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As you start or continue your lives together, you’ll want a full accounting of a few things you now share—that is, beyond the gifts from your wedding registry. Your finances need to be a top priority as you venture into your shared lives.
More than two fifths of LGBTQ+ respondents in a 2018 survey from credit reporting agency Experian indicated that they find it troublesome to maintain adequate savings. And more than one third reported they have bad spending habits that they aim to change. So, the early days of your official marriage are ideal to discuss some big topics. By doing so, you can lower your collective stress and increase the likelihood of achieving your financial goals together.
Budgeting: Where Does Our Money Go?
Your budget is the engine that makes your finances run smoothly and with fewer surprises. Since about one third of respondents in the 2019 LGBTQ Money Matters Survey said they don’t follow a monthly budget, this must-have financial tool should be at the top of your list of “new things the newlyweds should discuss.”
When you take the time to establish a budget, you’re laying all your money cards on the table. From monthly expenses to income, there’s nothing to hide.
To get started, make a list of all your individual and shared financial obligations each month. Then add your salaries. When you subtract your expenses from your income, you’ll have a reliable picture of what’s left each month—not to mention places you can potentially find some savings. You can even add a budgeting app to the mix and find ways to bring kids into the conversation about budgeting if you’re blending families.
Bank Accounts: To Share or Not To Share?
There’s no hard and fast rule that says a married couple has to have a joint bank account. You should, however, have a conversation about how you’ll bank, so you can explore the pros and cons of combined and separate banking.
Having joint accounts comes with a few benefits for newlyweds. First, you’re starting on even footing. “Our money” may sound more appealing than “my money” and “your money.” For couples who want that sense of shared ownership with the household finances, a joint checking account could be the way to go.
You may decide that you’d prefer to keep your individual bank accounts and settle up on expenses at month’s end. No harm, no foul in this case. You’ll likely want to designate one person to be in charge of your family’s accounting and be responsible for totaling up who owes what and to whom from the month’s spending.
There’s also a middle-of-the-road solution: Have a joint bank account and personal accounts as well. In this case, you can consider using a joint checking account to pay for the shared household bills. You can set up your direct deposits each payday to put a certain percentage of your paycheck into your joint account and the remainder into your personal account. This can be a useful strategy for couples where one person tends to spend more than the other.
Savings: How Much and for What?
You and your spouse have goals that go beyond making it to your first anniversary (you can do it). The ticket to achieving your financial goals is a solid plan for savings—and that’s a plan you need to make together.
As you open up about your finances to one another, think about all the dreams you share that have price tags attached. From buying a home to starting a family and your shared vision for your retirement years, the early days of your marriage are a prime time to have the fun conversations about the life you envision. Who knew money conversations could be fun, right?
Once you know what your shared vision looks like, you’ll be able to figure out how much you’ll need in the bank to bring those dreams to life. Here are some strategies to help you save your way for life’s goals, big and small:
- Emergency fund. According to the LGBTQ Money Matters Survey, 40% of LGBTQ+ people don’t maintain an emergency fund, while 49% do. Many experts recommend having three to six months of expenses saved, so you may need to build up your stash gradually. Since you could need to access this money quickly, you may want to consider a money market account from an online bank that offers debit card access. You’ll earn interest and won’t have to abide by banking hours when you need to tap your funds.
- Short-term goals. If you have goals coming up in the next 12 months, you don’t want to lock that money up. Place your short-term savings in accounts like high-yield savings accounts and CDs with short maturities to boost your savings while keeping those funds secure. Different savings vehicles make sense for short-term vs. long-term goals. You can expect to earn lower yields on short-term savings.
- Longer-term goals. For goals that are a year or more in the future, you may want to consider setting up separate savings accounts. By focusing on each of your savings goals—whether that’s the down payment on a home, a major vacation or setting aside money to start a business—you’ll be better able to track your progress and keep your motivation high.
- Saving for retirement. Two fifths of respondents in the LGBTQ Money Matters Survey said they don’t currently save for retirement. Although retirement may seem years, or even decades, away, it’s important to max out your retirement savings opportunities, whether that’s an employer-sponsored 401(k) or your individual retirement account (IRA). If you don’t yet have an IRA, now could be an excellent time to open one.
- Children’s education. For educational goals, consider starting a 529 plan to fund your children’s college education. The sooner you begin saving for major goals, the longer you’ll benefit from the magic of compound interest.
If you choose to invest any of your savings for longer-term goals where more risk is involved, always be sure to ask, “How much am I willing to lose?” before choosing an investment or financial product.
Credit Cards: What Are the Rules?
Your newlywed credit card conversation has the potential to be a nail-biter, but it doesn’t have to be. Here’s the key to smooth sailing: Accept that wherever you are is where you are.
For couples starting a marriage with a debt-free clean slate, you’re miles ahead of some other newlyweds. You’ll just want to have a conversation about the credit cards you each have and how those cards relate to your goals.
For example, if you have big travel plans in your future, you may want to consolidate spending on a single credit card that offers reward miles on your favorite airline. For couples who love the thrill of paying less for purchases, look for a card that allows you to earn cash back rewards that can be used as statement credits. You may also be able to save money by switching to credit cards with no annual fees. Adding your spouse as an authorized user can help you both save and earn more.
If you’re coming into the marriage with credit card debt and are concerned about the debt you carry, you’re not alone. Of the responses possible in the LGBTQ Money Matters Survey, having existing debt ranked as the top financial concern. Reducing or paying off personal debt ranked as respondents’ second top financial priority, just behind paying all bills on time.
First, you can use your combined credit card power to create a debt payoff strategy. Imagine using your credit cards to pay down your credit cards. Sit down with your spouse and explore any balance transfer offers your existing cards might have. If you find a balance transfer credit card or a balance transfer offer with one of your existing cards, you could retire your credit card debt faster, thus saving money by paying less interest. The money you save could be allocated toward your shared goals, such as buying a house.
If the state of your credit doesn’t make balance transfers an option, have no fear. You can use an accelerated debt payoff strategy like the debt snowball or debt avalanche to reel in your debt and get back on a firm financial footing.
The Money Conversation: When To Have It?
While your honeymoon probably isn’t the time (for most) to have a chat about personal finance, you don’t want to delay the conversation for too long. The sooner you talk about your shared finances, the more at ease you’ll both be. Consider getting creative: Even a topic like budgeting can be made more interesting by planning a budgeting date night with your spouse.
While money in a relationship is rarely smooth sailing across all your years together, a heart-to-heart about money can help you weather the tough times because you know you’re both working toward the same goals.
Cheers to the years ahead, and congratulations on finding one another. Here’s to a lifetime of goals met and dreams fulfilled—together.