When you said, "I do," you probably didn't mean, "I do know my spouse's money habits and have a plan to merge them successfully with mine so we can meet our shared financial goals as a team!" That's OK. Who did? It's not very romantic, but one of the best things you can do for your relationship, as well as your credit health, is to get smart about your (now mutual) finances. Here are answers to five of the most common questions about merging finances:
Q: We never talked at all about money or credit use before we got married. Now, it's been eight months, and we still haven't. It seems like such a difficult topic to broach. How should we get started talking about our financial goals?
A: It's never too late to get started on the right financial planning path as a couple. Even if you went into marriage blinded by love, now's the perfect time to spell out your money concerns and draft a financial plan for the future. Of course, it's ideal for couples to know each other's credit history and money foibles before getting married so they know what to expect, says Erik Larson, President and Founder of NextAdvisor.com. But having the desire to do it now bodes well for your future credit health and marital harmony. In fact, a recent study by the Federal Reserve showed that high credit scores are strongly correlated with successful long-term relationships.
Open communication, and lots of it, has helped the finances of Liz Schnabolk and her husband, Randy. "Having completely combined finances has definitely been an adjustment, mostly because it's different to have someone else know every single detail of what you spend money on," admits Schnabolk, 29, of New York City. "We have an unspoken agreement that we will run any large purchases by each other. It's not so much to ask permission, but more about just making sure we're both on the same page."
When having that first money conversation, it can also help to focus on the future, not the past. Many people link money to their self-worth, which is why it can be such a hot-button topic for couples. Don't judge what your partner may have done in his or her past financial life; instead, start the conversation by discussing where you want to be in the future.
Q: Should we have joint bank accounts?
A: "Based on statistics, it's probably good to have a joint bill-paying checking account into which you each deposit whatever amounts you decide are equitable, then have separate accounts for each of you," says Kathleen Grace, CFP, CIMA, and author of Prince Not So Charming. That said, this decision should be largely based on your comfort level. Some couples say mixing their money in shared accounts feels right; just as many insist keeping every cent separate works perfectly for them. Talk out your preferences.
Q: Can my spouse's spotty credit report affect mine?
A: Yes and no. First, the no: Each person has his or her own credit score and report. When you get married, many aspects of your life merge, but your scores and reports will always be separate. Any accounts your spouse has in his or her name alone affect only his or her credit report, and vice versa.
But any missed payments on joint accounts – whether credit cards, mortgages, or utilities – will negatively affect both scores. Additionally, if you live in a community property state (California is one), certain debts accumulated in one spouse's name during the marriage are legally owed by both spouses.
So each of you should review your own credit report regularly. It is quite possible for one spouse to have a considerably higher or lower score than the other. In that case, it can be tempting for one spouse to "coast" on the other's stellar score, abdicating all credit applications to him or her. But make sure you establish credit in your own name, says Laura Adams, author of Money Girl's Smart Moves to Grow Rich and host of the Money Girl Podcast. Nobody likes to think about such a possibility, of course, but, "Down the line, you could be a single person on your own, and may not have enough credit to qualify for big purchases," she says.
Q: I'm a saver, but my husband...not so much. How can we stop squabbling over spending?
A: "It's not so much that money, or lack of it, is the problem. It's that you think differently about money. Money can mean very different things for people who love each other very much," notes Patrice C. Washington, Founder and CEO of Seek Wisdom Find Wealth, a personal finance training and development company. Understanding that "it's how they were raised, not an attack on you as a person" is key, says Washington. Keep emotions out of it. Easier said than done, right? But Washington has a tip: "Don't have any conversation at all about money if either of you, let alone both, is upset." Instead, she suggests setting a regular "money date," where you check in with your spouse about your finances once every three months. If something comes up that upsets you, write it down to discuss when you've set aside the time to tackle your finances – together.
Q: What are some financial planning tips we can use to start working towards common financial goals?
A: "Having similar financial goals is the only way you can track your success year after year," says Washington. In order to identify common goals, take a step back and look at your big financial planning picture together, preferably with a certified financial planner who can help you draw up a plan to get to where you want to be, suggests Grace. "Couples being on the same page is paramount. Relationships are not easy to begin with, [then] throw in kids, in-laws, let alone discord about financial goals, and it's like a recipe for disaster."
Sean McQuay, NerdWallet's credit card expert, experienced budgeting success with his wife once they acknowledged and accepted the intractable parts of their personalities and lifestyles. "We had a down-to-the-dime budget that was much too constricting," he says. "We left no money for eating out, for example. We ended up eating out anyway. We took over a year to realize a budget needs to reflect who we are and what we want to do. If not, you end up spending the money anyway, and that's worse."
Eric Holtje and his wife, Stephanie, both 30, credit their "very deliberate" approach to spending as a couple for putting them in a position to start a family. The Richmond, Va., couple is expecting their first child. "We do not make any rash decisions, especially those that would have long-term ramifications, with regards to spending. We talk at length before making any decisions. That approach for the past five years has prepared us for the baby," says Eric.
To find more suggestions on how to make marital money merging go smoothly, check out How to Discuss Credit History and Financial Plans with Your Partner.