Maybe you’re getting married, or maybe you’re just planning to take the next step in your relationship and move in together. While your partnership and your plans are unique, one nearly universal recommendation for relationship harmony is that you must talk about your spending, your saving goals and your debts.
Combining money and marriage is rarely simple. In fact, there is a growing field of professionals who offer financial counseling for couples. Here are some financial topics to take on as you get more serious with your partner.
1
Are you going to build joint savings? Traditionally, couples who merge their lives also combine bank accounts, but that isn’t a hard-and-fast rule. Some couples choose to keep their accounts separate to maintain a basic level of independence. Or one person could decide they want to pay down their own debts before merging finances.
While couples can be married and keep separate finances, an upside to combining your accounts is that both of you can access the money and see where it’s all going. Of course, you can also keep a shared account in addition to personal savings. One downside to keeping separate accounts is that if you are married and one person dies, the other may face legal hurdles to accessing the partner’s savings without a will.
2
How much should each of you save? If you earn very different incomes, you might decide to save the same amount—or you might decide to save in proportion to your earnings.
3
What kinds of savings will you have? In addition to saving for goals, like a house or vacation, you should also save for the unexpected: a job loss, a car accident or medical treatments not covered by insurance. Prepare for the unexpected by creating an emergency fund in a liquid form that can be easily accessed. Aim to put away at least three to six months’ worth of expenses in that account. Good options include:
- A money market account is a way to earn interest on your emergency savings. You have regular access to your money and even the ability to write checks from the account.
- A high yield savings account is another way to make sure that your savings earn an above-average interest rate. And though you can’t write checks from it, you do have regular access to your money when you need it for big-ticket expenses.
- A Roth IRA is a retirement account with tax advantages once you reach retirement age, though you can withdraw money you contributed without a penalty before you retire.
4
Will you file your taxes jointly or separately as a married couple? Combining your income when filing jointly may bring lower tax rates. But if one spouse is self-employed or is likely to owe taxes, it might be better to file separately.
5
What’s your plan for retirement? Younger couples who don’t have a lot of extra income to sock away may struggle with deciding to save for kids’ education or for retirement. You’ll need the college fund much sooner. But though retirement may seem very distant, starting retirement savings in your 20s or 30s makes a massive difference over the long term.
With loans, scholarships and other programs, you may not have to pay for all of your child’s education—but you could eventually have to pay for 30 years of retirement. So make sure you and your partner open an IRA; and opt for a 401(k) when your employer offers it, especially if the employer offers a contribution match.
Starting with these considerations, you can begin to take on your finances in marriage—or whichever form of partnership you’re in—to avoid conflict and reach your goals.
Colleen Kane is a freelance writer who has written for CNBC, Fortune, Money and many other publications.