Comprehensive Financial Planning for Couples

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Financial compatibility is as important as mental, emotional, and physical compatibility. Even the happiest of couples find their relationship tested when it comes to money. Also, when you're with someone for the long haul, it can be tricky to figure out your financial future together. Should you share a bank account? Should you combine finances after marriage? What kind of retirement accounts will you have? Questions like these concern many couples.

While the responsibilities and obligations of marriage are many, few are as important as managing money together – efficiently and effectively. And to succeed financially as a couple, it is crucial to think about managing money as a team instead of as two individuals. Also, you'll need to consider several factors together, like differing levels of risk, debt, family obligations, children, and more which can impact your relationship with your partner. If you need guidance on how you can pool your finances to better manage your money and secure your financial future, reach out to a professional financial advisor who can advise you on the same.

Why is financial planning important for couples?

Money issues are a common denominator when it comes to straining relationships. Lack of transparency with respect to finances can cause friction between a couple. Hence, it is important for couples to consider financial planning if they want to be on the same page as their partner.

One of the key components of a financial plan is to make sure that both partners are aware of each other’s personal financial situations, such as income, savings, debt, future career opportunities, and more. Financial planning also involves making sure that both partners understand their fiscal responsibilities towards each other. Lastly, financial planning isn't just about budgeting; it's also about learning how to communicate effectively with your partner while showing each other mutual respect and appreciation. That said, it takes much more than simply discussing money to reach your combined goals successfully as a couple.

What important considerations should couples make before starting with financial planning?

1. Should you combine your finances after marriage?

While this is a common question that puts most couples in doubt, there isn't a right answer to this. The decision when and if to combine finances after getting married is a personal one. You need to consider several factors like your commonalities, present and future expectations when it comes to financial goals, a desire for financial security and stability, as well as whether you trust your partner when it comes to finances or not.

When deciding whether or not to combine finances, consider what each of you brings to the table – Do you both have similar financial goals? Do you share similar values and views on money?

There are certain benefits of combining your finances such as trust building, easy budgeting, and transparency;  however, it also poses some challenges. You may feel a lack of control over your income or experience guilt while spending on your desires. Some couples also choose not to combine finances at all. For instance, if your partner has a poor credit history, is in debt, or has conflicting financial habits, it may be wise not to combine your finances. In the end, remember, this is an important decision that should be made after a careful consideration of both your current financial situations keeping your future goals in mind.

2. How do I combine our finances after marriage?

Different couples adopt different approaches to combining finances. While some pool in all the money and use it as required, others split expenses. Some couples also share expenses by contributing to a joint account and maintaining separate savings accounts. There can be numerous such combinations, depending on your circumstances. Once you have decided on a way to combine finances, you can set financial goals and decide on a timeline to achieve them.

To determine if combining finances after marriage is the right call for you, consider the pros and cons and consult with a financial advisor before making any decisions.

How can couples comprehensively plan their finances?

1. Assess your combined net worth as a couple

It is a misconception that net-worth analysis is only for the wealthy. A couple's net worth (sum of all assets they hold as a couple minus their liabilities) can be a good starting point for devising a robust financial plan. Putting a precise number on your combined assets and debt can help determine your financial health. Once all assets and liabilities are calculated, your financial planner can advise you on the way forward.

2. Determine your financial goals as a couple

A couple’s financial goals will direct their financial planning. Couples need to have clear financial goals, both short and long-term. This could include buying a new house, funding your children’s education, planning for retirement, and more. For instance, assume, as a couple, you plan to travel extensively after retirement. Now, this may require you to save more. This, in turn, will influence your retirement planning. Therefore, it's paramount that, as a couple, you determine your future financial goals together.

3. Be honest with each other regarding your income and expenditure

While discussing finances with your partner, do not just focus on income and expenses. Discuss any debt that you may have such as student loans, a trust, or a desire to buy a home. Both of you need to understand each other’s views with respect to money and build towards a secure financial future. Having this discussion will also help you avoid any surprises later in the relationship.

