I am so excited to be bringing back Molly’s Money! I’ve been wanting to bring this series back for a while, but honestly, I just needed some inspiration. I put the question out there on Twitter and Facebook and got some GREAT questions from a lot of you!
Needless to say, I have a lot of material for a while. BUT, if you have a personal finance / debt / money question, please please please post it in the comments below or you can e-mail me! I’d LOVE to try and answer it for you!
So, this week’s topic seemed like a very popular one as I got A LOT of questions about this one: How do you combine your finances after you get married?
Now, this is a loaded question and I could probably write an entire series just on marriage and money, but I, along with the assistance of my better-half, am going to try to do the best I can to at least scratch the surface on the issue today.
So, without further adieu, let’s get to it:
MOLLY’S MONEY: “HOW TO COMBINE FINANCES AFTER MARRIAGE”
I am going to put this out there right away: It should be noted that I am NOT an expert and there are A LOT of different ways that couples combine finances after they’re married. This just happens to be how my husband and I chose to combine OUR finances and it has worked very well for us. We are 100% on the same page with everything regarding our money and it’s a really important part of our marriage. You may do things differently and that’s okay, this has just worked for us, so keep that in mind. I’m also talking personal finances here and not business finances or anything like that.
1. Once you say “I do,” it’s no longer my money and his money. It’s no longer my debt or his debt. It’s OUR (collective) MONEY. Or it’s OUR (collective) DEBT. It’s no longer mine or his, it’s OURS.
I’d say this is the most important thing to get out there right away and it should definitely be discussed before you say “I Do.” This is often the toughest step to swallow at first, but is honestly KEY to having a successful, open, and honest marriage.
Money is one of the TOP reasons that couples get divorced these days and the earlier you get started on being fully open and fully trusted with your finances, the better off you’ll be.
This was also one of the reasons I really wanted to get out of debt before we got married. My debt was my issue and my mistake and I didn’t want my husband having to deal with it. Luckily, we were married less than a month when we sent in that last check to NovaDebt. And yes, I say we because at that time, that last little bit of debt, even though it was mine to begin with, was then ours. And I hated that and I wanted it gone. And so together, we became debt free.
But seriously. I can’t emphasize how important this is. When you become husband and wife, you’re committing to ALL of that person. Every. Last. Bit. And that includes the money that comes in and the money that goes out. It’s OURS. When you get a raise, you both get a raise. When he loses his job, you both lost a job. You win, lose, and draw TOGETHER. Every. Last. Penny.
In my opinion (and I truly believe in my heart of hearts that my opinion is right), you both have to come to agreement on this and get this one right before you can go any further in your marriage.
2. When literally combining your finances, decide which bank account you want to go with. Together.
When John and I got married, he had way more invested, quite literally, in his bank. He had his mortgage, savings, credit cards, etc. all with one bank. With my bank I just had a checking and savings account. So, it was MUCH easier for me to close out my accounts and move over to his bank than it would have been for him to move to mine. So it was a no brainer for us.
Maybe the best option for you both is to BOTH close your accounts and start fresh by opening a joint bank account at a new bank. The answer to this question is really going to depend on your individual situation.
But you need to consider a few things before you make the ultimate decision:
- How much do you each have invested in your individual current accounts?
- How logistically easy / difficult will it be for one of you to close out your accounts and move them to another bank?
- Make sure to consider any bills or expenses that are automatically drafted…
- IMPORTANT: See #3 below
3. Don’t fall into the trap of “Well, we’ll open a joint bank account, but we’ll each keep our own separate bank accounts too on the side.”
Now, this may be a hot button issue for some of you as I know a lot of couples who have gone this route. Or maybe they didn’t even open a joint account at all, they just decided to keep their accounts separate. But let me warn you, if you decide to go this route, you’re opening yourselves up to potentially serious conflict down the road.
The justification for some people is, “Well, I may want to buy something that my significant other doesn’t want to spend money on, so I want to have my own stash of cash for those situations.” But, I’m sorry to say, that ain’t how marriage works.
The MINUTE that you introduce any kind of secrecy in your marriage, the quicker you’re setting yourself up for trouble. And in addition to that, when you’re, quite literally, FORCED to make financial decisions together, inevitably the closer you’ll become. For the most part, EVERY SINGLE DOLLAR that leaves our account is agreed upon by both my husband and me.
