partner finances

It’s important for partners to discuss finances, even if only one of you takes the lead on the day-to-day money management. Make sure you’re both aware of key financial information in case of injury or illness to keep difficulties minimal.

talking about money

Use these conversation starters to keep both partners aware of what both of you should know.

Top priorities

  • Is there a list all accounts, investments, and debts?
  • Where are records filed? Are they stored digitally or on paper?
  • Do both people know the usernames and passwords for these accounts?
  • How are bills paid? How are expenses tracked?

Other considerations

  • Where are estate planning documents? Who has copies?
  • What kinds of arrangements are planned in case of a death?
  • Who are the beneficiaries of your assets?
  • How do children fit into the financial picture?
  • Where important legal documents are (like birth certificates, marriage licenses, passports)?
  • Where are insurance policies?

There are many ways for partners to combine finances. Look at these options and decide together what will work for you.

Set up a joint checking account that will pay for all living expenses, like rent, bills, groceries, and any other shared expenses. Each person contributes an equal amount of money to the joint checking account every month. Whatever money is left over from your paycheck each month beyond what you’ve agreed to contribute to the joint account would go into your own personal account.

This works basically the same as the method above. But instead of each person contributing the same dollar amount to the joint account, each person contributes a percentage of their income. Ideally, this percentage should be less than 50%. This is great for couples where one person earns more than the other, but both people want to share the same lifestyle (dinners out, vacations, dream home, etc.).

This is ideal for couples where one person makes a lot more money, or where one person is staying home with kids or going to school. In this case, the higher-earning person would take on all of the expenses. Just be sure you talk about how you will handle the future. What if you split up? When the person who had been staying home goes back to work, will they take over all the expenses?

Each person picks different bills and expenses to pay for. For example, perhaps one person pays for electricity and cable, while the other person pays for rent.

This can work well for married couples who don’t enter into marriage with a lot of separate assets. You could each deposit all of your money into the same checking and savings account. Or, you could deposit all of your money into the same savings account while each of you maintain separate checking accounts for “fun money.”

In this method, a couple decides to live on one partner’s income, and put all of the other partner’s income in savings. This means a couple would set their whole budget and lifestyle choices based on only one person’s income. Everything else could go towards an emergency fund and/or saving for a house or retirement.

couple looking at a computer

getting married

Before entering a partnership, it’s important to understand each other’s views about money. Don’t forget, marriage is a contract. You’ll have money flowing in and out. Here are some things to consider.

Topics to discuss before marriage

Combining accounts

Before getting engaged, you may have your own savings, checking, and investment accounts. What mix of private and joint accounts is best for you? What independence do you need with your money? What joint goals are you both working toward?

Housing

Will you live in one partner’s home or find one together? If selling a property is in the picture, make sure to talk through potential tax consequences from capital gains with your tax professional.

Financial goals

Talk through where you want your money to go and why. How much of a cushion makes you both comfortable? What things do you want to save for? What types of insurance should you have now? (Don’t forget to revisit your insurance needs as situations change).

Budgeting

Now that there are two of you, you may have to take a closer look at each partner’s attitudes about and habits with money. A budget is a good way to make sure you’re both contributing towards your financial goals.

Debt

This subject can be tricky, but it’s important. You both will need to feel good about when you borrow money and why. You also need to understand what debt each person is bringing to the marriage, and then decide which debts to combine and which to keep separate. There are pros and cons to each.

Many advisors recommend that each individual keep his or her own credit cards and credit history. Doing so helps ensure financial independence and provides greater flexibility if either spouse finds themself alone at some point in the future. Also, if one spouse has a poor credit history, it may be advisable not to combine debt. This lets the other spouse keep his or her good credit rating.

Estate Planning

A wedding is a hopeful thing. It may not feel like the right time to be considering death and disability, but when you’re deciding to take responsibility for each other, it’s something you should discuss. Consider the consequences of losing wages or passing away without an estate plan in place.

Pay attention to the beneficiaries on life insurance, IRAs , 401(k) plans and other plans that allow naming a beneficiary. What’s written in those policies could override will or trust instructions. If you have questions, talk to an estate planning professional.

rain cloud

getting divorced

Going through a divorce can be one of life’s most painful experiences. In addition to the emotional stress, you have to make your way through the process of undoing the many financial connections you and your spouse have created over the years.

If possible, try mediation. Litigation can be expensive. If you and your spouse want to limit the cost, consider discussing your situation with a mediator. To find one in your community, visit the Association for Conflict Resolution.

