How to Manage Money Like a Rockstar Couple

First, congratulations!

If you’re reading this article, you’ve likely found a special someone to share your life with. As such, you’ve decided to research the best way to financially combine your lifestyles.

Managing money as a couple is not just important, but it’s also a great way to level up your relationship as you set and achieve your lifestyle goals and wealth-building milestones. In this article, we’ll explain our five steps to managing money as a rockstar couple. Our aim is to provide the framework you need to build a budget, set up your accounts and automate your way to success.

Step 1: Have “The Talk”

First, start an honest conversation with your partner about money. The goal of this conversation is to determine if you two are a good financial match. Because – let’s be honest – if the two of you cannot see “eye to eye” about money, it’s unlikely that you will have a successful union. If your goal is to retire comfortably, but your partner’s goal is to spend money like there’s no tomorrow, the mismatch in priorities will poison the relationship. So, have the conversation – before wedding vows are exchanged – so you can save stress and heartache in the long run.

(Note: if wedding vows were already exchanged, don’t stress about it. Today is the next-best day to start, right?)

Here are some points to cover during the conversation:

Your Numbers

Each of you must be 100% transparent about your financial situation. Without this information, you cannot confirm if the two of you are a good match. While you may say that you’re on the same page, the numbers don’t lie. To understand how your partner manages money, you need a clear look at their financial profile. Here are some questions to ask:

• Do you have debt? If so, how much? And what’s your plan to pay it off?
• How much of your income do you set aside for retirement?
• Do you have an emergency fund?
• What’s your credit score?
  
  

“First, there’s no judging. No complaining about a person’s financial past or spending mistakes. Although it’s a cliché, it is what it is. Second, no raised voices. If you’re at an impasse on something, hold it over to be discussed at the next scheduled talk. And third, all goals or decisions should be agreed on jointly. There can be some back and forth, but at the end of the day, whatever is decided on has to be something that both individuals buy into.”
David Bakke – Money Crashers

Family History

Get a sense of how your partner’s family dealt with money. Were they extreme savers? Was money always scarce? Did they always spend beyond their means? An understanding of your partner’s family history will help you learn how they feel about money on a deeper level. For example, if your partner loves to spend beyond their means because they grew up in an impoverished family, try to show compassion for their history. Perhaps this means widening the “fun money” budget so your partner doesn’t feel like they’re sacrificing their happiness. Or maybe it will require a continual reminder of what financial wellness means for the two of you (like peace of mind, more vacations, a cushy retirement, etc.).

I recommend going on a ‘financial date’ – someplace where you are going to be enjoying yourself, have time to talk in between ordering and eating, and in public. Always give your partner the benefit of the doubt. They’re doing the best they can, just like you are.”
Amy Jo Lauber, CFP – Lauber Financial Planning

Long-Term Goals

Money is a tool you can leverage to reach your goals. So, ask yourselves – where would you like to be in 10+ years? How will money help you get there? How much money will you need? These questions will allow you to see a clear picture of your shared future. They will also help you understand what decisions and sacrifices you must make now to realize your long-term dreams. For example, if your intent is to live a lavish lifestyle – while also enjoying a lavish retirement – you will need to make specific decisions about your earning potential, savings, and investments. Being on the same page will help you stay accountable to each other and ensure you’re on the right track to reaching your goals.

Step 2: Set Financial Goals

After you’ve had “the talk” with your partner, your next step is to set financial goals. Saving and investing is always a great idea on its own, but – without understanding why it’s important – it will be difficult to stay on track. Clear, tangible, and realistic goals will be your guide as you make important financial decisions as a team.

When you set your goals, be sure to organize them into four tiers: short-term, intermediate, long-term, and retirement.

Short-Term

Short-term goals are goals that can be achieved in one year or less. This includes building an emergency fund for a rainy day, paying off a credit card, saving for a new computer or summer vacation, etc. When creating your short-term goals, you want to focus on small goals that you can accomplish easily as a team. As you check these goals off of your list, the positive boost of accomplishment will encourage you as you work toward your intermediate and long-term goals.

Intermediate

Intermediate goals can be accomplished within three to five years. These may include saving money for a down payment, getting rid of your student loan debt, or saving enough cash to start a business. Think of your intermediate goals as stretch goals – they’ll take more time and effort to accomplish, but not so much that your goals will become too abstract.

