Splitting Finances When Married: Strategies for a Successful Financial Plan

Introduction

Splitting finances when married is an important step in creating a successful financial plan. It involves making decisions on how money will be shared between spouses and how it will be managed. Understanding what splitting finances means and the various ways to approach it can help couples create a plan that works for them.

Definition of “Splitting Finances”

Splitting finances when married simply means deciding how money will be shared, saved, and spent by both spouses. It is important to have a plan for how the couple will manage their finances in order to reach their goals. This could include setting up a joint checking account, allocating funds for different purposes, and tracking spending.

Overview of Benefits of Joint Finances

According to a study conducted by U.S. Bank, 74 percent of couples who combine their finances report feeling better off financially than couples who keep their finances separate. Combining finances can provide numerous benefits, including increased transparency, easier budgeting, improved communication, and more efficient tax filing.

Budgeting System that Works for Both Spouses

Creating a budgeting system that works for both spouses is essential for successful financial planning. Here are some tips for couples to consider when establishing a budget:

Establishing a Budget

The first step in creating a budget is to identify the couple’s income sources, such as salaries, investments, rental income, etc. Then, they should list out their fixed expenses, such as rent or mortgage payments, car payments, insurance, etc. Finally, they should include flexible expenses, such as groceries, entertainment, travel, etc., and determine how much of their income they want to allocate to each category.

Allocating Funds

Once the budget has been established, couples should decide how much of their income they want to allocate to savings, investments, and other goals. This can help them stay on track with their financial goals and ensure that their money is being used in the most effective way.

Tracking Spending

It’s also important for couples to track their spending so that they can stay on top of their budget. Tracking spending can help couples identify areas where they may be overspending and make adjustments accordingly. There are numerous tools available to help couples track their spending, such as budgeting apps, spreadsheets, and even paper and pencil.

Pros and Cons of Separate Bank Accounts

Another option for couples is to keep separate bank accounts. Here are some of the advantages and disadvantages of this approach:

Advantages of Separate Accounts

One advantage of keeping separate bank accounts is that it can provide each spouse with a sense of financial independence. This can be especially beneficial for couples who want to maintain some autonomy in their relationship. Additionally, if one spouse has a bad credit score, having separate accounts can help protect the other spouse from any negative consequences.

Disadvantages of Separate Accounts

On the other hand, there are some drawbacks to keeping separate bank accounts. For example, it can be difficult to track spending and budget when each spouse is managing their own accounts. Additionally, it can be harder to save for long-term goals when the money is not combined.

Evaluating the Usefulness of Financial Apps

Financial apps can be a great tool for helping couples manage their finances. Here are some of the most popular financial apps, as well as their pros and cons:

Popular Financial Apps

Mint is one of the most popular financial apps, and it allows users to track their spending, set budgets, and monitor their credit score. Other popular apps include Clarity Money, which helps users identify areas where they can save money, and YNAB (You Need a Budget), which helps users create a budget and stick to it.

Pros and Cons of Using Financial Apps

Using financial apps can be helpful for couples because it can make it easier to track spending and budget. Additionally, many of these apps offer features that can help couples save money and reach their financial goals. However, it is important to remember that using these apps does not guarantee success, and couples should use caution when relying on them.

Strategies for Handling Unexpected Expenses

Unexpected expenses are a fact of life, and couples should have a plan for dealing with them. Here are some strategies for handling unexpected expenses:

Saving for Emergencies

Couples should aim to save at least three to six months’ worth of living expenses in case of emergencies. This money should be kept in an easily accessible account, such as a high-yield savings account.

Dealing with Debts

If couples find themselves in debt due to unexpected expenses, they should take steps to pay off the debt as quickly as possible. This could include consolidating debts, negotiating lower interest rates, and working with a credit counselor.

Conclusion

Splitting finances when married is an important step in creating a successful financial plan. Couples should consider their options carefully and create a plan that works for both of them. This could include budgeting, allocating funds for different purposes, and using financial apps to help them stay on track. Additionally, couples should be prepared for unexpected expenses by saving for emergencies and dealing with debts responsibly.

Summary of Key Points

In summary, splitting finances when married is an important step in creating a successful financial plan. Couples should consider their options carefully and create a budgeting system that works for both of them. They should also evaluate the usefulness of financial apps and have a plan for dealing with unexpected expenses.

Final Thoughts on Splitting Finances

Splitting finances when married can be a daunting task, but it doesn’t have to be. With careful planning and open communication, couples can create a plan that works for them and set them up for financial success.