Regardless of where you are in your relationship with a significant other, merging finances and sharing responsibility for paying bills can be a major adjustment. For those recently engaged and saving for a wedding, to newlyweds who just purchased a home, to those who have simply decided to take their relationship to the next level, finding financial compatibility among all the other changes can be a daunting task. At the same time, following a couple key rules of thumb can make all the difference for a successful transition. Below are some tips for navigating potential pitfalls, avoiding unwanted stress and creating a positive experience within a shared budget.
1 – Identify your individual style. Something that often gets overlooked is realizing that not everyone shares your philosophy when it comes to saving or paying bills. Do you pay only minimum payments? Do you pay immediately or at the last minute? The reality is a lot of our personal financial habits were learned from our parents…and not everything passed on was good. Before you start sharing bill paying responsibility or saving for the future with a loved one, it’s important to understand what is important to you and be able to communicate that to your partner.
2 – Open a joint account for joint debts. This means, if you are moving in together, open a new checking account for all obligations you agree to share. A good recommendation is not to attempt to merge things radically in the beginning. Your best bet is to start small with rent, a cable bill, or savings account while still keeping your own accounts for other debts like a car payment or credit cards.
When you are ready to open a new joint account with your partner, there are some things you can do to make the transition of sharing and communicating easier without leaving someone feeling vulnerable or that they lost their privacy. A simple suggestion is to agree to a systematic approach for contributing funds. Set up a direct deposit from payroll for a predetermined amount which will make it easy to track and ensure that money is there when it’s time to make the payments.
3 – Paying bills is a participation sport. Although in time one partner will likely take the lead, it’s important to establish a routine of paying bills together. Sharing the financial responsibility is only part of the equation, which makes it critical to make time together to review and pay bills. Take time to review your plan and discuss what’s working well. Talk about future goals and share ideas on how to save money. Creating a fun and stress free environment will ensure positive communication and help you feel connected to your partner on financial-related topics.
4 – One size does not fit all. Although you will likely have input from parents, siblings, and friends telling you what to do, remember that there is no exact formula that works for everyone. For example, you may earn more money, or maybe you have more debts, or maybe your partner has more money saved. Acknowledging the differences in your situations will make it easier to come up with a game plan that works best. The most important thing to realize is what is fair and appropriate for your personal situations. Be sure that you are both contributing and value what the other brings to the equation.
5 – Free isn’t always free. Whether you decide for a checking or a savings account, be sure you are aware if there are any hidden costs. Some banks have maintenance fees if you don’t carry balances above certain levels which can be a challenge when you start a new account. Cancel paper statements and opt out of an ATM card. Depending on the bank and the account type, these fees can total hundreds of dollars per year. Considering that you can make online payments and the main goal is to simply integrate budgets, cut out all the additional features and ensure that the potential account is truly at no cost to you.
6 – New and improved. Ultimately starting something new requires trust and compromise. With plenty of open and honest communication, opening a joint account on a new, shared purchase can bring couples closer together since they will each be contributing towards a shared goal.
Our team of loan officers at the Kelly Mortgage Team at Envoy Mortgage is here to answer your questions and help you navigate the home buying process if you are considering purchasing a home. Our team of loan officers serves clients in Pennsylvania, Delaware, and New Jersey. For more information please contact our office at 610-355-1801 or email Dan Kelly at email@example.com.