“My best advice is to treat your finances like a business. This means that your financial unit must actively budget and frequently review your income statement and balance sheet. Just as a business or company would frequently do the same thing. By considering joint finances as a business, couples will be able to put practical fundamentals to setting financial goals such as saving for an emergency fund, vacation or automobile and paying down debt.”
Ryan Bradley – Koester & Bradley, LLP

Long-Term

Long-term goals are goals that can be accomplished in five to ten years. When creating your long-term goals, ask, “Where do we see ourselves in ten years?” Wherever you envision yourselves to be, your long-term goals are the tools that will take you there. Long-term goals can range anywhere from being mortgage-free, saving for your children’s education, financial independence, etc. Envision the lifestyle you want to achieve and then whittle each aspect down to concrete goals.

Retirement

Depending on where you are in your stage of life, retirement can range from an extremely long-term goal to an immediate, short-term goal. Regardless of how close – or far away – you are, it’s important to prepare for retirement now. The earlier you start, the more potential you will have with respect to building a solid retirement. If you wait too long, it will be much harder (and require much more effort) to build a comfortable retirement.

With this in mind, it’s important to set and prepare for your retirement goals now. Ask yourselves, “What do we want our retirement to look like?” Then, whittle each aspect down to a tangible goal.

Step 3: Create a Joint Budget

Reaching your financial goals won’t happen overnight. Instead, the small, daily decisions that you make will snowball into big financial wins in the future. Your budget is the magic tool that will ensure you’re on track to reach your goals. The following steps will help you and your partner create a joint budget that will ensure that you’re setting enough money aside for your financial milestones.

First, Add Up Your Numbers

To reach your goals, you’ll need a practical plan. That means crunching the numbers to get an exact idea of what you need.

To get your goal numbers:

1. Determine how much money you will need to accomplish each goal in Step 2.
2. Divide each number by the estimated years it will take to reach each goal. Then, calculate a monthly number.
3. The final number for that goal will be a line item in your joint budget.

Let’s take a look at some concrete numbers to illustrate how this process works.

Suppose that you and your partner have the following goals:

• Summer vacation in Italy next year (short-term)
• Down payment for a home (intermedia)
• Retire with a $10,000 total monthly income (retirement)
• Save for child’s college education (long-term)

Your next step is to determine how much money you will need to accomplish each goal. Meaning, how much will it cost for a summer vacation in Italy? How much money will you need for a down payment? Do your research and be very specific: the work you do now will pay off exponentially in the future.

Once you know how much money you will need for each goal, divide the number by the estimated years and then calculate a monthly number. For example, let’s suppose that a summer vacation to Italy will cost $8,000 total. Because your vacation is next year, $8,000 is your yearly amount. Dividing $8,000 by 12 will give you approximately $667. This means that you and your partner would need to save a total of $667 each month. This number will be inserted into your budget as a line item.

“There’s a phenomenon that happens when couples keep their money separate: the lack of transparency creates a sense of mystery and distrust. You can’t see what the other one is spending, so a suspicion often ensues. When you create a budget together, you are removing that barrier and agreeing to work together to achieve your goals. This creates an incredible sense of unity and team work.”
Ahna Holloran – Fika Finance

Next, Choose a Budgeting Style and Stick with It

“Joint budget” can have different meanings for different couples. This is because couples tend to vary in how they prefer to manage their finances. If you and your partner prefer 100% financial integration, it might make sense to have a single budget that tracks all income and expenses. If you prefer to keep things separate, you may want three budgets: one for you, one for your partner, and another that tracks shared expenses and earnings (or contributions). Regardless of your budgeting style, it’s important to have a budget that’s convenient to track.

Selecting Your Budgeting Software

If you really want to stick to a budget, getting a great piece of software is the best way to go. And, best of all, your software doesn’t have to be complicated. There are many apps in the marketplace that make budgeting as easy as texting. If you prefer the tried and true spreadsheet, Google Sheets is an option. Or, you can use mobile apps like EveryDollar (free) or YNAB.

Step 4: Set Up Joint Accounts

Once you have a joint budget, your next step is to set up joint accounts. Joint accounts make it easier for both of you to manage and contribute to your savings and investment goals. As with joint budgets, your style of joint accounts will vary depending on what feels most comfortable.

