As the 2014 wedding season winds down, recent newlyweds are beginning the process of figuring out their finances. However, many of today’s couples are having the “big financial conversations long before they discuss reception venues or floral arrangements. If and how to combine your accounts is a big decision for a couple – here are some tips and information to help you and your main squeeze make the decision that’s right for both of you.
The “All In” approach works best for couples with similar assets and spending habits. For some, this means a single, joint account into which all funds are deposited and from which all bills are paid. A variation on this method is each person moving a set amount of funds to two joint accounts – a checking account to pay bills and a savings account for future purchases or, as the name implies, long-term savings. Some couples may take it one step further and live on one person’s salary while putting the other’s into savings.
There are, of course, some considerations to make before joining your accounts. For instance, if one person has some credit card debt, perhaps the best plan would be to create a strategy to get him or her to a zero balance before forming a joint account and avoid affecting the partner’s credit score.
Meeting in the Middle
Perhaps the most common practice, the “Meet in the Middle” method and its variations, is a good way of allotting funds on a case-by-case basis. Because of different salaries, some couples find that contributing a percentage of their salary to a joint account works best. For others, dividing up their bills and payments (for instance, she pays the mortgage, he covers the utilities) is the best way to maintain financial balance.
Keeping separate accounts can be tricky as family dynamics change. Two accounts may be a better choice at the beginning of a marriage due to student loans or credit card debt. However, if you plan to have children or buy a home, these major costs will undoubtedly mean that it’s time to re-examine your setup. This is to be expected and even welcomed.
No matter how you choose to combine finances, or if you choose to at all, talking about existing debt, having ongoing conversations with your partner about spending habits and setting financial goals are all important.
For more insight on what account(s) would work best for you both, consider talking with a MCU personal financial officer.