Financial Planning for Couples: Our Expert Talks Merging Finances and Setting Goals

Getting married is an exciting step in any relationship, but along with the romance comes the practical side of merging lives, including finances. Successfully combining finances can set the stage for a harmonious and secure future together. To help guide engaged couples through this crucial process, we sat down with seasoned financial advisors to gather insights and advice on financial planning for couples: Hazel Secco of Align Financial Solutions and Jon Morgan of Venture Smarter.

First Steps in Merging Finances

Merging finances can seem daunting, but taking it step-by-step can make the process smoother. When starting, couples must be open and honest about their financial situations, including their debts, income, and spending habits. Hazel advises that the first conversation should involve laying everything out on the table.

“The first steps couples should take when merging their finances are to decide whether they will completely merge their accounts or maintain separate ones for personal spending, and determine the amounts each will keep,” she noted. “You don’t want to discover later that one spouse has a separate ‘rainy day’ account and feel betrayed. Communicate about it in advance so that both partners have clear expectations. Once you've made these decisions, visit your primary bank to create a joint checking account and transfer funds from your individual accounts into the joint account.”

Evidently, starting with transparency builds a foundation of trust and understanding, ensuring that both partners are on the same page from the very beginning.

Jon adds that couples should also “understand each other’s complete financial picture. This means taking the time to sit down together and lay everything out on the table—debts, assets, income, credit scores, and ongoing financial obligations. Whether it's student loans, car payments, or savings accounts, transparency here is key. This conversation might be uncomfortable at first, especially if one partner is carrying more debt or has different financial habits, but this is crucial for building trust.”

Once you understand this, you can delve deeper. What does this look like? Jon says “the next step is to discuss your financial values and philosophies. How do you each approach saving versus spending? Do you have different attitudes toward risk and investment? These discussions help you to align your financial behaviours and expectations moving forward, which is essential for avoiding conflicts and ensuring that both partners are on the same page.”

Creating a Joint Budget

Creating a joint budget is a pivotal step in couples’ financial planning. Designing a budget that accommodates both partners’ financial goals and spending habits is essential, striking a balance that works for both. According to Hazel, the key is to prioritize and compromise, highlighting how “couples should list non-negotiable and discretionary expenses to determine which monthly living costs are mandatory and which can be adjusted. This approach ensures that current priorities are not entirely sacrificed, preventing resentment between partners. Respect each other's high-priority expenses, discuss the monthly cash flow, and identify what's feasible together. This way, you can align your financial goals and maintain harmony in your spending.”

Similarly, Jon explained that couples should “start by listing out both short-term and long-term goals and identifying any that you share. From there, outline your combined monthly income and categorize your expenses into essential costs like housing, utilities, and groceries, versus discretionary spending like entertainment, dining out, and personal hobbies. Moreover, allocate a portion of your income to savings, whether that’s for an emergency fund, retirement, or other specific goals. A key part of this process is flexibility; you need to create a budget that respects both partners’ spending habits while ensuring that you’re working toward your shared goals.”

By crafting a budget together, couples can align their financial aspirations and create a roadmap that supports their shared future.

Avoiding Common Financial Pitfalls

Every couple faces potential financial pitfalls, but with the right strategies, these can be avoided. Hazel highlighted some common issues, such as overspending, failing to save, and not discussing major financial decisions.

“Common financial pitfalls couples face include significantly overspending beyond their budget. While unforeseen expenses can arise, setting boundaries and limits can help manage spending and prevent long-term financial issues,” she informed us. “Another pitfall is a lack of transparency and communication between partners. Merging accounts needs constant communication and adjustments, just like a marriage. It's crucial to be open-minded and see what needs to change and what works to master the joint financial future.”

Jon echoed the sentiment that communication breakdowns are one of the most frequent. He adds that “even in relationships where one partner takes the lead on financial management, both should be actively involved in major decisions like investments, large purchases, and long-term financial planning. This involvement will ensure that both partners feel informed and engaged in the financial direction of the relationship, reducing the likelihood of resentment or surprises later on.”

But it doesn’t just stop there. He continued, “Couples usually underestimate the impact of debt. Taking on joint debt without a clear, mutual plan for repayment can lead to financial strain. So, it’s very important to have a clear strategy for managing and reducing debt, whether that involves paying off high-interest credit cards first, refinancing loans for better terms, or setting up a strict repayment schedule that both partners commit to following.”

Continuous communication and regular financial check-ins are the best way to avoid these pitfalls. As well, understanding common mistakes allows couples to be proactive, ensuring they navigate their financial journey smoothly and avoid unnecessary stress.

