Marriage and Finance: How to Know What to Combine and What to Keep Separate

Marriage and Finance: How to Know What to Combine and What to Keep Separate

 

Financial issues are a major factor in the current high divorce rates. Too many couples simply get married without considering the future implications to their personal finances. Add to this, the different financial education backgrounds; well then, money matters can quickly escalate, and become explosive. To prevent this from happening, couples should have a serious conversation about their financial future.

 

Keep It Together or Separate?

 

Long gone are the days when men controlled the marriage's financial fate. Now, with more women in the work force, this antiquated system doesn't work. Still, as a married couple, you must offer a solution to the age-old question "should you keep your finances together or separate?" There is no one "best" solution to handling money. What works for one couple may not work for another. That's why talking about it before marriage is so important. Even so, according to Forbes, only about 18 percent of American couples keep their finances completely separate. However, most couples don't keep all of their money together either. Actually, according to statistics, most couples keep about 44 percent of their finances separate and combine the rest.

 

Bank Accounts

 

Many individuals already have a savings, checking and investment account, and most financial advisors agree that having separate accounts allows each individual to feel independent. There is just something comforting in knowing you can tap into personal finances when the need arises.

 

Even so, having a joint account makes it easier to cover household expenses, shared bills and entertainment expenses. A solution you might want to consider is keeping most accounts separate and having one joint account where both individuals deposit amounts to use for their common expenses.

 

Credit Card Use

 

Some people are taught to "pay cash" for everything while others use "plastic" as if they were millionaires. This difference in spending habits causes explosive arguments in young marriages. Reconciling these spending habits is challenging, which makes it a good idea to talk about attitudes on borrowing money before the marriage; hopefully, a compromise sits around the corner. However, you can also address the problem by keeping credit cards, records and histories separate. Doing so ensures financial independence for both individuals.

 

Future Financial Products

 

Contrary to what your in-laws think; you are not two kids fighting over the last piece of candy. A couple's finances are important and addressing your financial future early in the marriage is crucial. There is never a good time to ask these questions and discuss issues relating to death and disability, but it is a conversation that must take place before it is too late. Consider your views on the following questions and then set your financial goals and buy your assets according to your answers.   

 

    * Should we create a joint IRA or 401(k) plan?

 

Couples do sometimes create a retirement fund plan together, but they often also have individual retirement plans in place. Otherwise, most couples decide to keep IRA and 401(k) funds separate, to ensure the safety of such funds for retirement use.    * Should you buy life insurance policies for each other?

 

While life insurance is a personal decision, it can be an important consideration if you both work, or when there are children in the marriage. You want to consider the implications of the loss of an income to maintaining the household, educating the children and to keeping up the lifestyle you are accustomed to.

 

    * How much auto insurance should we carry?

 

When starting a life together you should also review your auto insurance policies to make sure you have sufficient coverage for both vehicles. Place each other's names on the policies and review your personal injury coverage to make sure you have adequate coverage for everyone who might be in the vehicle.

 

    * What type of health insurance do we need?

 

Often a health insurance policy is sponsored by the company you work for. If both individuals work, review the policies to make sure your coverage doesn't overlap. In some cases, it may be best to reduce the coverage and the expenses of one policy, just because the other spouse's coverage is more comprehensive. By reviewing both policies you can determine the better option.

 

   * Where do we live?

 

Real estate can also be an issue that plagues couples, especially when individuals already own a home. You should discuss whether you wish to live in a home owned by one individual or whether you should sell the property and buy another home together.

 

Bottom Line

 

Most couples use both a separate and combined financial product methodology. Products such as retirement funds, IRAs, and 401(k) plans should be held separately, to ensure the well-being for both individuals in their retirement years. Of course, if additional funds are offset for retirement years, then these can be placed in a joint account later in the marriage.

 

You want to review your joint and separate financial assets every couple of years to make sure you aren't buying overlapping protection and to make sure that these cover your marriage and family needs.

 

You should also make sure that estate planning issues are worked out and updated periodically. You should always converse and make final dispersement provisions for a spouse and any added family members, should you or your spouse pass away uneventfully.

 

Kevin Beene is a personal finance consultant who enjoys sharing his tips and knowledge with people through blogging. Learn more about saving on car insurance by clicking the link

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