Marriage and finances is a critical mix that you have to work out with your spouse. It is difficult to make it work simply because of the differences that you both have. At least, in terms of earning and how you plan on spending it. But just as you are marrying two different people in one household, you need to make sure that your finances are also going to end up as a perfect combination.
But of course, when it comes to money, love hardly comes into play. Even two of the most caring individuals can be driven apart by the wrong marriage of finances. An article on The Wall Street Journal mentioned how a money is a major issue to drive a couple apart.
On July 24, 2012, Dr. Terri Orbuch, a psychologist and research professor of the University of Michigan’s Institute for Social Research, published the results of observing couples over many years. Starting in 1986, Dr. Orbuch revealed that after 25 years, 46% of the 373 couples being observed is already divorced. In this study, the divorced couples mentioned that the number 1 conflict that drove their marriages apart involved their finances. 49% of the couples who divorced mentioned that they had so many fights about money that it affected their perception on their next marriage and finances. They felt that it will be the same problem over again.
Three ways you can manage your finances in marriage
It is true that money in marriage can be a difficult subject to breach but it is necessary. Sometimes, the fear that couples have about the possibility of a fight keeps them from discussing financial matters with their significant other. But we all know how this will only make things worse.
Another study from the Kansas State University in July of 2013 discussed the link between financial arguments and a lower satisfaction in the relationship. The study had the following revelations:
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Money arguments are the top divorce predictor.
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Arguments about money are usually more intense and more difficult to get over.
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As the arguments increase in frequency, the satisfaction in the relationship decreases.
It is evident that from the very beginning, the couple should set the rules and discuss how their finances will be managed. It should not be decided by one alone. It has to be a consensus between the two – regardless of the income being contributed by both.
Your marriage and finances can be combined harmoniously and how you do it will depend on both of your personalities. There is no single formula to make it work. But if you talk about it, you can reach an agreement.
Assuming that the household expenses amount to $3,5000 and the husband earns $3,000 and the wife earns $2,000, here are three options in splitting household expenses.
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Dividing the household costs in proportion with the income being earned by each. If the husband earns $3,000 and the wife $2,000, the proportion will be 60% and 40% respectively. For a household that spends $3,500, the husband will contribute $2,100 and the wife will pay for the remaining $1,400.
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Dividing the household costs equally, regardless of the income. The other option is to just split the costs equally. In this case, both the husband and wife will pay $1,750. The husband will obviously have more money to spend as he wishes.
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Combining accounts completely and spending money from that joint account. Both paychecks will be directly deposited in their account and any expense will be taken from that. Each of the spouse can opt to receive an allowance for personal expenses or carry a credit or debit card.
All three are effective but make sure that both of you will agree on the course you will take in managing your finances. Never let the higher income spouse decide on the finances – that will cause resentment between you two in the long run.
Financial issues that can harm your marriage
We are discussing all of this because your marriage and finances can ruin each other. You need to keep your finances from destroying your marriage. Given that, we will share with you various financial issues that you need to tread carefully when you are discussing it with your spouse.
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Who pays for what? The first problem is obviously who will pay for what. Ideally, this is a topic that you want to discuss prior to your marriage. It has to be clear what you need to expect with each other. Best to clear this out before you really commit with reach other.
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Debt. Another major problem is debt. In some cases, couples bring debt with them. Student debt and credit card debt are among the most common. You need to divulge these with your spouse and if they are willing to help you along with your financial difficulties, then you know that you have a keeper.
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Spender vs saver. There are two types of people in this world: the spender and the saver. In some cases, a marriage ends up with both. If you are in one of these relationships, you need to set the rules between the two of you. If anything, dividing the household costs should be clear and you have to make a commitment to always be honest when it comes to credit.
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Who makes the financial decision. It is never in the rule book that the one making the most income should spearhead the financial decisions. It should always be between the two of you.
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Family. This involves both the children and the extended family. One may want to give their kids what is needed and the other may want to be more strict. The key is to discuss and compromise. Also, if one from the extended family needs help, never decide to help without the other’s permission.
You want to try and talk these over prior to your marriage. You need to settle your differences and air out your concerns before any of you commits to one another. According to a poll question raised by the NFCC (National Foundation for Credit Counseling), 45% of their respondents know that discussing finances is necessary but still feels that it will be an awkward conversation. Overall, 68% of the respondents feel negative about talking financial matters with their fiance.
While it may be awkward, it is an important part of your marriage. So you have to make sure that you open the lines of communication and be as understanding and respectful as possible when you are discussing money matters.
Tips to grow your wealth as a couple
Both your marriage and finances will benefit from communication. But even more than that, frugality can take your finances to the next level.
At one point in your marriage, one of you will have to decide to stay at home when you start having children. This is inevitable – unless you are rich enough to afford a stay at home nanny. But if not, sooner of later, you will need to get used to living on one income.
So here’s a proposal for you: why not start living on one income right now? We are not saying that one of you quit immediately. You can continue earning dual incomes but you will use frugality to make you rich even before the kids start arriving.
In our example above, the couple can live on the salary of the husband alone. A few adjustments on their spending can help them keep their expenses down to $3,000 instead of $3,500. The $2,000 that the wife is earning can be put into their savings – completely. By the time the couple celebrates their first year anniversary, they will have $24,000 in the bank. They can choose to dip into this to celebrate but it should not be extravagant. Let’s say they wait another year before they start having children. By their second year anniversary, they have $48,000 in the bank – not including interest.
Having that much money in the bank will ease off the tension between couples because they know that they are financially secure. When one decides to quit their job to take care of the children, the adjustment will not be as difficult as it will be.