powerful and spouses are often eager to establish a home where their family can grow.  A home can be a good investment, but it requires careful consideration.  Couples need to consider the source of their purchase money (whether they have the cash or will need a mortgage), how much house they can afford, how to prepare for the mortgage process if they are going to borrow, and how the mortgage will be repaid once the house is purchased.  This may seem like a challenging process, but it can be surmounted with some discussion and wise advice.  A trusted home loan advisor can be instrumental in helping a couple prepare their finances for the home purchase. In addition, a good mortgage home loan advisor can help the couple understand the process and know what they can afford.

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Marriage is an exciting part of life.  Open communication, wise planning, and a little good advice can help ensure that finances in marriage flourish and do not become a source of struggle that holds a marriage back.

If you’re newly married, open a First Performance Checking account online today to get started on combining your finances together. If you’d like more information on other areas of shared finances, contact a knowledgeable First Bank advisor today.

By: David Frederick
                            David Frederick, J.D., LL.M. is the Senior Vice President and Director of Client Success and Advice at First Bank Wealth Management and Adjunct Professor of Economics at Washington University. David may be reached by phone at 314-995-8764Phone Call Icon or via email at [email protected].