Unnecessary friction about money during a marriage is unavoidable but you can work together to combat it.
Marriage is a union between two people that lasts a lifetime. You promised each other to stay together, through thick and thin, in sickness and in health. Once the honeymoon period from the wedding wears out, you will be hit with the reality of financial management that comes with your new life (in the form of rent and bills!)
Joint finances mean something different for every couple. Some couples keep their money mostly separate and only share one or two bank accounts. Other couples combine everything—bank accounts, credit cards, investments accounts, and more. When it comes to combining finances there isn’t a right or wrong answer. Instead, it’s important to find the best solution for you and your spouse.
Here are 6 tips for combining your finances after marriage.
Tip #1. Manage Your Debts Together
Who doesn’t want their debts to magically settle themselves overnight? While we all wish our debts are gone, realistically we are likely to have some debt with us, including carrying some of it into marriage.
Discuss and be open with your spouse about each other’s debts. Share with each other about your loans, credit history, and spending habits. This is to avoid future miscommunication or any financial mishaps that might come in the future.
It is certainly okay if both of you want to treat each other’s debts separately, but when you think of them as household debts, it becomes easier to put aside some money to clear them. Clearing existing debt is very important for your cash flow especially if you are planning to make any big purchase in the near future like buying a home and car or even having kids.
Tip #2. Draw Your Household Budget
If both of you are working, you can both contribute to household income. However, your contribution might not be equal if you have different amounts of salary and commitments (debts!).
To determine how much each of you needs to provide for the household is to make a list of the person’s debt. After that, write down the household expenses that include utility bills, groceries, rent or house loan, and others in the budget.
After you did this, determine the percentage for each expense. For example, both of you want to contribute 10% of your income to pay utility bills. If you earn RM4,000 a month and your spouse earns RM4,500 a month, your contribution can be RM400 and RM450 for each other.
Tip #3. Create an Emergency Fun
Saving for a rainy day is Personal Finances 101 for everybody. And this applies to couples too. In general, a financial planner advises that your emergency savings should cover from 6 to 12 months of your household income.
With this fund, you are more than ready to face any unexpected situation like losing a job, poor health condition, or any miscellaneous stuff. An emergency funds provides your family money and protection during any financially bad situation.
Getting started is hard, but try to save at least RM100 per month as a couple, and if both of you are working, you can increase that amount according to your budget. Small changes like a coin or RM1 notes is essential and can be saved separately in your ‘tabung’ to help add to your existing monthly saving.
Tip #4. Set Your Goals
To live together financially healthy, couples will need to identify their short- and long-term goals.
When it comes to the short-term, is anything up to 2 years or less. Ask each other “Do you want to upgrade your current house ( e.g buy a house or rent another apartment? ) travel every year or have children?. With this, we would like to recommend to set up different money jar for each goal and determine the amount you will put in each jar weekly or monthly.
For long-term goals (anything more than 2 years) you may want to plan for your kid’s future education funding, retirement, or buying a second home. Set up a plan that stretches for several years to include how you planning to achieve these goals. This planning can help you to work harder to earn more money.
Tip #5. Pursue Combined Investment Planning
Before you decide on investing, you need to determine what is the right way for you. Never jump blindly into every opportunity to invest until you are aware of the technicalities and your risk profile. Instead, consult a professional like a licensed financial planner who can help you guide you through the process.
You also need to be careful not to over-invest or over-fund your retirement fund. Young couples tend to over-fund their retirement because they are worried about the future. But, this can also hinder their short-term goals. That’s why it is so important to lay the whole planning for all your goals and make sure your investment strategy is in place and doesn’t conflict with your other goals.
Tip #6. Seek professional support
If you feel the financial planning with your spouse reaches a dead end, consider getting help from a professional. Help like couple’s counseling can provide as the intermediary for both of you to discover deeper issues and figuring out a way to face the issue. Consider joint sessions for better responses and higher chances of communication between both of you.
For the financial part, seek your licensed financial planner to make sure your financial goals are correctly aligned with your partner plan. A financial planner will help to make sure your household cash flow is balance and your asset is allocated properly. But, of course, all decisions will come to your hand and financial planner only showing you the way how it will be properly done.
Talking about finances with your partner can be an awkward conversation. Finances are something that is considered very private. But, when you open up to them on your financial situation, it will help to set the course for better financial goals and as both of you slowly working towards the goal, you will realize that marriage is not a one-man show and you will need each other to make it work.
The best way to have a good money conversation with your spouse is to create a judgment-free space. Regardless of your partner financial situation, you have to approach it with neutrality and compassion as you create a plan for your household finance.
What is your go-to steps for finances after getting married?