Single Bank Account

A single, joint bank account is a popular method and likely the most convenient in the long run. With a joint bank account, both partners have access to the funds they need with complete oversight over how the funds are being managed. Expenses, savings, and investments can be withdrawn from one account for easy money management. Plus, in the event that a partner passes, the surviving partner will have immediate access to the funds without needing to fill out extra paperwork or consult with a legal team.

Disadvantages of a Single Account

While the single account method is convenient, it doesn’t come without its drawbacks. You may not like another person having oversight over the way you spend your money – especially if both of you work hard at earning it. Because both of you have equal access to the joint funds, it’s important that each partner is happy with the arrangement and communicates often.

For example, if you want to make a large purchase that’s outside of the agreed-upon budget, you’ll need to communicate this before a purchase is made to ensure your partner is on board (and vice versa). Not to mention, if the relationship sours, untangling your finances could get messy. With equal ownership, any partner could make large withdrawals or close the account without needing the other partner’s permission.

“I’ve been a financial counselor for decades and I can tell you this with 100-percent certainty: when it comes to money, don’t trust your partner. Yes, have ‘the money talk’ before you get married. Yes, agree to financial goals as a couple. But no, don’t take their word for it. Every month – or at least every quarter – sit together and review all the bills and balances on paper and online. Don’t hear them say everything is OK. Look at everything to ensure it’s OK. Anyone can fall victim to temptation, so it’s not a sign of lack of trust. It’s simply an acknowledgement that we’re all human."
Howard Dvorkin, CPA – Debt.com

Separate Bank Accounts

Another option is to maintain separate bank accounts and only open joint accounts for specific purposes like savings and investment goals. While less convenient than a single bank account, it presents an alternative for couples who prefer to maintain independence over their own finances. As long as you both are contributing to your goals and expenses, this method can work as well as a single account.

Disadvantages of Separate Accounts

The disadvantages of separate accounts are mainly the flip-side to the advantages of single accounts. Because you do not have oversight over your partner’s finances, you will have to trust that they will contribute to your goals according to the plan you both agreed upon. If they do not do so, you will have a problem to work out.

Plus, in the event that a partner passes, you’ll need to ensure that the surviving partner can access the necessary funds. This means setting up the other partner as a “payable-on-death” beneficiary, setting up a trust, or giving your partner power of attorney. Otherwise, the account will need to go through probate before the money is transferred to the surviving partner. This can mean lots of time and unnecessary taxes.

“The joint account I have with my husband is used to pay only our living expenses such as food, utilities, and our son’s expenses such as school fees and doctor visits. For our personal expenses, we will pay for them separately with our own money. This way, we can avoid a lot of money conflict when it comes to spending.”
Gladice Gong – Earn More, Live Freely

Automate Everything

Step 5: Meet Regularly

After you set up your goals and accounts, it’s a good idea to set up a regular time to check in and discuss your progress. This can be monthly, quarterly, yearly – whichever you prefer. If you have a financial advisor on your team, you may want to enlist their help to discuss your progress on an annual basis. What’s most important is that you have an established plan to celebrate your wins and discuss new items that may affect your finances. This is also a good time to bring up any financial concerns that either of you may have. However you decide to check in, the important part is to communicate regularly to ensure you’re always on the same page.

“I call these ‘money dates.’ This is the time to review changes to your budget and upcoming cash flow. Your finances are not static; by meeting regularly, you are able to stay on top of your money and make adjustments as needed.”
- Alex Wilson, CFP, BFA

Optimize Your Wealth-Building

Managing money as a couple is a great way to level up your relationship and work together as a team. By setting goals together – and reaching them! – you will deepen your relationship. The most important part is to communicate, automate your goals, and check in regularly to ensure you’re both on the same page.

As a digital bank, Axos Bank works hard to give our customers the most value from their money. This means low fees and competitive interest rates on deposit accounts, and simple technology that will help you manage your money with ease. When opening a joint account, consider High Yield Savings and Rewards Checking. Both accounts have zero fees and interest earnings that pay much more than the national average for traditional banks.

With low fees and higher interest rewards, you’ll have more money to reach your goals.

How to Manage Money Like a Rockstar Couple

This blog post was published by Axos Bank on March 5, 2021 and last updated on March 9, 2021.