Engaged in KC: 8 Steps to Plan Your Joint Finances
Congratulations on your engagement! As you prepare for your upcoming wedding, it's a great time to start planning your financial future together. By taking a proactive approach, you can lay a solid foundation for a prosperous life as a married couple.
In this blog post, we'll explore some key considerations for engaged couples alongside some valuable Kansas City resources to help you navigate your financial journey as you plan for marriage.
Start With the Basics
Talk About Money
Sit down together and have some honest conversations about money.
What is important to you and what is difficult for you when it comes to money? Discuss shared financial aspirations.
Consider short-term and long-term goals, such as buying a home, traveling, or saving for retirement. This will help guide your financial decisions and ensure you're on the same page.
If money conversations don’t come easy, try some of these tips to improve your skills. If you think you could use more help, consider a Financial Therapist like KC-based Nathan Astle and his firm Relational Money. Now is the perfect time to set good money communication habits.
Create a Budget
Developing a budget may not sound exciting, but it's a vital step in managing your finances as a couple. Determine your combined income, track your expenses, and allocate funds for essentials, savings, and fun activities.
There are handy budgeting apps like Mint or YNAB that can make this process more enjoyable and organized. Let me suggest Mint.com for the budgeting newbies. YNAB is great for those who are ready to get serious about budgeting or have significant debt to pay down.
Build An Emergency Fund
Start building an emergency fund together to handle unexpected expenses or financial setbacks.
Aim to save three to six months' worth of living expenses. Aim even higher if either of you deal with uncertain compensation or uncertain job security.
Look for high-yield savings accounts with competitive interest rates while keeping your funds easily accessible. You can check rates for local Kansas City banks and online banks at depositaccounts.com.
Check out more tips for managing your cash here.
Merge Your Finances With Intention
Think About Account Types
As you plan to merge your lives, it's essential to consider how you'll handle your finances together. There’s no right or wrong when it comes to how you merge your finances, so long as you communicate about your approach intentionally and it feels right to both of you.
You can choose to maintain separate accounts, open joint accounts, or find a combination that works for you.
By the way, have you decided how you’ll split expenses?
5 Common Ways Couples Split Expenses
50/50
Each partner deposits a fixed, equal amount into a joint account monthly. Pay joint expenses from the joint account. All other income gets deposited into individual accounts.
% of Income
Split joint expenses based on each partner’s share of the total combined income. i.e. partner A making a $100k salary pays 60% and partner B making $60k pays 40%. Individual expenses can still be paid from individual accounts.
Category Based
Define whether an expense is an individual expense or. joint expense based on category. i.e. one partner owns the home and pays the mortgage and home maintenance from individual funds.
% + Allowance
Deposit a fixed $ amount into each individual account monthly. This works like an "allowance" to use freely or save up. Other income is deposited into a joint account. In effect, joint expenses are split based on each partner’s % of the total income.
100% Joint
Combine all income into a joint account and fund all expenses from a joint account. No individual accounts. Can use separate credit cards for gifts or private purchases if agreed. In effect, all expenses are split based on each partner’s % of the total income.
Take an approach that feels right to both of you. Meet regularly to discuss your finances and to revisit whether your approach to splitting expenses is still working for you.
Consider a Prenuptial Agreement
Discussing a prenuptial agreement can provide peace of mind and clarity for both partners. A prenuptial agreement spells out how assets, debts, and property would be divided in case of a divorce.
☝️Note: Even if you decide to keep individual accounts, the money in those accounts will likely still be considered marital property unless you have a prenuptial agreement that states otherwise.
But prenups aren’t only for divorce. Prenuptial agreements are great tools to plan your finances for marriage and to start your marriage out with honesty and transparency.
Consider having a conversation about this topic and consult with a family law attorney in Kansas City, such as Hannah Wittman with the law firm Joseph, Hollander & Craft. An attorney can also help you understand what the law defines as marital and separate property if you don’t get a prenup.
Make A Long-Term Plan
Set Goals Together
Use those skills you’ve honed talking about money to discuss your long-term priorities. What major purchases do you hope to make? What do you want your working life and retirement life to look like?
One simple way to get started setting a long-term savings goal is to use a tool like the Vanguard retirement income calculator to estimate how much you should be trying to save now for retirement.
Save Regularly
The most important thing you can do for your long-term finances is to save and invest regularly so you’re building a nest egg to work with. Even if you can’t afford to save the ideal amount right now, start as small as you need to.
Building the skill of a regular monthly savings amount will serve you well for life. Research retirement account options, such as 401(k)s, IRAs, or Roth IRAs, and consider making regular contributions to take advantage of tax benefits and compound interest.
If you’re not ready to get into the weeds with a long-term plan, I get it. You’re already planning a lot right now. Tackle what you can right now and turn back to a financial plan when you’re thinking about buying a house, considering a job change, or starting to plan for kids and their education.
Conclusion
By following these steps and seeking support from the wealth of Kansas City resources available, you and your partner can embark on your married life with confidence and financial security.
Remember, planning your joint finances is not just about money—it's about building a strong partnership based on trust, communication, and shared aspirations.
Congratulations again on your engagement, and here's to a happy and prosperous future together!
If you need guidance, reach out to one of our Kansas City financial advisors who can help you create and track a financial plan that fits your goals.