By the time this “$50 Week” runs in print and online, I’ll be a married woman. I met my fiancé in my junior year of college, at a time when I still wasn’t covering all of the expenses for which I now assume full responsibility. Years later, while we remain more or less the same couple we were as undergrads, our finances have changed drastically—in some good ways and some bad ways. And in the months leading up to our wedding, a budget-friendly elopement to Prague at the end of December, our talks have bounced between “to have and to hold” and “to spend and to save.”
Whether you’re in a relationship, living with a partner, engaged, or long-married, finances are a constant source of discussion and debate. There are always lessons to be learned. So far, I’ve found these nuggets to be the most valuable.
Communicate, Communicate, Communicate
As Eric Whitacre and Hila Plitmann stress in this month’s cover story, communication is the key to a functional relationship no matter what. Discussing your financial situation and goals with your partner is of particular import. According to a 2004 study commissioned by SmartMoney and Redbook, 70 percent of couples talk about money, but most of those couples don’t know how to talk about money properly. When you move in together or get married (or both), your finances also combine forces, for better or for worse. And while joint checking accounts are not as commonplace in this century as they were in the last, your personal checking accounts shouldn’t be any less open.
Make it a point to regularly sit down with your partner and look over your bank statements online before you take care of the big ticket expenses like rent and utility bills. Though it seems like the best idea is to split everything down the middle, a profitable month for one partner and an equally slim 30 days for the other ought to be taken into account—especially if you’re both singers. Salaries and bonuses will shift mercurially, especially if you’re just starting out as professionals.
Financial guru Suze Orman recommends paying bills in proportion to your earnings, meaning that one side can take on 60 percent of the rent if their salary is that much higher in comparison to the other half. My fiancé’s 40-hour workweek has put him in a position to help me, the freelancer, cover several expenses that affect both of us, whether it’s him covering the groceries for a week or helping me with a Geek Squad bill to keep my computer (and, in essence, my business) running smoothly. Last year we were in the exact opposite position. Discussing these situations without the emotions that often come when we check our account balances helped to reach solutions quickly and amicably—after all, business is business.
The Couple That Spends Together
Communicating specifically on what you’re purchasing, whether as individuals or as a couple, is a simple but significant way of keeping your finances harmonious. My fiancé is a sucker for a good meal out (especially one that involves eel and avocado rolls and yellowtail sashimi), while I can’t pass up a good bookstore. When the weekend rolls around, we are constantly brokering deals with one another, acknowledging that there is a give-and-take for that sushi meal or the latest Alex Ross book. There are times when I talk him down from ordering half the menu and others when he has to stop me before I reach the checkout counter with a stack of novels.
When it comes to specific financial goals, sitting down and making a spending plan will also help you as a couple work out your individual budgets. As you are able to accrue more than you spend, don’t forget to tuck some of that money into a high-interest savings account and set aside for the proverbial rainy day. Have a joint understanding that it’s OK to celebrate a fiscally successful month, but don’t take that as a signal to book a 10-day vacation to St. Thomas if by the next month you’ll be wondering how you can pay the cable and the phone bills.
This seems like common sense, but communicating (there’s that word again!) these thoughts with your partner is essential. Chances are they can’t read your mind. It took my fiancé and me a while to establish our spending habits with one another, and we had to build up a mutual trust that the expenditures don’t derail our checking accounts. That trust comes in handy when the delivery menus come out or an Amazon.com box is on our doorstep.
Get a Room (But Don’t Move In)
Even if you’re not game to set up a joint checking account, do consider an account for your bare-minimum expenses. The first of the month feels a bit less like Russian roulette when you know that you have the funds set aside for your landlord, the cable company, Bally Fitness, or AT&T—and that even if there is a budgetary blackout, you won’t have to worry about whether or not your most important checks will bounce.
What’s especially helpful in this particular case of a joint account is that you have the money allocated specifically for one purpose, which means there is less stress in joint managing the specific funds. According to SmartMoney’s 2004 survey, 18 percent of couples experiment with individual and joint accounts, allowing some fiscal independence along with the couple dynamic. Do be clear, however, on what comes out of the joint account as opposed to the individual account.
As TheKnot.com spinoff, TheNest.com, points out, this arrangement leaves you with three accounts to keep track of: Yours, Mine, and Ours. Yet these three building blocks should be there in your financial baseline. Pool together as much as you want, whether it’s for the basics or the bulk of your spending, but don’t lose your personal finances in the process. You’re still an individual when it comes to your credit score and, if you don’t file a joint tax return, the IRS.
Set Goals Together . . .
Knowing where you want to be is just as important as knowing where you are. Articulate your goals, whether it’s that you want to have an emergency savings fund stocked up with three months’ living expenses by the summer or that you want to purchase a home by the end of the decade. Be sure to factor in expenditures like concert tickets, dinners out, and Starbucks runs as well. Whether or not you’re proud of them, they’re still part of your financial map, and your partner should be aware of all territories contained therein.
For us, our biggest financial goal has currently been our wedding trip. Over the last eight months, we’ve allocated specific paychecks toward the plane tickets, wedding planner, hotel, rings, dress, suit, and quick honeymoon in Budapest. With just a handful of weeks to go, even a few beers on Wenceslas Square are being weighed against a Starbucks run on the Upper West Side. More than setting aside money to buy specific items and experiences, however, we’ve also made clear how much we want to keep in our savings account to make sure we don’t completely blow our nest egg on what’s supposed to be a meaningful, yet modest, wedding. According to a statistic published by Liz Perle in her 2006 book Money, Americans save about 1 percent of their annual wages—less than any other industrialized country. Don’t follow the trend.
. . . And Handle Pitfalls Together
That being said, the minute you start to have a sizable savings is when the other shoe drops. For me, that was experiencing a computer meltdown two months before my wedding, leaving me in the position of having to buy a new laptop on just a few days’ notice. Even though it’s my computer, we tag-teamed the process, from researching a replacement to looking into Best Buy’s store credit card program (a small miracle with 0 percent APR for 18 months). My debt became our debt and, with a more immediate goal, we also looked at our planned expenses for the rest of the year and found ways to trim and shift spending so that the debt of a new MacBook and all of its bells and whistles—not to mention a fiscally fortuitous two-year protection plan—didn’t turn into an unmanageable debt.
Discuss your debt. Whether it’s your credit card bill or their student loans, you are responsible for clearing your debt together, whether by law or by principle. As individuals, your credit score may be fine even if your partner’s is floundering, but those two scores together are considered when you’re looking for a loan or setting up a joint account. Though addressed to you or your partner, those e-statements and paper bills for personal accounts should be communal reading, whether the amount is $50 or $5,000. You’ve built a great relationship, and with understanding and trust, no number is unmanageable.
