Navigating Finances Together: A Guide for Newlyweds and Engaged Couples

Whether you are engaged or have recently married, developing a plan to combine finances with your partner can significantly reduce finance-related stress down the road by promoting transparency and simplicity in your relationship.

According to a 2021 survey conducted by Ramsey Solutions, 41 percent of married couples said that they fight about finances. Additionally, couples that manage their money independently from each other are five times more likely to separate due to money issues. The good news is that as an engaged or recently married couple, you and your partner are in a perfect place to talk about how to handle your money as you begin your life together.

This post does not cover budgeting; it is assumed that the couple is comfortable with their day-to-day spending and is intended to encourage a broader discussion on financial strategy and goals.

Understand Your Current Situation

Before diving into the details of what accounts to open and what will be shared and what will be separate, take a step back and determine where you and your partner stand financially at a high level. Discuss what accounts the two of you already have and how they are funded. Do you have savings accounts, retirement accounts, individual brokerage accounts, or any other assets that your partner should be aware of? What about debt? It is important for both you and your partner to have a clear understanding of each other’s financial standing as you begin your life together so you know what opportunities and challenges may arise down the road. This is especially important in states like Wisconsin, where all assets and liabilities are split 50/50 with your partner once you get married.

Discuss Financial Priorities and Goals

Once you and your partner understand each other’s current financial situation, it’s time to talk about priorities and future goals. Priorities can be viewed as smaller financial commitments that you account for on an ongoing basis. They can be leisure-related, such as setting aside money for travel, or they can be tied into a larger goal like regularly contributing to your retirement accounts. Goals, on the other hand, are focused on the bigger picture. Buying a house, retiring at a certain age, and starting a family down the road are all examples of financial goals. Discussing these priorities and goals gives each partner a clear idea of what is important to you financially, both on an ongoing basis and at the big picture level. It may also reveal any budget-related changes that might be required to fund these goals.

Open New Accounts and Close Unneeded Accounts

After determining your current financial situation, priorities, and goals, you should consider the logistics of you and your partner’s everyday checking and savings accounts. There are many ways to approach this, but we recommend the following:

• Open a joint checking account that is used for shared expenses only. These expenses include your household bills (rent/mortgage, utilities, groceries, etc…) as well as any shared activities that you do with your partner such as sporting events or concerts. If you and your partner’s incomes are similar, this account should be funded evenly between the two of you. However, if one partner earns significantly more than the other, they should consider contributing more to this account. This account can be funded on whatever schedule works best for the two of you, but the most common strategy would be with every paycheck or monthly.
• Keep (or open) separate individual checking/savings accounts that are used for personal purchases. The biggest benefit of this strategy is to provide each partner with a bucket of funds that are available to spend on whatever they’d like without having to draw from a joint account. This can reduce any tension in your relationship that stems from one partner feeling as though the other is spending too much of their money. Keep in mind that it is important to ensure any other accounts are being funded appropriately prior to this “fun money” account. It wouldn’t be fair to yourself or your partner if you were giving yourself more personal spending money but not meeting your joint or retirement contribution obligations.
• Designate one joint savings account that contains your emergency fund. This money should only be accessed in the case of an emergency or when you need a significant amount of cash quickly that your other accounts are unable to cover. The amount that you keep in this account will vary for every couple, but it is important to have enough savings kept separately from all other assets to cover you and your partner in an emergency.

Pro Tip: For any savings accounts that you use, consider opening a high-yield savings account. These accounts are virtually identical to traditional savings accounts but will earn you considerably more interest on the assets held in them. For more on high-yield savings accounts, check out this blog post from last year by my colleague Alicia Vande Ven.

Final Tidbits

Here are a few more points to keep in mind as you work on combining finances with your partner:

• Make sure to update the beneficiaries on retirement plan accounts that may require spouses to be named beneficiary. This includes 401(k), 403(b), and 457 accounts as well as others.
• Consider having the conversations noted above during a “financial date night.” Discussing finances isn’t the most exciting topic in the world for most people, (except for me!), so why not combine it with a nice homemade meal and make a date out of it?
• While you are in the process of opening and closing any accounts with your partner, consider closing any of your “kid” accounts that you have had since you were in high school or earlier. These accounts often have a parent on the account registration as well as more stringent guidelines related to deposits and withdrawals. It’s time to become independent!

Combining finances with your new or soon-to-be spouse can seem daunting at first. After all, finances are a pretty important part of your lives, and you want to make sure you are both on the same page! That is why I suggest taking small steps and having the conversations that I described in this post. Doing so can help ensure that you and your partner begin your new life together on the right note financially.

Evan Waltz is one of the support team and the newest member of Walkner Condon Financial Advisors. He is a Client Service Specialist who works with clients locally in Madison and around the country.

You should always consult a financial, tax, or legal professional familiar about your unique circumstances before making any financial decisions. This material is intended for educational purposes only. Nothing in this material constitutes a solicitation for the sale or purchase of any securities. Any mentioned rates of return are historical or hypothetical in nature and are not a guarantee of future returns. Past performance does not guarantee future performance. Future returns may be lower or higher. Investments involve risk. Investment values will fluctuate with market conditions, and security positions, when sold, may be worth less or more than their original cost.