Everyone has different questions when they hear someone is getting married. When Mrs. Frugal and I got married, the questions tended to revolve around the ceremony and reception. (The most asked questions were, “Where will the wedding be?” and “How many people are you inviting?”)
There are far more important questions, and since this is a blog about finances, I’m going to focus on some of the important financial questions. Being that Mrs. Frugal’s sister is getting married in the next month, I thought it would be good to put some thoughts about marriage down.
One Checkbook or Three?
It sounds like a silly question, but it’s important. I’ve written about this topic before, but it is worth re-visiting.
When Mrs. Frugal and I got married, we joined all of our finances and paid for everything from one checkbook (rather than having a joint checkbook and our own individual accounts). We recognized that finances are a topic that can divide couples and we did not want to begin our marriage with a mentality of this-is-mine and that-is-yours.
I would recommend the one checkbook approach to almost everyone.
After our first year, we wanted to buy each other Christmas presents without the other person knowing what we had bought. We decided to take money out of our joint account and put it in individual accounts.
When we set up our individual accounts, there were a few things we made note to do. First, each of us took equal amounts out of the account. Second, we took money out of the account after agreeing on an appropriate amount to take out and decided on a monthly amount we could continue to take out as an allowance.
Too many couples that keep both individual and joint accounts have their own salary deposited into their account and then pay for joint costs by writing a check to the joint account. I can’t see any quicker way to divide a couple in the financial aspect of their life than to do this. Feelings of inequality are bound to creep up. The idea of managing your joint finances this way is much more like an arrangement between roommates than one between two people who have decided to be partners through life.
Keep Your Finances Simple
My finances were more complicated than they needed to be. Over the course of our first year together, I automated almost all of our payments and wrote out directions that explained what needed to be done each month.
Meet Regularly About Your Finances
We decided to meet once a month to talk about our finances. At the end of the month I would prepare a report detailing our income and expenses.
Set Goals
Set financial goals for yourselves. I did a podcast (on another podcast, link to the show notes found here) on goal setting. Briefly, the goals need to be specific, attainable, and with steps outlined on how to reach them. Once you have an idea of how much you’re spending you should begin to see expense categories you can tweak in order to save money.
Remember You’re Teammates
Finally, remember that you’re in this together for the long-haul. Both of you may make unnecessary purchases in your years together, but you should remember that you are trying to reach the same goals.
{ 1 trackback }
{ 2 comments… read them below or add one }
What about when one person is bringing significantly more debt to the marriage than the other? There rarely seems to be advice on addressing that in regards to joint accounts and budgeting. Especially when you’re making about the same amount.
I think coming together with your new spouse and having this all important “finance chat” is a crucial step for every new couple.
I work with State Farm, and we often recommend that our customers add insurance considerations into their “things to think about” list of to-do’s when getting ready to say “I do” – in addition to the 8,357 other things that need to be done.
As you can imagine, there are a lot of different insurance buckets to be evaluated and acted upon to make sure guys and gals get the right coverage together before they tie the knot (and in some cases, even save money by doing so). I think one of the best ways to get started with all this is to meet with an agent in-person to discuss both of the spouses current coverage, needs, etc and make a plan for what they’ll need in the future.
Another thing to think about, which may help new couples starting out in building a financial future together (and couples who’ve been together for a while that need some assurance), is to build an “emergency fund.”
With the economy in its current state, it’s just good sense (as many finance experts will tell you) to have money set aside in the event the unexpected happens.
An easy way to get started with this is to use a financial calculator to chart out where your money goes each month and how that will impact your situation.
There are a lot of different calculators out there but one I’ve found helpful and comprehensive is available from Kiplinger: http://www.kiplinger.com/tools/budget.
As newlyweds think about how to establish their emergency fund, we at State Farm urge our customers to incorporate the cost of potential insurance deductibles – auto, home, health, and others – in the event of a claim – as you never know when an emergency will arise – and having some backup funds for those costs can make all the difference.