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Yours, Mine and Ours-part one

A two part practical guide to marriage and money.

Now that the anticipation, planning, excitement, and joy of your big day and the honeymoon are behind you, now what? As you settle into your new life together there will be issues to resolve regarding money and finances.
Yours, mine and ours often sums up the new financial dynamic for most couples. There are a number of changes that will be occurring in your finances. This is a major transition for most people. This series is presented as a guideline of practical tips to hopefully help you reduce a major cause of stress for most couples – money!
Hopefully this guide will lead to open, honest communication and agreement on your new financial strategy. Your philosophy or strategy on money, debt, goals and objectives and finances in general is a key area of your new life. Your individual beliefs as well as your “couple” beliefs are important to understand and integrate into your strategy. Keep in mind that you may have different individual beliefs on a lot of these topics. Neither is right or wrong but you should be aware of each other’s beliefs.

Starting Point

A good starting point is to define your philosophy on money. What are your goals and objectives, individually and as a couple? Are they different? How do you view money? How important is it to you? How will you resolve your differences? There are many areas to consider as you develop your philosophy; for example lifestyle, debt, savings, instant or deferred gratification, purchases, financial priorities, goals and objectives.

Create Your Plan

Now that you have defined your philosophy, it is time to move onto some of the nitty-gritty. To create your plan, start with the basics. Cash flow, income and expense reconciliation, balance sheet, written goals and objectives, priority listing of goals and objectives with timeframes, establish a regular review cycle of your finances, monthly for example.
The first step is to have an accounting of your income and expenses. Often this is called a budget; I prefer to call it cash flow management, as budget is somewhat negative. Expenses can be divided a number of ways, here are some examples; fixed vs. variable, necessities and luxuries. There may be some overlap in these categories.
How will you allocate your income? How will you pay bills? When? How will you handle discretionary income/spending? At what level do you both need to agree on the purchase? How will you allocate income between bills, savings, purchases and your other goals and priorities?

Discuss Your Plan

I have highlighted a few areas for discussion below.

  • How will you pay bills? Who? When?
  • Income – How will you allocate, bills, retirement, fringe benefits, debt, spending money?
  • Debt – How to handle existing, new debts.
  • Major purchases – at what level – partner consult?
  • Emergency Money – What level for comfort zone?
  • Savings & Investments – Amount, frequency, decision process.
    These should help you start to develop a consistent philosophy and strategy as a guideline for how to handle money and financial matters.

     

Write It Down

It is a good idea to create a written budget or spending plan, the numbers may shock you. The next step is to create a balance sheet, what you own minus what you owe. Again, this is a starting point to better understanding your finances. As you reflect on the balance sheet it is a good time to write down your goals and objectives, both short and long term.It is suggested to do these exercises individually and then together as a couple. You may find areas that need to be discussed further to reach agreement.

The next step is to clearly define and develop your “couples” strategies on cash flow, budgeting, spending, debt management, investments, goals and objectives, in general your financial philosophy and game plan.

Objectives

We suggest that you break these down into short-term, intermediate, and long term. As with all goals this is the focus of your planning. I suggest you write these down and prioritize them. You may find it easier to create your individual goals and then create a couple’s “goals and objectives” sheet.
The following discussion points and questions will help define and develop your “couples” strategy for handling money. The answers to these questions might surprise you! We suggest writing down your individual answers first and then your “couple’s” answer.

Cash Flow

How will you handle income and expenses? All into a joint account? Or each individually with a joint account for common expenses? How will you define necessities, luxuries, and delayed purchases?

Debt

How will you handle existing debts? How about new debt?

Bill Paying

Who’s responsible for? When? How to coordinate with pay cycles?

Benefit Coordination

Who will carry the health insurance? How to maximize your 401(k)’s. Do either of you have a 125 Plan?

Credit Cards & Atm’s

What is your strategy? How many? How to use? Pay off strategy.

Spending/Budget

How to monitor and manage? At what level do you discuss? How to treat minor/major purchases? Written budget with follow up and tracking.

Money Management

How much do you want in an emergency account? Do you prefer to save and pay cash for larger purchases? Are you more of a saver or spender? How about your spouse? Can you come to an agreement? Where does current lifestyle rank on your priorities?

Investments

Who will manage? Who decides how much? Allocation/risk tolerance? How will you coordinate the different programs? What are your investment goals and objectives?

Retirement

Where does this rank on each of your priorities? When, at what age, at what level of current income? How important is it?

Insurance

Taking care of yourself and each other. You should review your Home/Auto policies-possible savings or improved coverage. How much Life Insurance do you have? How much should you have? How important is it? Often overlooked is Disability Insurance.
This exercise is designed to assist you in finding common ground and areas that you will need to compromise on as you develop your strategy.
One of the keys to financial success is to have clearly defined written goals. This provides the roadmap for you to follow. Agreement or at least a negotiated understanding is critical to minimizing arguments and keeping both of you on the same page. Together is the only way this process works.
Setting a goal and working diligently towards its accomplishment can be a source of great pride and reward. Open and honest communication and agreement is important as you integrate the finances of marriage. There will be many areas to include that you each may have a different opinion or experience with. Often this can lead to polar opposite views you will need to work it out to come up with some workable middle ground.
These discussions have the potential to get very intense and emotional. One suggestion is to try and keep this task based do not “attack” each other, but work together to create a “new” plan that you both can live with.

Read more about insurance in the second part of this article, Yours, Mine and Ours part two.

 

The worksheets referenced; balance sheet, cash flow, goals & objectives are available at no charge. Simply call Michael A. Masiello and ask for them.

It is suggested to do these exercises individually and then together as a couple. You may find areas that need to be discussed further to reach agreement.

Masiello & Associates is a full service financial planning firm that has been helping people since 1990. They can be reached at 720-0590. Visit our website www.mmasiello.com.


MASIELLO & ASSOCIATES/Estate & Wealth Preservation Council, LLC 1777 English Road, Rochester, New York 14616
Securities Offered Through Multi-Financial Securities Corporation,
Member NASD, SIPC
Masiello & Associates/Estate & Wealth Preservation Council, LLC
& Multi-Financial Securities Corporation are not affiliated companies.

Written by Michael A. Masiello

© 585wedding.com 2011