Couples need clear plans for merging finances
BY LAURIE WINSLOW World Staff Writer
Thursday, February 14, 2013
2/14/13 at 7:42 AM
Cupid seems to have no sense when it comes to dollars and cents.
In the realm of love, money disagreements can rip two hearts apart. That's why it's imperative for couples to have regular heart-to-heart talks about finances, financial advisers say.
Money can be symbolic of power, but it's also something that people haven't been socialized to talk about, said Sissy Osteen, state resource management specialist with the Oklahoma State University Cooperative Extension Service. Rather than talk about finances, couples often avoid the topic.
"People go out on dates and ask if they want to have children someday without ever talking about money, and that is just ludicrous," Osteen said.
According to the American Express Spending and Saving Tracker, 66 percent of surveyed couples admit to having financial disagreements, and 55 percent say their spouse has at least one bad financial habit.
Everyone has a different perspective or attitude about money, which may not be a big issue on an individual basis, but when people join their lives and incomes they have to reconcile those differences, said Dan Safranek, a certified financial planner and founder of Safranek and Associates LLC.
The most common and classic problem arises when a spender and saver connect. One person doesn't worry about money and spends freely, while the other is a worry-wart and a saver. If not addressed, that tension can build over time, Safranek said.
Couples can learn a lot about each other's money habits by talking about their family history and how money was handled growing up, Osteen said. What does money mean? Does having money mean you can have what you want when you want it? Or does it mean you're just going to be able to eat and have the basics?
The sooner couples can start talking about money the better. That doesn't mean asking someone on the first date what he or she earns, but it involves being open to discussing money as a normal part of life so that it doesn't become so mysterious and overpowering, Osteen said.
Some find bringing up the topic of money prior to marriage awkward and difficult. They may fear they'll scare someone off by talking about money, but the goal is to have a great loving relationship and a healthy financial relationship, Safranek said.
Having a talk about money should be one of the first conversations couples have before they say 'I do' because it's fundamental to the relationship going forward, he added.
"You can never have too much communication about finances," Safranek said. "Some people like to bury their head in the sand and don't talk about it. Or, they think if they don't talk about it that it will go away, but that doesn't solve anything.
"The more you can communicate the way you want to handle money or how you expect the finances to be handled, the better."
Osteen said there isn't one best way to handle finances in marriage - it depends on the personalities of the couple and how they've handled things in the past.
Whereas one couple might prefer to pool their money into one account, another may prefer to divide it among three accounts - their own individual accounts and a household account they both contribute to.
For a combined household account, Osteen suggests that couples contribute based on the percentage of their income. If the wife earns twice as much as the husband, she would contribute twice as much of her income to that joint account.
Osteen also suggests scheduling a regular time to discuss money matters. This allows couples to plan for expenses such as vacations, major purchases and holiday spending.
"What we see many times is one person is responsible for the money, and the other person doesn't have a clue what's going on, so then when there is an emergency ... it can cause lot of stress," said Margo Mitchell, president and CEO of Consumer Credit Counseling Centers of Oklahoma.
Mitchell, likewise, suggests arranging a "financial date" at least once a month so couples know where they are financially and can talk about bills, expenses and their budget.
"It's really important for couples to each understand what the other person's goal is financially and then work a compromise, and not to be critical," she said. "Let's say my goal is to go to Paris, and my husband may be more practical and think we should pay off a car loan. We need to talk and negotiate that together."
Neither spouse should find fault with the other's goal. If a couple needs to talk about major issues such as how to pay for a new car, that is something they should discuss together. One person shouldn't make the decision.
"If you're aware of what your goals are and know what you're saving for, that makes the saving easier," Mitchell said.
Tips for couples merging their money
LowCards.com offers some of the following tips to help couples who are planning to merge their finances.
FULL DISCLOSURE OF ALL DEBT AND FINANCIAL OBLIGATIONS
Get everything out in the open. Make a list of all student loans, car loans, credit card debt, even loans to friends and parents. Get copies of individual credit reports to share the financial past.
HAVE A PLAN FOR UNITING FINANCES.
Separate accounts give both spouses some autonomy and are the easiest solution in the early years, but they become complicated as your family and possessions grow. Joint accounts merge all income and expenses but requires communication and agreement. It can make paying bills easier, but it also means less privacy and independence. Joint/separate accounts divide up the expenses while still having an account of your own that you can control. Both partners should have some money they can control and spend on their own.
The best way to deal with debt is to pay it down as fast as possible and avoid late payments. The faster you pay off your loan balance, the sooner you can start saving and building a strong financial foundation. If you have multiple credit cards with a balance, pay off the balance with the highest interest rate and then move to the card with the next-highest rate.
Transparency keeps vision clear
KEEP SPENDING UNDER CONTROL.
If you are on a tight budget, both partners need to make a plan on how much to spend on daily purchases and how much to save for big purchases.
BE OPEN ABOUT MONEY.
Many people deceive themselves about how much they are spending. Problems arise when one partner is secretly saving, spending, or gambling thousands of dollars. If this can't be easily confessed and explained, consider financial counseling.
Financial experts recommend having an emergency fund in a savings account that totals three to six months of living expenses. Set up an automated deposit from your paycheck into your savings account.
RAISE YOUR CREDIT SCORE.
Make it a goal for both partners to have a credit score over 720. This will help you qualify for the best terms and interest rates on loans and save thousands of dollars over your lifetime. Raise your credit score by paying your bills on time, paying down your debt and limiting your credit applications.
KEEP A CREDIT CARD IN YOUR OWN NAME.
Keeping a credit card in your name helps build your individual credit history. If you are worried about your partner's spending habits, then he or she should not carry a credit card.
MONITOR YOUR ACCOUNTS.
Websites like Mint.com can keep track of all accounts - investment, checking, college funds and loans. This keeps information clear and in the open for both spouses.
If arguments prevent you from getting started or making a financial plan, seek professional counseling from a financial counselor or credit counselor. Contact Credit Counseling Centers of Oklahoma at 918-744-5611.
Original Print Headline: Love and Money
Laurie Winslow 918-581-8466
DAVID HOUSH / Tulsa World