Now, there could potentially be one exception to this point: “My spouse has had debt collection issues in the past and so we don’t want to tie our accounts together for fear of both of our assets now being available to creditors.” This is obviously a sticky and complicated scenario, but it does happen. My suggestion would be to still open an account that you TREAT as a joint account, but is really in the name of the non-vulnerable spouse. THEN you can have the vulnerable spouse be an authorized user on the account. That way, same rules apply, but you’re not risking that account being open to creditors. Check with your bank to be sure that it’s not technically a joint account and that this is the best option for you both.
4. Do A Monthly Budget. Together.
Now, I will say that in our marriage, John is the primary decision maker and “keeper of the finances.” He pays our bills and does all of that crap that makes my head hurt. I am in the know on everything, whether I understand it or not. I am not the one gifted with numbers, my husband is, so I gladly let him take care of our money management. But, we still sit down together, every month, and we look at our budget and see what needs to be adjusted, what expenses we need to prepare for that month, etc.
We agree, together, what the rules are going to be at the beginning of the month, and then we hold each other accountable in following the rules throughout the month. Obviously being disciplined and sticking to the rules is tough for some people, but the accountability of working together can be helpful.
By doing this together at the beginning of the month, you can get the frustrations, discussions, and the debates out of the way. Then, come to an agreement, come up with any compromise that may be required, and then, for the rest of the month, you don’t have to deal with ongoing strife.
And remember: “Children do what feels good, adults devise a plan and stick to it.” -Dave Ramsey.
Want to see how we do our budget? You can see EXACTLY how we set our budget AND get a sample spreadsheet here.
5. Personal Spending Money in Marriage
So you want that individual bank account so you can buy what you want. I get it. In general, as a couple, want to talk about any MAJOR purchase decisions together. The way that you personally define “major” will depend on your income, but it should be something you agree on. Now, if I want to run to the store and get a cookie dough twister for myself, I’m gonna do that and it’s probably okay if I don’t ask John ahead of time. BUT, if I want to buy that $150 Kate Spade clutch I’ve had my eye on for months, I AM going to talk to him about it before I make that purchase.
Now, John and I both have built into our joint budget two line items called “JOHN CASH” and “MOLLY CASH.” Each month, depending on our other budget restrictions, bills, expenses etc. we budget in CASH money for ourselves. It can range anywhere from $50 to sometimes even $200 each depending. THIS is the category where we can spend our money how we want. If John wants to go to Home Depot and buy a tool or supplies for a project, he can do that with this money. If I want to go shopping and get myself some new shoes, I can do that with this money.
This is also the category in which we buy presents for each other at Christmas or other holidays so we don’t ruin the surprise.
We both believe it’s REALLY important to have these line items built into your joint budget because it does still allow you some wiggle room, financial freedom, and the ability to make minor purchases without a “budget committee meeting.”
Now, it may be tempting if one spouse makes a lot more, then they may think that they should get more spending money. WRONG. WRONG-O. NOPE. NAH. NO. If you’re confused about this, refer back to point number ONE. My income + my spouse’s income = OUR income.
Also, if there is a larger purchase that you REALLY REALLY want, but you just can’t seem to agree on it, this is the category and the opportunity where you can save up each month to eventually buy it on your own.
6. Mortgage, Utilities, and Other Bills
When we got married, I moved into the home John already owned and the mortgage was in his name. There was really no option or even reason at the time to “add me” to the mortgage. Obviously we pay the mortgage together, but the actual house is in John’s name only.
However, this past November we decided to refinance. When we went to go through to steps, we realized we had two options: 1) to keep the loan and mortgage in John’s name only or 2) refinance together and have it be in both our names.
We opted for option ONE because although my credit score is not terrible anymore, my credit score is still low enough that it would have hurt us more than my income helped us. So, the rate to refinance was better if we just kept it in John’s name. So, that’s what we did. Now, I still had to sign and initial like 20,192,129 pieces of paper because of NC state law. But, in the end, it’s all in John’s name. The paperwork just says I’m married to him.
With utilities, those are all still in John’s name as well, again, because it’s just easier that way and not necessary to add me or change them. But, we both pay them.
The only thing we did combine was our cell phones which we went on a family plan because it was cheaper and in that case, John actually came onto my plan. This made sense for us at the time.
This is all the more boring, nitty gritty stuff, but it’s important to at least address and get out there. A lot of these things are really going to be up to you as a couple.
Okay, that’s all the points I have for today. And I know that this is not EVERY point that needs to be hit. I also know that, for a lot of people these points could potentially raise more questions than I answered, and that is not only okay, but also GREAT.
Please, ask your questions! Again, leave them in the comments or you can e-mail them. I will do the best that I can to answer them each in a future post (keeping you totally anonymous).
Thanks for reading!