Questions You Need To Ask Your Spouse About Money
A couple weeks ago I published the article How Different Couples Eliminate the Stress of Money. In that article, I tried to drive home the fact that you must communicate with your partner, especially about money, if your relationship is going to last for the long haul. I didn’t go to in depth on the actual questions you should be asking each other. Luckily Logan Roehm, who was one of the contributors for that article has outlined some of the key questions you need to ask. Without further adieu, I’ll let Logan take it away.
Getting engaged is awesome. Now you and your future spouse are all blissed out thinking about your wedding-the cake, the dress, the music-it’s an exciting time. But remember, a wedding is a day, the marriage is what lasts a lifetime, or at least, it’s supposed to. According to a Debt.com survey, 59% of Americans say that financial issues played a role in their divorce and 62% of those marriages lasted less than 10 years. Not really that lifetime you were thinking of. But here is good news, with just a few simple strategies before marriage and early on, you can prepare yourselves for a lifetime together.
I’m going to focus on marriage instead of moving in together for two reasons. First, not all couples will live together before marriage, but most will live together after marriage or at least consider themselves to be one household. Second, living together doesn’t require you to combine financial information, not necessarily bank accounts, but your financial history, an important legal piece to marriage.
There are two major options, either can work. You can continue to have your own separate accounts, or you can combine your finances, which requires a few more conversations. We’ll start with things you need to consider even if you’ll be keeping separate accounts, then move into additional conversations you should have if combining accounts. In the end, I will share my personal financial setup.
Separate accounts can work in any situation, but it tends to be easier if you both make similar salaries because it feels less like one person is getting the short end of the stick. So, if you are thinking you want to have separate accounts, you still need to consider the following:
What kind of debt is each person bringing?
Debt is critical because that old saying “what’s mine is yours” really applies. This can be the form of credit card debt, home loan/car debt, student loan debt, etc. Know what your partner is bringing and devise strategies for how you are going to pay it off together.
What is their credit score?
If you are planning to make any major purchases together, like a house or car, knowing your partner’s credit score is important because getting joint loans can be more difficult if one of you is rocking a bad credit score. Also, credit scores can be a financial clue to whether your partner pays bills on time, spends within their means, and takes care of financial obligations. Being married to a financially irresponsible person can wreck your credit.
How will the bills get paid AND who will pay them?
Especially if you’re going to retain separate accounts, you need to know who pays what bills and where the money comes from. Will, you each take some bills? Does one person pay all bills? Or will one person give money to the other and if so, how much? If you will have joint accounts, who makes sure the bills get paid on time?
How do major purchases work?
This one only applies if you are sharing accounts because if your accounts are joined, it likely comes out of your joint account. Things will come up that cost a lot of money: hospital bills (maybe even for the birth of your joint children), major home repair, furniture purchases, and vacations are some examples. You need to decide what you will do to cover these expenses.
What will our savings look like?
Shelby recommends that you have at least 6 months of living expenses saved up and an emergency fund because, in life, things will go wrong. You need to determine whose name the accounts will be in and how contributions to those accounts are going to occur. Also, if they are in one person’s name, you need to be clear about what those accounts can and cannot be used for. If you are sharing a savings account, what percent of household income goes into that?
Joining accounts adds an extra layer. Again, it can work in any situation, but my husband and I specifically chose this route because there is a huge salary disparity between us: I’m a teacher, he is a computer engineer (I’ll give you three guesses who makes more and the first two don’t count!). We didn’t want to have to figure out how to split the bills fairly because it would have been confusing, but we had to have more conversations such as:
Do we have any separate accounts?
Will all your accounts be combined or will each of you have one account without the other person? If you are going to have some separate money, you’ll need to consider what is covered by joint accounts and what is covered by individual accounts. You also need to talk about how money goes into those accounts so that no one is “hiding” money from the other person.
Is each person a spender or a saver?
This can make or break joint account marriages. If you are a saver and your partner a spender, you are both going to get frustrated if you don’t have this conversation. Discuss how much you need to save each month or put towards regular bills and expenses and how much is open for spending. Discuss how much each person can spend safely. Trying to drag your partner to the other extreme is not going to work so find a compromise.
What can each person spend without discussion?
Your partner shouldn’t have to call every time they want a $5 sandwich, however, if they are going to buy $100 of new clothes, that might need to be a conversation. Everyone has a limit-mutually discuss it and discuss why that number is important for financial security, to keep tabs on the account spending, etc. *Note: You should not make this apply to traditional purchases like groceries, gas, etc. Also, things that are going to be for both people, like a furniture purchase, should be discussed separately.
Will there be a joint credit card?
Just because you join accounts doesn’t mean you have to join credit cards. However, if you are, you need to discuss what can go on the joint credit card. This may just be food and gas, or it could be anything you guys spend together or anything anyone spends at all. You also need to discuss if you will still have any separate credit cards.
How receptive is each person to the others needs/wants?
If you are constantly denying the other person’s needs or wants that require spending, that is going to get rough fast. No one wants to be put in a stranglehold over money. That means sometimes each person needs to okay the $50 shoes, the expensive dinner, or the extra round of golf to make both parties happy.
Our Personal Setup
I told you at the beginning I would share my financial setup with my husband-so here it is. We have a joint checking where all our bills and expenses get paid. It also pays for our joint credit card (Ally cashback rewards through our bank) which can be used for things that we do together (movies, concert tickets) or buy together (groceries, furniture, vacations) all of these being discussed. 70% of our joint income goes to this account and anything left over at month’s end becomes savings.
We have a joint savings and 10% of our household income goes to this account. We use it only for emergencies or if a large expense hits that we couldn’t regularly afford. An example of this is my grad school tuition. Then we each have separate checking accounts that receive 10% of our joint income. This is our “play money”-I can’t tell him what to do with his, he can’t tell me what to do with mine. We don’t have to run any purchases from these accounts by each other. In addition, we each retain one separate credit card for personal purchases. I have a Discover for cash back and he has a Delta card for building miles toward travel. We discuss our finances biweekly to make sure we are on target and won’t go over our budget.
This is not a complete list of questions but should be enough to get you started. The simple fact is this: talk about money. You are going to share everything with this person. The least you can do is talk about how you will afford life together. Even when you’ve tied the knot, keep talking. Finances are always changing, and you can either learn to weather the storm together or find yourselves sinking in the debt ocean. Remember, if you’re going to the chapel, you also need to be going to the bank.