Managing Money In Couplehood

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CBS/The Early Show
Whether you're married, engaged, or living together, a healthy money management plan will help keep your finances and relationship in great shape, says Saturday Early Show Personal Finance Adviser Ray Martin. That includes evaluating your spending habits and savings styles on a regular basis.

Here are three possible ways to manage your money:

Traditional: One Joint Account
Pooling both partners' money into one account. This is the best way to have a clear view of what is coming in and going out in financial terms. But the challenges will include keeping organized and maintaining control of the checkbook. Wars have begun over less.

Modern: Separate Accounts
Each partner maintains his or her own accounts and responsibility for the bills is divided between them. This provides the ultimate in control for those who are set in their ways or just so financially incompatible that this is the only way to coexist financially. There will be double the number of checks to write and records to keep. Unless your bank offers a relationship deal, you may also get dinged for extra fees. It will also add extra work to paying for any joint obligations, such as mortgages and loans.

The Combo: Keep Separate And Establish Joint
This is a combination of the traditional and the modern. Think of this as sharing a bathroom, but having separate sinks. Each partner deposits his or her pay into a separate account and then transfers an agreed amount to the joint account and pays the household bills from this.

Getting married does not necessarily require taking ownership of each other's assets and responsibility for each other's debts. In fact, the debt one partner brings into the relationship (such as student loans and credit card bills) is not your responsibility.

There are three things that you should absolutely discuss before you get hitched:

  1. Reveal financial history. Has either person filed for bankruptcy or had credit problems? It's a good idea to get this out in the open and resolve how to deal with it, because it will come out later when you apply for a joint loan for a car or a home. Also, ask if there are tax problems such as non-filing of returns, tax liens or nonpayment of taxes owed. These problems could cause an unsuspecting partner grief when they file a joint tax return.
  2. Discuss health insurance and life insurance. If both of you have employer-provided coverage, select the coverage that best meets both of your medical needs. Consider how much life insurance benefits are needed to support a partner who is financially dependant on the other.
  3. Draft wills. Designate beneficiaries. If there will be property owned separately and especially if you are expecting children, get a will or update an existing one to reflect your wishes. Also, update the beneficiary designations on retirement accounts, employer provided benefits and life insurance policies. These desgnations will supercede whatever is stated in your will, so do not let this go forgotten. It's also a good idea to get or update a living will and health care agent to clarify your intentions for final care and the persons to make these decisions.
Finances is a difficult topic for a lot of couples to discuss, no matter how long they have been together.

What should they ask each other? Martin suggests:

  • Ask what's working and what's not working.
  • Discuss your money habits and how they have changed.
  • Ask what systems you want to adopt to handle your joined financial responsibilities.
  • Continue to re-evaluate your money management system, money habits, and any changes in your situation.
Poor money management can erode a couple's finances and relationship. But financial housekeeping is the key to a cohesive financial household.

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