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Family Finances: Sharing Your Financial Life: A Guide to Managing Family Finances

Provided by the International Finance Corporation

One of the most difficult things for a married couple to deal with is their finances.  Research has shown that money was the most frequently reported issue that couples argue about.  They fight over differences in ways to spend it, the need to save, how to invest it, who should pay what, how to divide up the responsibility for money tasks, and many more issues.  Almost all marital decisions, in some way, are linked to money — from taking a new job, to choosing what kind of car to buy, to deciding about children's education.

Since many feel uncomfortable talking about money, it is rarely discussed.  Usually the subject is brought up only when a problem exists, and then it becomes not a discussion but an argument.  By waiting until the simmering problem explodes into a crisis, it becomes difficult to approach the situation calmly and with a rational mind.  This tendency to avoid discussion is why money tends to inflame so many passions and result in so many relationship crises.

Couples find that when they can resolve their financial difficulties and conflicts, their marriage or relationship usually improves. This is not to say that a lack of money problems guarantees a happy marriage, but it definitely results in less strain on the relationship.

Here are some rules of the road for couples:

Decide upon mutual goals and develop a plan to accomplish them jointly.  In some unions, one partner is designated as the chief financial officer who pays all the bills.  In others, the fiscal duties are divided.  Do what works for you, but spell it out.  No one wants to pay late charges because it wasn't clear who was supposed to pay the bill.  A team approach means no unilateral decision-making.

Be completely honest about your finances.  Ideally, this honesty occurs prior to marriage.  For example, large debts may adversely impact a newly married couple's financial life.  Your ability as a couple to jointly qualify for credit at a low interest rate can be diminished by one partner's financial challenges.

Develop a spending plan or budget.  Without a budget in place, you will have no idea where your money is going.  A budget helps to create order in a household and cuts down on haphazard spending.  Set ranges rather than absolute limits on certain expense categories.  Once these are set, work as a team to stay within the parameters.  For example, if you are approaching the upper limit of your "meals out" allowance for the month but are under your "grocery" allotment, consider eating at home instead of dining out.

For dual-income households, think about how to organize your accounts.  You can choose from several types of arrangements.  A joint account pools all your income together.  Another option is to maintain separate accounts and assign bills based on income.  This option gives each person the most autonomy.  Some couples choose a combination of the two methods, with a joint account for shared expenses such as the mortgage or groceries, and separate accounts for individual expenditures such as clothing.  You may want to experiment with different organizational structures until you find the system that is the most compatible for your family.

Consult each other on all "major" purchases.  Since couples may have different ideas on the  amount that constitutes a major purchase, set a limit.  Agree on an amount where any purchases up to that limit can be made without consulting each other.  Endeavor to be open about any instance when you deviate from this agreement.  Hiding over-the-limit purchases made without consultation can only lead to trouble.

"Money talk" meetings should become a regularly scheduled family event.  Money discussions should be comprehensive and not only include a monthly budget review but also a review of the progress toward long-term goals.  Your financial summits could coincide with bill paying or take place when your bank statement arrives.  The first meetings may be difficult if you are not used to discussing money issues, but eventually they will become more routine and comfortable.

Set financial goals that are challenging yet attainable.  For example, if you both agree to start saving to buy a home, you need to decide on a set amount to go toward that goal each month. These goals should not cause such hardship in your financial life that you later decide they are impossible and abandon them.

Make it a habit to continually eliminate "wants" from your monthly budget.  Everyone desires to set aside money for pleasurable things in life.  However, there probably are some areas that you can eliminate or reduce without too much pain.  Consider your monthly budget as your financial garden; plant it neatly, then go back and weed it regularly.

Maintain at least one separate credit card.  Even if you apply for joint credit cards, you should still have at least one credit card in your own name.  Each partner needs a strong individual credit history as insurance in case one of you gets into credit difficulties.  If you do decide to part ways, you'll have an easier time obtaining credit with your own credit history versus a non-existent or negative joint history.

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