Young couples should handle finances together

It is no surprise that most couples today rate finances as the highest stressor in their lives.

Many young couples are fortunate to have parents who can offer sound advice about finances. Others are able to hire financial advisers. For those who have neither, the Internet can provide constructive ideas for making sure that finances do not make, “For better, for worse; For richer, for poorer” both worse and poorer.

In her article, “6 Money Mistakes Newlyweds Make,” Erin Burt of Kiplinger’s Personal Finance offers financial suggestions for young couples. If you like the ideas below, her complete article can be found on the Internet. Burt includes helpful links to related financial advice.

Create a budget
Burt suggests that young couples immediately prepare a budget. Here is what needs to be included:
“Your first step is to write down your fixed expenses, such as rent, car payments, insurance premiums and student-loan payments. You should also make a habit of contributing to your savings or investments as if you were paying a fixed bill each month. Then write down your flexible expenses, such as utility and phone bills, transportation costs, groceries, trips to the ATM and miscellaneous items.”

Newlyweds should track their expenses for several months to determine where their money is actually going and then decide on necessary changes.

Other advice
Prepare for emergencies. Couples need to create an emergency fund that could help them survive for three to six months if a worst-case scenario happened involving their jobs or health. This fund can also cover unexpected costs, such as emergency car and home repair.

Secrets create problems. Even before marriage, couples should share information about debts or other financial burdens.  If one person brings debt into the marriage, both partners need to make a plan to pay off the debt. Burt warns that “you should never officially commingle your debt,” which could threaten one or both partners’ credit ratings for the future.

If one person eventually takes charge of paying the bills and preparing tax forms, spouses need to meet monthly to review finances.  Major purchases and savings accounts should be held in both spouses’ names so that each partner maintains a positive credit rating, Burt advises.

Finally, Burt suggests that couples should not “sweat the small stuff.” Make sure each person has a discretionary fund so that small purchases do not create controversy.

Getting help
Parents can give assistance. Before couples marry, parents can offer to help them make plans for handling finances in their marriage. If their situation is complicated, schedule a meeting with a financial adviser.

With a divorce rate of about 45 percent, we know it is challenging enough to learn to handle communications and daily living. Not handling finances well can create a mountain of anxiety that young couples may not be able to climb. At its best, love is not blind, and finances are not a mystery.