Handling finances as a single person can be difficult. Add another adult with income into the mix, and the difficulty can expand. Frequently, a couple will have both a spender and a saver. This is why couples need to have a strategy when it comes to handling household finances.
Here are some personal finance tips that couples should consider so that their life together will go smoothly.
Decide Who Handles the Money
Who is going to pay the bills? This is an important consideration when it comes to household finances. Will the same person handle all bills? Will each individual handle the bills that he or she incurs?
Paying a bill twice would be bad, but failing to pay a bill in the first place could lead to even worse ramifications down the road. This is why it’s important to have a clear delineation of who is going to pay which bills.
Decide Where the Money Goes
Married folks will usually be more likely to join finances altogether, but some couples who have not yet tied the knot may want to join finances as well. At a minimum, there should be a pot of money that will go to pay joint bills. This would likely include a mortgage or rent, utility bills, and food.
There should also be money left in the budget for individual entertainment. If one member of the relationship wants to shop and the other wants to go to a game, there should be money available to do so as long as all necessary bills get paid each month.
This could come about via a joint checking account for all money, or it could come about through having a joint account only for shared bills while maintaining individual accounts for everything else.
Pay Off Debt
If you happen to have debt, it’s important to pay it off. Otherwise, it will be difficult to meet other financial goals. Debt can be somewhat complicated based upon its origin.
If one person in the relationship brings more debt to the table, they might feel obligated to take care of it on their own. On the other hand, some couples might decide to tackle the debt together.
Setting up a strategy to pay off the debt is important. One great option is the debt snowball strategy advocated by Dave Ramsey.
Set Shared Goals
Couples should have goals that are common to both individuals. Moving toward shared goals can provide a common experience and build a stronger bond. These goals might involve saving for a down payment on a home or stashing money for a nice vacation.
Regardless, these goals should be discussed and both members of the relationship should agree to them.
Save Money (Together and Separately)
Emergencies will happen, and so will retirement. This is why it’s important to save a bit with each paycheck. Ideally both spouses or partners will have access to retirement savings vehicles. Even if they don’t, it’s possible to save with an IRA in most instances.
Setting a set percentage of income is a good way to build up savings over time. This percentage should be similar for each person’s income. Personal finance expert David Bach recommends saving around 15 percent of your income to retire at an upper-middle-class level.
While it might be hard at first, building up to this level over time could be the perfect way to make traveling together in retirement a reality.
Make sure to keep your own savings, as well. You may want to make your own big purchases, and you don’t want personal issues to affect your finances. While joint savings are great for joint pursuits (like buying a home, retiring, or taking a vacation together),
Setting up a budget and working toward financial goals is as important for couples as it is for individuals. When two people are involved in making decisions, there are bound to be periodic disagreements. This is where effective communication is key. Those who are able to navigate joint finances are more likely to succeed over the long term.