Early in a marriage, couples who haven’t already invested time in learning about each others’ money values and priorities may face unexpected conflict. Even people going into a marriage for the second time can have difficulty aligning priorities and values when it comes to money. It's easy to see why many people avoid the topic of money in the beginning stages of a relationship—it's not a romantic subject.
The alternative to discussing financial matters together is one partner in the couple balances the books while the other person has little to no involvement. Prior to marriage, discuss how you want to approach finances as a pair. If you find that your partner does not share your values or priorities for saving, negotiating before joining your lives (and finances) is easier before marriage than it is after.
Track Income and Expenses to Create a Budget Together
Create a spreadsheet to track income and expenses for at least one month to see how your spending compares with local and national norms. Set aside funds for large purchases or expenses that need to be saved for. Use credit as a second choice to meet expenses, and only for long-term purchases that will be amortized over a number of years, like a home or a car. (For more from this author, see: The Cookie Jar Method of Budgeting.)
Personal finance ratios can be useful in determining how much of your monthly income should be allocated for housing-related expenses. PITI, which is an acronym for principal, interest, taxes and insurance, is the sum of the monthly loan service (principal and interest), the monthly property tax payment, homeowners insurance premium, and, when applicable, mortgage insurance premium and homeowners' association fee.
The PITI ratio is created by dividing this sum by your monthly income. Lenders use the PITI ratio to determine whether you can qualify for a loan. You can use the score to also assess your relative liquidity as housing costs are usually a couple’s top expense, followed by health care and transportation.
Don’t forget to count savings toward retirement as a current goal. Use the power of compounding to grow your money over a long time horizon together.
Review and Improve Credit Scores
You should each pull a credit score for yourselves and determine how to improve it if either of you has a score is less than 700. The lower your scores, the more you will likely pay in interest. Managing debt is a lifelong pursuit. Bank card issuers will usually provide one free credit report annually, so ask for one and review the data for accuracy. You can also use a website like Credit Karma to get a free score. (For more from this author, see: How Your Credit Can Affect Home Ownership.)
Set Financial Goals
You and your spouse should set personal financial goals together. Spend one Saturday or Sunday morning a month reviewing where you are with these. You may have goals for combined household savings, debt reduction, interest reduction on outstanding loans, and investments. You should also plan your spending so even if you are using separate accounts, the amounts spent on essentials are shared rather than covered by just one partner.
In the event one partner is not working, the the working spouse should agree to value the investment of time spent on services to the household or for care of children. In many states, salaried income is judged as community property. Discussions of income allocation should not be dominated by the highest earner. (For related reading, see: Managing Money as a Couple.)
Saving and Investing
Putting aside money for a long term goal means delaying gratification for what could be months or years. It is important to determine how well you are moving toward your goal. Reward yourselves with a special night or treat, even if a small one, for meeting your goals on a quarterly or annual basis.
Household savings rates in the U.S. are often low. Don’t let yourselves fall into this trap. Create a rainy day fund from the get-go and try to earmark at least 10% to 20% of salaried income for savings and investment.
Review Tax Filing Strategy
Don’t forget that as a couple you will be paying taxes according to a new filing category. Review with a tax professional tax how you wish to change withholding at work to cover any anticipated liability for tax before the next tax filing deadline. Money-related issues for couples is stressful enough; facing a tax shortfall is doubly stressful, especially in the first years of a marriage.
Use Online Resources
Check out websites offering free calculators for saving toward a goal, like Bankrate. Compare your cost of living numbers against those standard for your community using the free website Numbeo. If you are thinking about relocating to save on housing costs, compare cities using a website like City data to find median spending on commonly budgeted categories like housing, food, gas, utilities and eating out.
Work Together as a Team
As a married couple you aren't expected to do everything together, but planning and managing your finances is one thing you should work on as a team.
(For more from this author, see: Things to Consider Before Retiring Abroad.)