Financial professionals say there’s no system that’s right for everyone. “The important thing is that both people need to be involved in the finances at some level,’’ said Jean Keener, of Keener Financial Planning in Texas.
A key issue is each person’s attitude. If one is a “spender’’ and the other a “saver,’’ trying to completely combine finances may create problems. Similarly, if one person is meticulous about recording transactions and the other is not, disagreements or costly mistakes may result.
If one person has more money saved or earns a higher salary the couple needs to discuss how much each will contribute.
Personal histories also come into play. A prior marriage or children will likely inform how someone wants to handle money.
Liability issues likewise need to be addressed. If one partner is in a profession with a high risk of lawsuits or owns a business that could get sued, having only joint assets could endanger the couple’s financial stability in a worst-case scenario. Even matters like whether there is adequate insurance on each person’s car could put joint assets at risk.
On the other hand, holding at least one joint account enables both people to access money that could be frozen in an individual account if the person dies. Since an estate can be held up for months, it’s important to make sure at least some funds are available to a surviving spouse.
Couples who decide to share an account must also share information about when they tap it. An agreement on how much may be spent without consulting the other partner may be one way to avoid disagreements.
For people who bring substantial assets - or debts - into the relationship, the first step may be a prenuptial agreement.
For couples who have disparate incomes, it may be impossible to contribute equal amounts to household expenses. One solution is for both to contribute the same percentage of their income toward common expenses.
Couples unsure which system will work best for them may want to make decisions gradually, suggested Carlo Panaccione, of Navigation Group Inc. In the first year of living together, couples will identify their most problematic areas, he noted. One way to avoid arguments is for each person to have a pot of money that can be spent without discussion.
Eileen AJ Connelly writes for the Associated Press.
