By Rebekah Hall
University of Arkansas Division of Agriculture
For couples who are tying the knot this summer, it’s critical to get started on the right financial foot by setting shared goals and understanding the emotions behind money.
“Individuals enter relationships with different backgrounds, families of origin, life experiences, values and expectations,” said Laura Hendrix, extension associate professor of personal finance and consumer economics for the University of Arkansas Division of Agriculture. “Differences in financial management habits can lead to conflict as well as financial crisis. Couples should fully explore and disclose debt before they get married.”
Hendrix said a helpful way to start talking about finances is for each person to reflect on their financial history, including how their parents handled money and discussed family finances.
“We sometimes go into a marriage assuming that our spouse thinks the same as we do in terms of how we want to do things,” Hendrix said. “Just as with other aspects of married life, family decision-making also springs from a history that influences how we expect to do things in the future. Without talking about these issues, many couples will feel blindsided by the financial difficulties they may create.”
The emotions behind money
Hendrix suggested couples try an activity in which each person writes down the feelings they associate with certain financial situations, such as winning the lottery, having no savings for a financial emergency or one spouse managing the money exclusively. Then, share your responses with your partner.
“If you reflect on your emotional history connected to these concepts, you realize they are not neutral,” Hendrix said. “For example, having $30,000 in school loans may create a sense of panic for one person, who sees the years of indebtedness ahead as financial bondage because of their past experiences with debt. Another person may feel very secure in knowing that those loans are an investment in the future because of their increased earning potential.”
“Different people are likely to respond differently — including emotionally — to these examples,” Hendrix said. “These emotions are likely to be connected to a person’s life experiences.”
Set shared financial goals
“No one is born with the natural ability to manage money,” Hendrix said. “Trying to operate financially without a spending plan is like trying to build a house without blueprints.”
Together, break your savings goals down into the following categories:
- Short-term goals that can be accomplished in one year.
- Intermediate goals that can be accomplished in one to five years.
- Long-term goals that require five years or more to achieve.
It also helps to be as specific as possible about your goals, assigning each one a potential price tag after conducting research about how much they each may cost, Hendrix said.
“For example, if your goal is to go on a one-week vacation, you would need to research the price of travel, lodging, entertainment and food,” Hendrix said. “Once you know the total price, with maybe a little extra for unforeseen circumstances, divide it by the number of weeks or months left until you want to go on your vacation. How much will you need to save each week or month to reach your goal?”
Hendrix said that as couples go through life, there will be several milestones for which they will need to be prepared financially, such as the birth of their first child or the purchase of their first house.
“The earlier you begin looking toward these milestones, the better prepared you will be when they arrive,” Hendrix said.
Get smart about credit
Hendrix said making the decision to use credit is a very personal matter, and one on which both partners should agree.
“Establish credit limits and discuss what will be ‘allowable’ purchases or reasons to use credit,” Hendrix said. “Credit cards can be convenient but can also lead to overspending. Using credit properly can help build a good credit score. Poor credit habits — such as late payments or maxing out cards — can damage your credit score.”
It can help to frame conversations about credit through the lens of your shared financial goals. Couples can ask themselves the following questions:
- How will the use of credit help us achieve our goals?
- How will the use of credit keep us from achieving our goals?
For couples who may already be overextended on credit cards, Hendrix said it’s crucial to beware of credit card repair scams.
“Some companies who advertise debt reduction may seem to offer a quick fix for your credit problems,” she said. “Beware of companies that ask for money up front. A reputable program will spend time reviewing your financial situation, help you set up a budget and teach you about money management.”
Share the responsibility
Hendrix said that setting clear rules within marriage about how money is handled can help mitigate issues of financial control and dominance.
“In addition to agreeing on goals and establishing a spending plan, this may mean having two or three separate checking accounts — to be drawn upon for specific and distinct categories of spending — rather than pooling income where everything goes into one account,” Hendrix said. “If a power conflict exists in a relationship, having separate accounts will allow the partner who may earn less, or feel like they have less power, to have some sense of autonomy.”
Even in the absence of a power conflict, Hendrix said, keeping money separate often helps partners retain “a healthy sense of self-direction and personal responsibility.”
“Some couples put an equal amount of their money into a joint checking account to cover household expenses,” Hendrix said. “The remainder of their earnings is saved in individual accounts or spent as each sees fit. This way, each partner has some money to call their own that they can manage without answering to the other spouse.”
If one money management system does not work, try to analyze why and change it — then, try again, Hendrix said.
“Both partners need to be involved in developing a workable system,” Hendrix said. “If they are not, the system will likely break down since they do not have a commitment to making it work.”
For more information about financial health and money management, visit the Personal Finance page on the Cooperative Extension Service website.
To learn about extension programs in Arkansas, contact your local Cooperative Extension Service agent or visit uaex.uada.edu. Follow us on Facebook and Instagram. To learn more about the Division of Agriculture, visit uada.edu. To learn more about ag and food research in Arkansas, visit the Arkansas Agricultural Experiment Station ataaes.uada.edu.
