Debt on Overload?

"What's the best way for couples to manage their money?" is a question I'm often asked. While there's no perfect answer - couples differ in how much they want to merge their finances - it's a question that every couple is wise to give some thought to. What is vital, is that you agree upon a plan.

Set up a Money Date
While talking about money can be often be more difficult and emotionally charged than talking about sex, religion or politics, a simple conversation about money can save you a lot of tension and resentments throughout married life. The ideal is to sit down with your partner and discuss your finances together on a regular basis - schedule a "money date". If this is difficult for either or both of you, then you might want to get a third party, such as a financial counselor, planner or trusted friend to get you started on the right track.

To Co-Mingle or Not to Co-Mingle?
The question of whether or not to co-mingle your money is one of the most important decisions the two of you need to make regarding your finances. The extent of the financial merger often depends on the length of time that you have been together, but not always.

One of my client couples has been happily married for more than 30 years and they prefer to keep their finances very separate. Each dutifully writes me a separate cheque for � of my fees every year and that's the way they handle all their expenses. Older couples and those on their second marriage generally keep their finances separate longer.

While there's no perfect system, I find the one that works best is:

Set up a joint account. Both of your pay cheques, and any other income such as stock dividends and investment earnings, go into this "operating account";
Pay common expenses like mortgage, food, and monthly bills from your operating account;
Transfer an agreed-upon amount into long-term investment accounts, and into short-term savings accounts for travel, emergencies and any big ticket items, such as home renovations.
- Note: Ideally, investments should be managed with a common plan - even if you prefer to use separate investment companies. If there is no agreed upon plan and coordination, then you can end up paying higher fees and having investments that aren't optimal for the family as a whole;
After the essentials are taken care of, transfer an agreed upon amount into your "marriage saver" accounts set up for each of you to cover personal discretionary expenses. The agreed upon amount can be a percentage of each person's income or an equal amount. Once you set up this system, neither of you has any say over how the other person spends this money. That's the rule!

It might take a little negotiating to decide what you consider common expenses to be (golf memberships or season's tickets to the opera might be a bit tricky) and what are strictly personal items (triple-shot caramel macchiato, pedicures), but it's worth duking it out early to create a system that will avoid misunderstandings and arguments down the line.

The Marriage Saver Account
Having your own money that you can spend however you choose can greatly reduce arguments over money. That simple little bank account might just save your marriage.