If you ask psychologists the secret to a happy and successful marriage, they would probably tell you to be in the moment with your partner, always focus on the positive, keep the love alive, etc. In romantic relationships, especially when you are considering the next step, i.e., getting married, it totally makes sense to keep romance at the centre – it’s the element that keeps the relationship going. But dedicating all your time and energy to maintain the romance is dangerous, as it takes many facets to create a successful marriage. An important factor to consider? Your financial situation.
You and your significant other may be well, but are your finances well? Once you get married, many things become intertwined. Literally, two different people – their individual systems, habits, weaknesses, etc. – become one unit. Whether you like it or not, an important aspect that is always, always linked with marriage and one that you can never get away from is (surprise!) money. In fact, Terri Orbuch, a therapist and researcher, said that “Money is the No. 1 source of conflict in relationships.” However, fear not! Marriage is a beautiful thing. Marriage + money? When done right, you’ve set up the foundation for a happy, lasting union.
Ditch the “My Money/Your Money” Mindset
At first, it will be hard to think of your earnings as “our” money, especially when you and your partner have different attitudes towards money. You may be a spender, while your partner may be an avid saver. But now that you’re together, it would be wise to decide right away how you and your partner would manage finances as a married couple.
One of the first money questions that couples planning to marry should ask is how they would deal with bank accounts. Will you have separate accounts? Or will you both create a joint account? Or will you have a mix of both separate and joint accounts? The decision is yours and your partner’s to make, but remember to come to an agreement early on. Most of the time, it helps to establish a combination of both joint and individual accounts. The former should be used for family expenses, such as mortgage or rent, utilities, groceries, etc., while the latter can be utilized for your personal spending – be it a handbag or a weekend getaway to Bali with your homies.
But before you start talking about bank accounts, take a step back and assess your current financial health together with your loved one. Some of the things that are crucial for you to consider reviewing include:
- Savings ratio,
- Debt to income ratio,
- Emergency savings,
- Net worth statement,
And if you haven’t already, do yourself and your married life a favour by creating a basic financial plan.
Budget, Budget, Budget
Once you’ve gotten used to the concept of “our money”, it’s time to budget. If you’re used to budgeting solo, this is the time to get serious about creating a family budget. As previously mentioned, your partner may have spending habits completely different from yours. Similarly, he/she may bring assets or liabilities into the household. Taking time to set up a budget would not only help to keep your lifestyle in check, but it would also contribute to financial success in your marriage.
To develop the most realistic household budget, keep in mind both short and long-term expenses. Your partner and you must understand where your money is going every month. When you’re done building your family budget, stick to it and update when needed.
In terms of investing, it is recommended to diversify your investments by allocating your funds into various financial instruments and industries. Doing so could help mitigate investment risk. You and your partner can construct an investment portfolio according to your preferences and risk tolerance. For instance, 70% of your portfolio can be directed towards deposits and bonds, 20% in stocks, and 10% in cash or likewise. The more you diversify, the more you minimize risk. Every investment has risks involved, so your partner and you should discuss how adventurous your investment portfolio would be. Keep in mind your shared financial goals to direct your decision.
Open and Often Money Talks
In a study by Fidelity, 72% of couples say they communicate very well with each other on financial matters, yet more than 40% of the couples surveyed didn’t know about their partners’ earnings. If you’re in a relationship and thinking of marriage, you already know that communication is key. The same goes for money matters. You need honest, frequent conversations. Strive to do it weekly, but bi-monthly or monthly is fine. Ease into it by talking about career goals, how many children you’d like to have, future vacation plans, retirement plans, and so on. Then move on to everything money-related: money history, money goals, money fears, money weaknesses, the works.
It’s normal for a couple to have differences in financial knowledge and experiences. More often than not, one spouse takes the lead in money matters, as he/she has the better skill set to evaluate investment options or complex financial transactions. This is totally okay, as long as the other person is also involved and well-informed. Without these open and often money talks, lack of awareness from your spouse and/or you might lead to bigger problems down the road.
Money management in our personal lives is a huge deal, let alone in a marriage. This money journey belongs to your other half and you, so walk the journey together and build your wealth together. Your partner and you deserve a happy and lasting marriage – don’t let finance cause your relationship grief. Of course, every couple is different. Hence, there’s no “one system fits all” when it comes to money management in marriage. It’s never guaranteed to be easy, but one thing is for sure: planning ahead definitely helps.
This article was contributed by Funding Societies.