Every married couple has to decide how to make their household work. It can be challenging enough to figure out the small details like who will be in charge of laundry and dishes or who cares for the lawn and garden. But what about money? That's where things get interesting. Many couples combine their finances and pay all bills and expenses out of joint accounts. Others keep separate finances or take on a hybrid approach. But is that the best way?
According to research referenced in Bloomberg View, couples who pool all their resources report a higher level of happiness within their relationship than those who don't. Couples who pooled most of their money were happier as well. For example, couples who pooled 80 percent of their money were happier than those who pooled 70 percent, and so on. It's hard to say why this is the case, but some experts believe couples who share their finances just have less to argue about.
Say 'I Don't' to Toxic Money Arguments
If having joint finances means adding less fuel to the fire, then most people would say that's a good thing. This is especially true when you consider the growing body of research that shows money arguments can be lethal to a marriage. For example, arguments about money are the top predictor of divorce, according to a study last year by Sonya Britt, director of personal financial planning at Kansas State University.
%VIRTUAL-article-sponsoredlinks%"It's not children, sex, in-laws or anything else. It's money -- for both men and women," Britt wrote in a press release. The findings held up even when accounting for income and net worth, according to the study of more than 4,500 couples. And unfortunately, those money arguments die a slow death in most relationships, if they even die at all.
"You can measure people's money arguments when they are very first married," Britt said. "It doesn't matter how long ago it was, but when they were first together and already arguing about money, there is a good chance they are going to have poor relationship satisfaction."
4 Ways Joint Finances Can Improve Your Marriage
Research shows that money arguments get ugly -- and stay ugly -- more often than not. But, what if you could avoid these types of arguments altogether or at least limit them? If you're on the fence about combining finances when you get married, consider these benefits:
No haggling with each other. When you have separate accounts, you have to negotiate who is going to pay each bill or how to split them in a fair way. On the other hand, having joint accounts allows you to avoid the awkwardness of haggling with your spouse by handling all bills and expenses jointly.
Dream together, save together. When you've committed your life to another person, you've committed to building a future, and perhaps even a family, with your one true love. Having joint finances means chasing down dreams together and pooling your resources to make those dreams come true.
Joint finances build a sense of teamwork. You know the saying, there's no "I" in "Team." Well, nothing says you're out for yourself more than keeping separate score cards from the get-go. But it doesn't have to be that way. Having joint finances helps you grow as a team by forcing you to create joint goals and work together to achieve them.
The beauty of complete transparency. Having joint finances means you truly have nothing to hide. When all money is in one pot, you are forced to be accountable to one another and compromise on any money issues that might arise.
Money issues can make or break a relationship, and it's easy to see why pooling your money could lead to more happiness and contentment within your marriage. After all, marriage isn't just about the union of two souls; it's about becoming a family and sharing your joint goals and dreams. So, put away your separate checkbook, and bring your marriage to the next level by proving you're a team in every sense of the word. Saying "I do" to joint finances is the perfect way to do just that.
Holly Johnson is the founder of personal finance website, Club Thrifty, which provides tips for frugal living, budgeting, and more. Holly also writes about frugality and travel at Get Rich Slowly, Frugal Travel Guy, and her other website, Travel Blue Book.
"Your daily habits and routines are the reason you got into this mess," writes Trent Hamm, founder of TheSimpleDollar.com. "Spend some time thinking about how you spend money each day, each week and each month." Do you really need your daily latte? Can you bring your lunch to work instead of buying it four times a week? Ask yourself: What can I change without sacrificing my lifestyle too much?
Remove all credit cards from your wallet and leave them at home when you go shopping, advises WiseBread contributor Sabah Karimi. “Even if you earn cash back or other rewards with credit card purchases, stop spending with your credit cards until you have your finances under control,” she writes.
If you do a lot of online shopping at one retailer, you may have stored your credit card information on the site to make the checkout process easier. But that also makes it easier to charge items you don't need. So clear that information. "If you’re paying for a recurring service, use a debit card issued from a major credit card service linked to your checking account," Hamm writes.
Reward yourself when you reach debt payoff goals. "The only way to completely pay off your credit card debt is to keep at it, and to do that, you must keep yourself motivated," Bakke writes. Just make sure to reward yourself within reason. For example, instead of a weeklong vacation, plan a weekend camping trip. "If you aim to reduce your credit card debt from $10,000 to $5,000 in two months," Bakke writes, "give yourself more than a pat on the back."
“Establish a budget,” writes Money Crashers contributor David Bakke. “If you don't scale back your spending, you'll dig yourself into a deeper hole." You can use personal finance tools like Mint.com, or make your own Excel spreadsheet that includes your monthly income and expenses. Then scrutinize those budget categories to see where you can cut costs.
Sort your credit card interest rates from highest to lowest, then tackle the card with the highest rate first. "By paying off the balance with the highest interest first, you increase your payment on the credit card with the highest annual percentage rate while continuing to make the minimum payment on the rest of your credit cards," writes Mint.com spokeswoman Hitha Prabhakar.
To make a dent in your debt, you need to pay more than the minimum balance on your credit card statements each month. "Paying the minimum -– usually 2 to 3 percent of the outstanding balance -– only prolongs a debt payoff strategy," Prabhakar writes. "Strengthen your commitment to pay everything off by making weekly, instead of monthly, payments." Or if your minimum payment is $100, try doubling it and paying off $200 or more.
If you have a high-interest card with a balance that you’re confident you can pay off in a few months, Hamm recommends moving the debt to a card that offers a zero-interest balance transfer. "You’ll need to pay off the debt before the balance transfer expires, or else you’re often hit with a much higher interest rate," he warns. "If you do it carefully, you can save hundreds on interest this way."
Have any birthday gifts or old wedding presents collecting dust in your closet? Look for items you can sell on eBay or Craigslist. "Do some research to make sure you list these items at a fair and reasonable price," Karimi writes. “Take quality photos, and write an attention-grabbing headline and description to sell the item as quickly as possible." Any profits from sales should go toward your debt.
If you receive a job bonus around the holidays or during the year, allocate that money toward your debt payoff plan. "Avoid the temptation to spend that bonus on a vacation or other luxury purchase," Karimi writes. It’s more important to fix your financial situation than own the latest designer bag.