Marriage is hard enough. Throw money into the mix, and it gets harder.
This week we conducted an informal poll on Facebook, asking how married couples should manage money: together, separate, or a little of both. One of our Facebook fans commented, “As long as the bills are paid, you have money set aside, and both spouses can agree on financial decisions, there is no correct or incorrect way to approach this.”
Before you say your vows, decide with your significant other whether you’ll combine your finances, keep them separate, or choose a combination of the two. To help you with that decision, here’s a list of how each can affect your credit, bank accounts, and debt situation.
“What’s mine is mine; what’s yours is yours” – Keep finances separate.
Credit: If you have a higher credit score than your spouse and you never go in together on a auto or other loan, you won’t be dragged down by your spouse’s credit rating. On the other hand, if your score is the lower of the two, you also won’t stand to gain anything. Your credit scores will never come into play together to get a loan, so you’ll have to rely on your own score to get you approved.
Bank accounts: With separate accounts, you won’t have to worry about your significant other checking up on your purchases, and you might avoid some arguments. But it might get tough to decide who will foot a bill each time you go out together.
Debt: Thankfully, you won’t take on any debt that your spouse has accrued. It will be his or her responsibility to pay it off. Conversely, if you’re the one with the debt, your spouse won’t be sharing the load and you’ll keep hacking away at your debt yourself instead of becoming a unified front against paying it off.
“It’s all ours.” – Combine all finances.
Credit: If you bring the higher credit score to the couple, your spouse’s score will hurt your approval rating when you apply for credit together. But if your score is lower, you’ll benefit from your spouse’s higher credit rating and may qualify for loans you couldn’t get by yourself. When it comes to getting a joint credit card, if one spouse makes a late payment, it stands to hurt both partners’ credit scores.
Bank accounts: If your spouse makes more money than you, or if one of you loses a job and stops working for a time, it might be nice to know that there will still be funds in the bank. But it’s also true that sharing bank accounts can lead to more arguments about money and disputes over purchases.
Debt: You’ll take on your partner’s debt and he or she will take on yours. You’ll be unified in paying that debt back, and will probably be able to do so quicker than you would have on your own. But if you started out with zero debt, you’ll have signed on to help get rid of debt you didn’t create in the first place.
“Some is ours; some is mine.” – Combine some finances, but keep some separate.
Credit: You’ll be able to choose when it makes sense to apply for credit together, and when it makes sense to do so on your own. For instance, if you have a higher credit score, it makes more sense for you to apply for your own credit card. But if you’re in the market for a new mortgage, applying together can help you both diversify your credit profile.
Bank accounts: You and your spouse can monitor each other’s purchases on the joint account, but will still be able to make discretionary purchases on your individual accounts. Outline some expectations and decide which purchases should be discretionary.
Debt: If one partner comes into the marriage with more debt than the other, you can decide together which debt should be mutual. Perhaps you wish to help your spouse pay back his or her student loan debt, but think credit card debt should be managed individually. After you’re married, debt you accrue together can be shared, and you’ll shoulder the burden of paying it back together.
Bottom Line: Money in marriage is a touchy subject. No matter which of these routes you choose, you can avoid a lot of conflict by just being up front about finances. Find what works for your marriage. Make a household budget—find some good templates here—and stick to it.
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