When two people get married, they often get caught up in the excitement of it all – being in love, planning the wedding and honeymoon, and everything else that goes with newlywed bliss. What they often don’t think about are less romantic notions, like their finances. A couple’s failure to plan for their financial future can be costly; money is the leading cause of stress in relationships, especially for couples who are just starting out. Fortunately, as stressful as money issues can be, they are easy to avoid, too. Here are four great tips for newlyweds to combine their finances and keep stress levels low, as they begin their separate lives together.
Make a Financial Plan Together
Communication is key in any relationship, and that extends to your finances as well. Couples that are just starting out should sit down and discuss their finances. They should determine all of their income, savings, and investments, and the debts they are bringing into the relationship. They should discuss their respective financial goals, and make a budget that they both agree to. They should also discuss how they plan to pay bills and reconcile their budgets each month. After establishing a plan, couples should continue to convene, perhaps once a month when paying bills, to review their budgets and goals and ensure they are staying on track. Transparency and communication on finances alone can considerably reduce the stress money often brings into new relationships, so keep talking.
Consolidate Credit Cards
As you make your financial plan, you should also take stock of the number of credit cards you have. Determine which ones have the best APR and terms, then work to pay off the balances of the others and discard them. This will help you eliminate interest debt and other credit fees which hurt your bottom line and make it easier to account for all of your credit card activity. One word of caution, however: canceling your credit cards can sometimes have a negative effect on your credit rating; one way to avoid this is to attempt to raise the credit limit on the card or cards you keep, to offset the canceled cards.
Get a Joint Bank Account
Establishing a joint account – ideally one that allows you to pool checking, savings and investment activities – will further help you streamline and track your finances, and make pursuing savings and investment goals that much easier. Having a joint account will also make it easy to review and reconcile your monthly bills as well, particularly if you opt to use some sort of bill paying service. A joint checking account, where you both are drawing money simultaneously to pay expenses, requires a planned budget and good communication. However, a shared account can also bolster the trust you and your partner have in one another and can help eliminate distrust that can fester when married people keep their finances separate.
Establish an Emergency Fund
Another great cause of financial stress in new marriages comes from dealing with unexpected expenses due to unforeseen events. An HVAC system going down in the middle of a July heat wave, or a sudden cut in hours at one partner’s work, can become an unwelcome focus of your life in a heartbeat. To avoid stress from unforeseen financial emergencies, newlyweds should start an emergency fund as soon as they are married. If you determined how much money you need to budget for your monthly expenses as discussed earlier, a good emergency fund planning factor is banking enough money to cover your expenses for three months with no income. Once that emergency fund is securely established, any unexpected event that arises will be much more manageable, and stress levels can be kept to a minimum.