Whether newly married or moving in, save yourself some financial heartache by discussing your finances together with these tips on budgeting.
Becoming a couple means more than just creating a relationship together - it also involves being financially connected to one another. Although traditionally couples chose to keep their finances combined, many couples today are choosing to seperate their finances. This article will outline some tips on budgeting you and your partner will need to decide which scenario is best for you.
Combined Checking Accounts
The benefits to combining a couple's checking accounts are:
- Simplified record keeping;
- Straightforward money management (as opposed to doing everything twice);
- Fewer papers to sign and process; and
- Provides a unified financial front.
Of course, there is one major drawback to this budgeting tip: with both partners actively using the same checking account, it will be all the more difficult to track each individual's spending.
Separate Checking Accounts
There are several benefits to separate checking accounts, such as:
- Allowing each family member the autonomy to make their own purchases without having to check in with the other;
- Each individual builds his or her own credit independently of the other;
- Easy budget tracking; and
- Provides everyone with a sense of independence.
The most obvious downfall to a separated financal arrangement is that it can seem unfair. For instance, if one person makes less than half of the other and yet the bills are split equally, there is a fairly high chance the lower-paid portion of the couple will feel unable to ever get ahead or be able purchase things beyond their immediate needs.
What About Joint Credit?
The last consideration when it comes to a couples fnewly-combined finances is whether or not credit will be applied for jointly or seperately. Should either of you want to make larger purchases such as a house, car or appliances, it will be much easier to get a loan should you have joint credit.
With joined credit, both parties are responsible for the debt, whereas with separated credit, each individual's credit and debts are their own, and are not reponsible for the other. There is an exception to this rule however, which is applied towards items purchased as family expenses.
Therefore, one major budgeting tip is to know if one member of the couple has bad credit before entering into the relationship, so that the person with the good credit score can keep things separate and therefore not drag their good credit down alongside the person with the not-so-good credit.
Tips on Budgeting for Couples with Separate Finances
For those who do decide to keep separate financial accounts, sit down together as soon as possible to discuss a method to pay bills and deal with other finanial matters jointly related to the both of you. A useful budgeting tip is to open a third joint account that is designated as the house account. Each member of the couple then transfers their set amount of money every month to this account in order to pay bills. Of course, the two of you will need to determine just how much needs to be paid every month, and how much each person will contribute.
The best budgeting tip? Be upfront with each other about your financial weaknesses and needs, and discuss a plan—before moving in or tying the knot—to handle them.