Gather key tax, investment, and financial documents. Be sure you have your own copies and can easily access all important records. Important documents include:

  • Tax returns
  • Bank, mortgage and investment account statements
  • Pension and retirement account statements, such as 401k or IRA information
  • Insurance and beneficiary information
  • Prenuptial agreement

Know the purchase price of all your assets. As you gather your financial information, it will be important to know what your assets were worth when you got them as well as fair market value of the assets now so you can calculate after-tax values.

Request a copy of your credit report, which you can get free of charge at Annual Credit Report. Review it for accuracy and work to correct any errors.

Create an individual budget (including projected income and expenses) along with a net worth statement (personal balance sheet). Think about smaller expenses, such as extra transportation for shuttling children between parents or extended day care costs. Also, think about any maintenance or cleaning expenses that were normally performed by the soon-to-be ex-spouse.

If you are currently covered on your spouse’s health care plan, you need a plan for your individual coverage. If this will take some time, you might need to extend your current coverage with COBRA to give yourself extra time. Don’t forget about dental or vision coverage for children or other dependents, and be sure to add these new costs in your individual budget.

Be sure you and your assets will be protected after the divorce is final. If you will receive alimony, consider purchasing a life insurance policy on your ex-spouse in case of his or her death. It’s all important to make a plan for potential disability and long-term care expenses that might build up for you as a single person.

Be sure you know the after-tax value of traditional (after-tax) retirement accounts as well as Roth IRA, Roth 401(k) or any other after-tax assets in retirement accounts.

  • Remove your ex-spouse as beneficiary, executor, personal representative, successor trustee, or agent under healthcare and property powers of attorney (as appropriate).
  • Update your will. If you have minor children, consider leaving any assets in a trust for the children. You may want to name someone other than your ex-spouse as trustee.
  • Review both primary and contingent beneficiary designations. Don’t forget about:
    • Disability insurance
    • Long-term care insurance
    • Company benefits
  • If you know your ex-spouse’s estate plan, discuss it with your attorney. Your attorney can help you decide if and how your ex-spouse’s plan should affect your plan.

watch for stress

If you or your children are having difficulty coping with the divorce, don’t wait for the problem to get bigger. Consider talking with a qualified counselor or spiritual advisor.

hand with money bag in it

be smart about inheritance

The best thing you can do when you receive an inheritance or other type of payout is take your time. You need to think about short-term and long-term goals and opportunities. You’ll need to understand your priorities.

You may experience lots of emotions when coming into a payout. These feelings can cloud your judgement or keep you from seeing the long-term possibilities or consequences of your decisions.

Inherited wealth often results from the passing of a close family member or friend. You may feel guilty or undeserving of this money. Others may think that how things are distributed is unfair, creating friction between survivors.

Sudden access to significant money like an inheritance or Minors Trust or Per Capita Distribution could create a lot of excitement, leading to a spending spree or impulsive decisions for major purchases.

You may also feel overwhelmed by responsibility and unsure of what you should do next.

The many feelings you may experience after receiving a payout are why it’s so important to take time before making decisions.

First, identify your financial priorities. Look for short-term opportunities to use this money to further your financial goals.

  1. Create an emergency fund that will cover at least six-month’s worth of expenses.
  2. Pay down or eliminate debts. Some experts recommend starting with the highest interest rate debts first.
  3. Check in on your retirement savings progress. Do you have enough saved?
  4. Review your insurance coverage. Do you have appropriate health insurance? Property and casualty insurance? Do you have life insurance if there are others who rely upon you?
  5. If a mortgage could be a burden in retirement, considering paying that down.
  6. Look at funding a child’s college education.
  7. Consider your own legacy for your children or grandchildren, or for your favorite charity or worthy cause.

If you’re not sure where to begin, consider these questions when thinking about how to handle this money:

  • Is the money needed for immediate use?
  • What do you want to use the money for? Organize your wish list into “needs” versus “wants.” Prioritize the needs first, but you may be able to spend a small portion of your payout to buy something you want or do something fun
  • Do I want to leave money to my children or grandchildren?
  • How can I make the wealth last?
  • If you inherit things rather than money, such as cars, boats, real estate, and jewelry, what can be done with them?
  • How would the person who left me the inheritance want me to handle it?
  • With the Minors Trust and Per Capita Distribution, how can I invest it for my future education or achieving the great American dream of owning a home?

You don’t have to go through this alone. Trusted advisors can work with you to manage the inheritance in a way that lines up with your goals by:

  • Determining the best investment options and planning strategies to build, protect, and manage your money
  • Developing a financial and estate plan
  • Understanding the various financial issues involved with different types of inherited assets