Relationships require sacrifice, patience, and a whole lot of teamwork. You must apply those things to all aspects of your life, but especially finances. Managing money takes a lot of work and a lot of factors are in play, but tackling it together helps ease the burden. Today we’re talking about working as a team to manage your finances.
Let’s Talk About: Managing Finances As A Team
Regardless of your financial situation you and your partner will need to manage your money together. That means that it doesn’t matter who makes more or if you’re a single income household. You still need to manage finances fairly, as a team.
This really boils down to three important phases; your financial past, present, and future. Of course this depends on what stage of the relationship you are in. There’s no need to bring money up on a first date. But, after moving in together and certainly before getting married, there’s a few key financial items you need to talk through.
You absolutely must discuss the financial past that you’re bringing into the relationship. Before you can manage money in the present or plan for the future you have to lay it all on the table. This means talking about everyone’s least favorite subjects: debt and credit.
When you combine finances you don’t automatically absorb the other person’s debt. But after getting married you are legally responsible for each other’s debts. Whether it’s student loans, credit card debt, or just a financial mistake, be honest about it. If your partner is the one with debt be compassionate and if you have debt, hope they do the same.
After disclosing each other’s debts, you can start to plan together. This brings us to credit. If one of you has really bad credit you will need to repair it, and if one has really clean credit you need to keep it that way. When making joint purchases both of your credit scores will be taken into account and a bad one will affect a lenders decision making.
Now that you’ve discussed all of the skeletons in your closets, you can start managing the day to day. Of course the first step is budgeting. Lay out your incomes, joint and separate expenses, and financial goals (which we’ll get to in a minute!). Be sure to take into account debt repayment and credit repair.
There’s several different ways that a couple can choose to manage a budget. Maybe one partner will cover everything, maybe you’ll split everything 50/50 or based on income, or maybe you’ll each cover your individual expenses and split joint ones.
But the truth is that it doesn’t matter how you split it. It matters that both partners are involved in creating the budget, deciding how to divide it, and both feel that it was done fairly. You should make sure that both of you discuss your financial priorities and budget for them. This is a give and take process and it takes time to get it perfect.
Managing money together also means communicating about individual financial goals. Discuss your dreams of owning a home, going back to school, switching careers, or travelling the world. Talk about the big picture and how you’ll get there together.
Sometimes your goals will align and sometimes they won’t. You should both prioritize the most important things and prepare to make some sacrifices. Just make sure you strategize about saving and investing for your dreams.
Emergency and retirement funds are also a must. It’s impossible to plan for everything, no matter how good your budget is and you never know when you’ll find yourselves down on your luck. Try and be as prepared as possible so you can weather the storm together.