Setting Financial Goals Together

Setting financial goals, both short-term and long-term, is crucial for a couple's financial health. This process involves discussing what each partner wants to achieve and finding common ground. Jon emphasized the importance of having clear, achievable goals and revisiting them regularly.

“Setting financial goals as a couple is more than just listing aspirations; it’s about understanding each other’s dreams and working together to create a roadmap for achieving them. Start by discussing what you both want to achieve in the near future, such as building an emergency fund, paying off a specific debt, or saving for a major purchase like a car or a vacation. These short-term goals are important because they set the tone for your financial partnership and help build momentum toward bigger objectives,” Jon explained.

“Once you’re aligned on short-term goals, it’s time to look at the bigger picture. Long-term goals might include retirement planning, buying a home, or investing in your children’s education. Prioritizing these goals can sometimes be challenging, especially if there are differences in what each partner values most. In this case, couples should set timelines for these goals and break them down into actionable steps, such as deciding how much they need to save each month to reach a particular milestone.

“Flexibility is equally important; life happens, and priorities can shift, so it’s important to revisit these goals regularly to ensure they still align with your shared vision for the future. Communication and compromise play a big role in this process, ensuring that both partners feel their goals are valued and that they’re contributing equally to achieving them.”

A shared vision for the future helps couples stay motivated and work together towards their financial milestones.

Managing Debt and Building Savings

Managing debt and building savings are essential components of a healthy financial plan. Jon suggests couples should tackle high-interest debt first while creating an emergency savings fund. This dual approach ensures they are prepared for unexpected expenses while reducing financial burdens.

“Start by identifying and prioritizing the debts that carry the highest interest rates, such as credit cards or personal loans. Paying these off first can save you money in the long run and reduce the overall financial burden. If the debt is significant, consider consolidation options that could lower your interest rates or simplify payments. At the same time, it’s important not to neglect your savings. Building an emergency fund should be a top priority, as it provides a financial safety net for unexpected expenses. Setting up automatic transfers into a savings account will ensure you’re consistently putting money aside each month without having to think about it.”

He added, “Once you’ve established a solid emergency fund, consider setting up additional savings accounts for specific goals, such as a down payment on a house or future vacations. For longer-term savings, explore investment opportunities that align with your risk tolerance and financial goals. Regularly review your debt repayment and savings progress to stay on track, and don’t hesitate to adjust your strategy as needed to accommodate changes in your financial situation or goals. The key is maintaining a steady, consistent effort toward reducing debt and building wealth together, with both partners fully engaged in the process.”

By managing debt efficiently and prioritizing savings, couples can achieve financial stability and peace of mind, paving the way for a secure future together.

Real-Life Application: Talking to Austin Glanzer

So, how do budgeting and financing apply to real-life couples? We spoke to Austin Glazner of 717 Home Buyers, and he shared some inspiring insight into his own financial journey in the early years of his young marriage.

“I'm [now] 27 years old and married my wife, Liz, when I was 20. Even though I was young, I knew Liz was the one for me; however, I had only $38 in my bank account at the time. When I called my dad to tell him I wanted to marry Liz, he asked how I planned to support her. I had just landed a job in marketing and was confident I could earn enough to take care of us.

My dad gave me some invaluable advice: Liz and I should sit down and create a ‘Best Case,’ ‘Worst Case,’ and ‘Most Likely Case’ budget. This would help us determine if we could sustain ourselves in various scenarios. So, we went to a coffee shop and mapped out our budget, considering three possibilities: if only I worked, if both of us worked, and if we both landed our dream jobs.

This exercise was incredibly helpful. We discovered I could support us on my income alone, though it would be tight with no savings. The most impactful insight, however, was that we should aim for the best-case scenario. We both applied for our dream jobs and got them! Soon after our wedding, we were living our best-case scenario.

The biggest takeaway from this budgeting exercise was how it aligned with our goals. We knew exactly how we would live, what we would spend, and how we would contribute.

Shortly after getting married, we decided to live below our means, relying solely on my income. This allowed us to save a substantial amount of money within the first year, which we then invested in real estate. As a result, we now have a net worth of over a million dollars as a couple at 27 and 29 years old.

I now work full-time in real estate, flipping houses, buying rentals, and wholesaling properties.

All of this was possible because Liz and I aligned our goals, stayed on the same page, and took my dad's advice. I suggest that any couple sit down and align their goals together.”

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Financial planning for couples is a journey that requires open communication, mutual understanding, and strategic planning. By following the insights and advice from our expert financial advisor, engaged couples can confidently merge their finances, set realistic goals, and build a strong financial foundation.

As you start your journey and enter this exciting new chapter together, remember that successful financial planning can enhance your relationship and ensure a prosperous future.