Handling money issues

Question: I heard many stories about marriages that failed due to money problems. I am planning to get married in a few months and I don’t want to have problems with my partner about money in the future. We are both working professionals but we differ in our spending habits. Can you give me some advice on how to manage our money when we are already married?—John Christopher via e-mail

Response: Before I answer your question, let me ask you these: Have you tried discussing with your fiancée about managing money together? How well do you know each other’s lifestyle when it comes to spending? Do you have enough savings to start a family?

Very often, many couples who are about to get married do not discuss money matters. Instead, they reserve judgment based on their impression of their partner’s job and family background. Many couples avoid talking about money for fear that one partner may disapprove or feel offended. The only time that money is seriously talked about is when there is already a financial problem that threatens your marriage. For example, you are consistently missing paying your monthly amortization because you could not manage your cash flows anymore or your wife has already accumulated mounting credit card debts without your knowledge.

To establish a harmonious financial life, it is essential that you initiate an honest discussion with your fiancée about money. Decide how you two are going to share your expenses at home. If your fiancée earns more than you, you must resolve how much you want to contribute and in what way. Discuss with your fiancée your long-term financial goal as a couple. How much do you need to save together so you can buy your own house and have children later on? These are some of the issues and questions that you need to address during the discussion.

Here are some guidelines for you to follow:

– Organize your bank accounts. Create a joint bank account for common household expenses to be jointly funded monthly by each partner, depending on their respective incomes, while keeping each other’s personal accounts for individual expenses such as mobile bills, gasoline or books. You must agree with your partner on how you will share the expenses. You may also want to consider opening another bank account that will keep all your savings. This account will finance all your major expenditures such as housing, car and travel.

– Assign each one responsibility. Just like in a company set-up, one partner must play the role of an accountant while the other as the treasurer. One partner must be in charge of monitoring and reviewing all payment requests for household bills, making sure that all bills are charged correctly and paid on time while another takes care of managing the cash flows, ensuring that the bank account is properly funded. Not all expenses are paid by checks. You also need to keep a petty cash fund at home and one of you must be accountable for it.

– Set up a budget. A budget provides you a sense of discipline and helps you control your spending. When you budget, decide first how much of your joint income should be set aside as savings before you start allocating for your expenses. For example, you decide to take out 10 percent of your combined monthly salaries so that the remaining 90 percent will be budgeted for your expenses. Set an amount on each item and try to stick to it as much as possible. You may also need to secure an agreement with your partner when it comes to discretionary expenses. Agree on certain budget that will make an expense a major one. For example, if you are most likely to exceed the budgeted expense when you want to buy new LCD TV or new iPad then you need to initiate a discussion with your partner so the decision will be made by the two of you.

– Schedule regular money meeting. This is the time when you will review and assess your state of financial position as a couple. You can make this a monthly routine after all the household expenses have been recorded and reconciled with your bank account. The agenda of the meeting must be broad to include not only discussion about the budget but also other issues that may affect your financial life together. Are you keeping up with the budget? What expense item has exceeded the budget and why? Should you revise some items? Do you plan to have major purchases next month? How are you progressing with your long-term financial goals? Answering these questions will help you plan more productively. If you have financial issues such as difficulty in paying your personal credit-card debts or fears of losing your job soon, this is also the opportunity to bring this up and discuss this honestly and openly with your partner.

(Henry Ong is a registered financial planner of RFP Philippines. You can reach him at [email protected] for comments and questions. To know more about the RFP program, visit www.rfp.ph or inquire at [email protected].)