Your finances - Marriage changes things drastically
Published September 15th, 2006 in Budget Tags: budget, financial planning, Marriage.If you're new here, you may want to subscribe to my RSS feed. Thanks for visiting!
Getting married changes everything - including your finances and the way that you construct your budget. Several basic decisions must be made before or shortly after the wedding takes place. I’m not talking about a prenuptial agreement, either (we’ll talk about them some other time), but the very basic stuff like setting up joint accounts, frameworks for how money will be spent, and level of trust surrounding money decisions. This article by Dina Harbour, a professional credit counselor, should provide some helpful tips on what to do with your finances should you be thinking about getting married or have recently gotten married. Heck, it may even help us grizzled old veterans that have been married for more than 10 years!
Money and Marriage
By Dina Harbour
When I’m counseling newlywed couples, I get this question a lot, “how should we combine our money to pay for household and other miscellaneous expenses?” It’s a very important and excellent question. My first response is however, “do you have a budget in place?” Most of the time the answer is no, but that is why they’re meeting with me in the first place. Once a budget is completed we can answer this question, because you must understand how much it cost to live in your lifestyle comfortably on a monthly basis.
So lets say both husband and wife work a full-time job. The wife brings in a net income/take home salary (after taxes) of $1500 a month; the husband brings home $1700. Their monthly household expenses are $2000.00. This includes mortgage/rent, food, clothing, automobile expenses etc. If we combine their incomes together, their total is $3200 (1500 + 1700). Their monthly budgeted expenses is $2000, so we will divide this amount by their combines incomes 2000/3200 which will give us 62.5% or rounded up 63%. Now, we can conclude that they both should contribute 63% of their monthly income to their household expense account. Now the wife will put $945 into their joint account and the husband will contribute $1071 into that same account. As for their left over portion, they can agree to place an equal percentage in a joint savings or in a separate account for personal expenses or do both. I recommend both! They can create a vacation account, a gift account etc. But a couple should definitely have both a joint checking as well as a joint savings account for unknown expenses and emergencies.
Most of my clients are happy with this arrangement because it allows them to operate as a unit, yet leave room for their individual spending habits. I often suggest however that purchases over an agreed amount be discussed say $500 or $1,000 but that’s just a suggestion. I also suggest that the couple attempt to live below their means in case of an unexpected emergency or loss of income and if a couple plans to start a family they should both contribute an increased amount into their household fund while they are both working. This will decrease the stress of being overwhelmed by bills that are not of necessity. Save up cash for big-ticket items and avoid abusing credit cards (a common occurrence among newlywed couples). This system should work for all income levels.
©Copyright(c) 2004
Dina Harbour, Founder
Wanted Debt Or Alive
A Debt and Money Management Consulting Service.
Please visit my website at:
www.wanteddebtoralive.org
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budget financial planning Marriage
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