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When it comes to personal finance habits, each person has their own strategies, spending habits, and savings tools. If you decide to combine finances with a partner or spouse, several new conversations need to happen in order to ensure each person is contributing fairly to the budget and working towards common long-term goals.
Managing money as a couple is an important step in your relationship. With these tips in mind, you can be certain each step taken is in the right direction.
Sitting down and talking about your past and current financial experiences is an important step to understanding how you handle your income and expenses. Perhaps one of you is an expert saver and rarely splurges, while the other has had trouble with short-term cash flow and has had to research how do online installment loans work. Knowing where you stand will help you take the necessary steps forward to merging your finances. Before you make any significant decisions, talk it out. Create a safe space to discuss your spending habits and any trepidations you may have so that you can make healthy financial decisions moving forward.
When it comes to combining finances, there is a benefit to the customizable options at your disposal. Partners have the freedom to decide which method will work in their favor. In some cases, the proportional method is ideal — this means each person contributes to monthly expenses based on their earnings. In other instances, splitting everything down the middle feels like the fairest solution. You and your partner get to decide how you prefer to contribute to your household comfortably.
Disclosing existing debt is a crucial part of the financial foundation you’re building together. If you’re entering your new household with outstanding payments, talking openly about them helps you to identify the appropriate course of action — whether you choose to individually pick up additional employment, sell assets, or handle the situation together and cut back on expenses.
While it’s important to save and invest as much as you can, it doesn’t mean you can’t enjoy the money you’re earning. If feasible, allow for two small discretionary funds, one for each person in the home, with a set amount of monthly funds to spend at their leisure. This eliminates the need to hide purchases which can plunge couples into debt.
You may not want to think about worst-case scenarios from the get-go, but it’s one of the smartest decisions you can make as a couple. After you’ve established your monthly budget, take the total of your fixed expenses and triple it — that should be the ideal amount you’ll aim to save for emergencies.
An emergency fund will act as a cushion for any unexpected expenses, whether it’s an unforeseen medical emergency, an urgent repair in your home, or several what-if scenarios. This gives you peace of mind and will allow you to allocate the rest of your budget accordingly, knowing that you’ve taken steps to protect yourselves should something happen to your partner, yourself, or in your home.