4. Secure your finances by adopting suitable saving strategies

Spending every penny without proper planning can be detrimental to your financial health and future. Setting aside a fixed percentage of every paycheck can be a great way to manage your savings and expenses. Both partners can discuss and decide on a percentage. This strategy may work well for both salaried and self-employed individuals.

However, some couples also adopt unique saving strategies based on their understanding and comfort. Some of these include spending one partner's paycheck and saving the other's, deciding a fixed amount per partner to put into a joint account, dividing expenses and savings, and more. Whatever path you choose as a couple, it is important to keep financial security a priority always.

5. Set up an emergency fund for a rainy day

The most important financial planning rule is to always plan for a rainy day. Sudden medical expenses, business losses, job loss, and other emergencies often come unannounced. A couple's financial planning must account for such circumstances. This could include saving 3x or 6x of your annual income as an emergency fund, investing in low-risk assets, and more. Remember, an emergency can derail your finances faster than you may anticipate. Hence, accounting for emergencies while planning is always a wise move.

6. Invest in insurance

Insurance plans are arguably the most important investment you can make as a couple. Discuss health, life, term, long-term care and other insurance plans with your partner. You may also appoint your partner as a beneficiary on your insurance plan in case of a medical emergency or their demise. Keep a contingency plan handy to avoid any financial nightmares in the future. If you have children, insurance will help protect their future against unexpected circumstances.

7. Devise your investment strategy as a couple

Coming up with an investing strategy can be tricky for couples. You will have to contend with questions such as: How to build an investment portfolio with your partner? Should you choose passive investing or target aggressive trading? Should you opt for high-risk assets or play safe? Also, not every couple may have the same risk capacity or similar goals. For instance, a couple whose child would be moving to university in the next two years may not have the same risk appetite as a couple just starting their financial journey.

Thus, it may be wise to consult an investment advisor who specializes in investments and reach out to them for guidance. They will keep your risk tolerance, goals, and current financial situation in mind before devising a suitable investment plan.

8. Keep track of your spending patterns as a couple

One of the biggest challenges couples face when managing their finances is not knowing where their money is going. That's why tracking spending patterns is important so that you know where you are spending your money and how you can better spend and invest it. This can be done in several ways, such as using a tracking app or maintaining a note of all your monthly purchases and expenses.

9. Plan your taxes and adopt tax saving strategies

Irrespective of how robust your saving, investment, and spending strategies are, improper tax planning can slow down your financial progress. Thus, it is important to formulate tax-saving strategies that best suit your situation as a couple. These can include retirement plans and accounts, home-buying strategies, charitable donations, and more.

A pressing tax issue that married couples encounter is when they end up in different tax brackets. A couple with varying income levels could end up paying vastly different taxes when filing their returns. Another issue could be that of self-employment. If you are self-employed, you may not have access to the same benefits as employees, such as employer matches on 401(k) plans and matching retirement contributions.

Thus, it is critical that your tax strategies as a couple are charted out well in advance to make provision for any above-mentioned situations. Not to mention, it may also help you take advantage of every possible tax deduction and credit.

10. Manage your will and estate

Estate planning for couples can be overwhelming. One of the most important things to consider is who will have control over the couple's assets and property when they can no longer make their own decisions. Ensure that you have expressed your wishes early on and your estate plan clearly states your heirs and the division of your assets among your beneficiaries. A properly planned will and estate plan can ensure that your wishes are followed and that your loved ones are looked after your demise.

To summarize

Financial planning for couples is essential for a happy, stable, and successful relationship. Comprehensive financial planning can help couples secure their financial future, plan for retirement and emergencies both medical and financial, as well as pick the right investments. It also helps them to build assets and plan for big expenses. Lastly, financial planning can also help you better spend your money and where it can be best used.

Use the free advisor match tool to match with an experienced and certified financial advisor who will be able to guide you effectively on financial planning for both you and your spouse and how best to combine your finances. Give us basic details about yourself, and the match service will connect you with 1-3 professional financial fiduciaries that may be suited to help you.

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The blog articles on this website are provided for general educational and informational purposes only, and no content included is intended to be used as financial or legal advice.
A professional financial advisor should be consulted prior to making any investment decisions. Each person's financial situation is unique, and your advisor would be able to provide you with the financial information and advice related to your financial situation.