How my Husband and I Approach our FinancesFeatured
As a career woman, I am often asked questions about my career journey, team building, leadership skills, and marketing. What I don’t get asked a lot but am very passionate about, is couples’ finances.I met my husband seven years ago through my business school roommate (yes, setups through friends totally work!). Fast forward three years later, he proposed and we were engaged.If you haven’t heard this enough by now, you know that money issues are one of the top reasons couples divorce. I had heard this so many times that by the time I was engaged, I was determined to make sure that was never a reason for us. For those of you who are dating, engaged, in a domestic partnership, or married, I want to share some personal tips on how my husband and I went through the process of managing our finances together:Tip #1: Have an open dialogue about both of your current financial situationsIf there’s anything you should take away from this, this is it. Before you say I do, make sure you are both aware of each other’s financial wellbeing. Allocate a couple of hours where you both sit down and lay it out all without judgment. Disclose your income, loans (student loans, car loans, mortgage payments), credit card debt, monthly spending habit, and retirement accounts. Then, address any concerns or questions you each may have. Is there a reason you spend more than you make? Why are there missed payments? Are you individually aware of how much you spend per month or is this the first time you’ve even looked at it? This conversation could be uncomfortable for both of you and it could lead to many disagreements and fights, but it is an important one to have and it will lead to marital bliss down the line.Tip #2: Discuss how finances should be managed togetherLiving together before marriage helped my husband and I to learn of each other’s spending habits (along with living habits – like realizing I’m the messy one). But it wasn’t until after we were married that we felt more comfortable “butting in” on each other’s financial business. Prior to marriage, we had separate bank accounts and split joint expenses – I paid for my student loans and he bought whatever shoes he wanted. There was never an argument as long as we were paying our half of the bills.After we sat down and disclosed our financials, we started to discuss different options of how to manage our finances: do we join our income, keep our income separate, or do a combination of both? After weighing the pros and cons, including a discussion on prenups, we went with a combination. We chose to have our income in a joint account but each month, we would transfer a small allowance to each of our individual accounts. Because our spending habits weren’t insanely different, we felt comfortable integrating our finances together. However, we wanted some sort of personal allowance so that when we had spending disagreements, we were able to spend it through our personal accounts. For example, if my husband wanted to buy an expensive pair of shoes that I may not agree with or if he wanted to buy me a birthday gift, he could pay for it from his personal account without checking for approval or ruining the surprise.Obviously, every couple is different and there isn’t an option that’s right. Most of my friends do it a different way and what’s important is for you and your partner to agree on how to best handle your finances in advance. At the end of the day, you both need to agree on a solution where neither of you feel pressured or controlled by one other but at the same time, can hold each other accountable so finances doesn’t become the burden of your relationship.Tip #3: Develop a monthly budget with your income and expenses in mindWhether married or not, joint finances or not, I highly recommend a budgeting exercise for yourself or with your significant other. As a couple, we use Mint to monitor our monthly spend and Personal Capital to track our combined net worth. We linked our accounts to both tools and started monitoring our monthly spend by category. The results were eye opening – as a New Yorker, low and behold, the amount we spend on dining out, rent, and travel was absurd. After having three months of joint data in Mint, we then did two exercises together:In a spreadsheet, we entered all of our fixed expenses (rent, insurance, loans, electricity and phone bills) to understand what expenses to expect on a regular basis and assess if we could cut these down. For example, we joined our phone plan to save on bills.Using a budgeting app, we took a look at how much we typically spent per category (dining out, travel, shopping, health, charitable donations, etc), and tried to set a budget that was realistic but not restraining. From this exercise, we cut our eating out budget with a goal of eating out no more than twice a week. But we then increased our groceries budget a bit because we had to compensate for eating out less and cooking more.(As a starting point for budgeting, I’d suggest using the 50/30/20 rule: https://blog.mint.com/saving/how-to-budget/.)Another thing my husband and I do that our friends joke about is when we first joined our accounts, we would have monthly finance meetings where we block off an hour a month on our calendars. Every Saturday on the first of the month, we would sit down and take a look at our accounts. We would use this time to chat through which categories we are overspending so that we were aware of what habits needed to improve going into the next month. This was such a healthy exercise for our marriage – it helped us to develop great spending habits on top of building our communication skills with each other.Tip #4: Save and invest for early retirementThe exciting part of personal finances is planning for early retirement. The idea of working not because you are struggling to make ends meet sounded fantastic.Once your monthly spend is in a good spot, start to maximize all your retirement accounts – 401K, IRA, HSA, etc. On top of that, you should start to build a healthy three to six months’ emergency fund. And as your cash inflows grow, you and your partner can start to invest additional income in taxable accounts, college 529s, and more.Now that my husband and I are saving and investing, talking about finances is actually really fun for us. We talk about the stocks we want to buy, we imagine an early retirement where we can travel comfortably, we dream of buying a place we can call home, and much more. Tip #5: Reassess your goals once a year and educate yourself through booksThree years into our marriage and a lot of hard work on our finances, my husband and I no longer have our formal monthly finances meetings (although we still have a placeholder on our calendars). Overtime, it’s been included in our conversations during our walks together and we are fully aware of how we spend our money.However, at the end of each year, we do sit down and readjust our monthly budget for the following year because of life changes – new jobs, rent increases, health issues, etc. We also look through our fixed and variable expenses to find ways to continually cut down on it: do we still need all the monthly subscriptions we have? Finally, we look at our combined net worth and assess if we are on track to retire at 55.Separately, my husband and I both read quite a bit of personal finance and investing books throughout the years (him more than me now). Some easy-reading books that really jump started my passion with personal finance that I would recommend to this group are the following:• The Money Book for the Young, Fabulous & Broke by Suze Orman• The Millionaire Next Door by Dr. Thomas Stanley• The White Coat Investor by Dr. James DahleNo marriage is perfect, and my husband and I continue to argue about finances every once in a while. But a transparent conversation early on in our relationship really helped us to feel comfortable addressing concerns and differences as they arise. If this post has intrigued you, I’d love to hear how other couples manage their finances or answer any questions you may have!