How Married Couples Should Approach Co-Managing Wealth

Merging finances is about communication—and knowing how your spouse’s financial life affects you.

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Whether you’re engaged, a newlywed, or planning your golden wedding anniversary, it’s never too early (or too late) to improve the way you and your spouse manage your financial relationship.

Disagreements over money are one of the most common causes of marital strife, studies show, but honest communication and smart planning can help avoid serious conflicts.1

Along with communication, it is important to understand key technical aspects of joint money management. There are entire books devoted to these topics, but here are some suggestions to get you pointed in the direction of marital money bliss.

Communication Comes First

First things first for new couples: You and your spouse will need to agree on how to pay the bills and save for future goals, such as a new home or retirement. You also want to address the separate debts or obligations that you bring to the relationship. And, each spouse should know what will happen, at least financially, in the event of the disability or death of the other.

One way to address this challenge is to take the “yours, mine, ours” approach, also known as the three-pot approach. To preserve some financial autonomy, you and your spouse might each maintain credit cards and checking accounts in your own names to cover personal expenses or debt repayments. However, the bulk of your monthly income would go into a joint account to cover your monthly bills and shared expenses.

You may also want to open joint savings accounts for important long-term goals, such as a down payment on a house. Ideally, both you and your spouse would contribute a proportionate share of your earnings to these accounts.

Your Credit History and Joint Borrowing

Saving for a new home is one thing—applying for the mortgage is another. When you apply for a line of credit together, lenders will look at both of your credit histories. If either of you has any issues‚ such as a high debt-to-income ratio or a poor credit rating, that will affect your ability to qualify for a loan together. Likewise, if you share a line of credit together (whether a mortgage or credit card), you are both equally responsible for any debts you incur.

However, each partner still maintains his or her own credit history, which is tied to his or her Social Security number. That means that even if your spouse’s history and spending affects your joint borrowing, your personal credit history is still something you need to protect on your own.

Tackle Retirement Planning As a Team

If you both have 401(k) plans, see if it’s possible for both of you to make the maximum contribution. For married couples, even if one member of the family earns far less than the other, he or she can still contribute as much as the full amount of earned income up to the $18,000 annual limit. That might mean some artful budgeting throughout the year to get there. Remember, in 2016 each member of a married couple can contribute up to $18,000. If you are 50 or older, you can make an additional catch up contribution of $6,000, bringing the total to $24,000 for each spouse.

Also, when making asset allocation decisions, don’t overlook how your spouse’s retirement savings are invested—particularly with regard to your ages and retirement dates. This type of “silo investing” could lead to an asset allocation that’s either too aggressive or too conservative for your combined situation. Or you could end up with a retirement portfolio that’s overly concentrated in one or both of your employer’s company stock.

Love and Taxes

While many couples find it’s advantageous to file their federal taxes as Married Filing Jointly, there are some instances where it makes more sense to file separately. If you’re married and filing together, you complete one shared tax return and jointly take responsibility for the income reported and taxes owed. However, filing separately may be beneficial if you need to separate your tax liability from your spouse’s, or if one spouse has a significant itemized deduction.

Review Your Disability Insurance Coverage

Good health and the ability to earn a living are things many of us take for granted. But what happens if a long-term illness or serious injury prevents you or your spouse from going to work? While your employer may provide short-term and long-term disability insurance, in many cases, these group policies pay only 50% to 60% of your salary and do not replace commission or bonus income.

Therefore, you may want to consider purchasing separate individual long-term disability insurance policies. These policies can provide the cash you need to cover your essential living and medical expenses and may also pay for training or other assistance that will allow you to return to work.

Adequate Life Insurance

Here again, your employer may provide some life insurance coverage, but it is rarely enough to protect your spouse or your children the way you would like to. In addition, this coverage is not permanent, which means that you would be uninsured if you were to leave (or lose) your job. Therefore, you and your spouse may both want to consider buying a separate term life or whole life insurance policy. Even if one spouse does not work outside the home, a modest term life insurance policy on that person would cover the cost of full-time childcare and housekeeping, should that become necessary.

Keep Your Will and Beneficiary Forms Updated

Beneficiary designation forms—not your will—determine who inherits your retirement savings and life insurance benefits. So, make sure your beneficiary forms are up to date. If you have children, you may also want to name them—or trusts in their behalf—as contingent beneficiaries of your retirement accounts. This would ensure your retirement savings pass to them if something were to happen to both you and your spouse.

Your will governs what happens to your non-retirement assets, so if you haven’t created a will, commit to getting it done as soon as possible. This is especially critical if you have children. You can find templates for simple wills online, or you can hire an attorney if you’re not comfortable doing this yourself.


The content on this post is not intended to provide tax, legal, accounting, financial, or professional advice, and readers are advised to seek out qualified professionals that provide advice on these issues for specific client circumstances.