FINANCES IN MARRIAGE: SHARED OR SEPARATE?
Although money is one of the most discussed social topics, we tend to avoid it in a relationship with our partner. Many couples not only do not know the income of their partner before marriage, but they also do not know how much and what their partners spend money on. Personal finance experts from PARTNERS GROUP SK warn: healthy finances in a household reflect also a health of marriage. Money should be spoken about openly at home.
KNOW WHAT YOU SPEND ON
According to experts, marriage is, in this context, similar to business – if the owner does not know what his/her income and expenditures are, it is only a matter of time when he/she will have to close his/her business. The foundation of healthy marital finances is therefore a detailed overview of financial flows in a household. Firstly, the spouses should write down common revenues and expenditures. Then it is necessary to set goals regarding what to buy or arrange in the near future. The overview will show them how much money they have available and how much they will need in order to ensure flawless operation of a household.
ADVICE: In order to draw up a summary of expenditures and revenues we can use a simple table detailing expenditures on housing, car, insurances, investments, loans as well as variable expenditures related to meals, culture, sport, entertainment, travel, dressing or gifts. Also do not forget to break down revenues in the particular month. There are many applications through which you can track and compare how you use money. However, you can also use plain paper or a spreadsheet and fill it with all expenditures so that you get a good overview of financial flows in your household.
SET CLEAR RULES
Financial situation of partners should be clear before marriage already. Although they say that marriage should endure both good and worse times, it is good to know what partners enter into and what financial habits they bring into a common household. A chaos in common finances impends in particular if no clear rules are set and partners refuse to take responsibility for wrong financial decisions. Therefore, it is necessary to assign individual roles and set partners’ expectations. According to experts, an assurance that a partner may at any time inquire about accounts and that we are willing to disclose mutually our accounts, is often sufficient.
ADVICE: Healthy finances are reflected by the rule of optimal financial proportions of 10:20:30:40, according to which we should allocate monthly income in a common household. It breaks down as follows – use at least 10 % of a monthly income to create an emergency fund and 20 % to create medium-term assets, i.e. for retirement. Less than 30 % of income should be spent on debts (including a mortgage) and loans while optimally 40 % of income should be used for common consumption. If you think you have no money left to create an emergency fund or assets, try to check consumption once again. Even though expenditures such as rent, loans or mobile flat rates are fixed, you can always work with expenditures on meals, culture, entertainment, cosmetics or dressing. For example, having a lunch or dinner in a restaurant is much more expensive than a home-made meal.
A JOINT ACCOUNT IS MORE TRANSPARENT
Trust is a foundation of each and every functioning relationship. Experts agree that it is okay if partners decide to have separate accounts, but with a possibility of checking each other’s accounts. There are couples who have separate accounts and at the same time they do not share common expenditures. Each of them is responsible for their own money and they do not want to share it, which often causes suspicion and distrust of partners. Attention should be paid in particular to variable expenditures on meals, dressing, culture, coffee etc. With separate accounts partners can lose control. Therefore, they will get the most accurate overview with a joint account. Among other advantages, a joint account means lower bank fees and accurate overview of account transactions, which also implies better control by partners.
ADVICE: If you decide to have separate accounts, open also one joint – secondary account for depositing a pre-agreed amount on a monthly basis and create an emergency fund. It is very important that these funds are separated from your individual account and do not “allure” you. In your secondary account you should have an emergency fund for unexpected situations, extraordinary expenditures and common goals. If you receive a bonus at work, deposit it to this secondary account as well.
COMMON GOALS = COMMON MONEY
Marriage involves short-term as well as long-term common goals. It does not matter, whether it concerns household facilities, purchase of an appliance or a vacation. Common goals should be funded by common money, represented by an emergency fund. Waiting to save what remains from the salary does not work in most cases. Money is usually spent elsewhere and at the end of the month nothing remains there to be saved. Therefore, it is necessary to put aside money to an emergency fund immediately upon receipt of a salary to your bank account. The optimal amount of an emergency fund is six times the monthly salary. Partners can cover eventual difficulties or adverse situations such as loss of employment, malfunctioning appliance or repair of a car by such amount. In addition, emergency fund creates a sense of security, benefiting the relationship.
ADVICE: In order to save, open a secondary account, which is usually provided for free by most banks, to your current account or consult a professional on what financial products would be the most effective for you in short-term, medium-term and long-term saving.
