The Complete Guide on Financial Planning for Couples

According to a recent survey of Certified Divorce Financial Analysts (CDFA) professionals, the top three reasons couples split up are basic incompatibility, infidelity, and, not surprisingly, money issues. In fact, financial disagreements account for around 22% of all divorces.

Financial planning as a couple is a whole different ball game compared to managing money on your own. Once you are in a serious relationship, whether you are married, living together, planning a future together, or even going through a divorce, your finances are no longer just about you.

You are likely building or dividing something shared. You might find yourselves splitting rent, saving for a wedding, or thinking about starting a family. If you have tied the knot, legal responsibilities will also begin to take effect, such as shared debts and joint bank accounts. If you are parting ways, things can get equally complex.

Handling money as a couple can be challenging at first, simply because you may not have done this before. Even if you have managed finances with a previous partner, this time around can probably be different. Every person has their way of thinking about money. That is why it is essential to approach the situation with a fresh perspective.

To help with this, we have built this guide on financial planning for couples. This four-part guide can help you navigate the essential aspects of couples’ financial planning and provide a clear understanding of the financial implications of being in a relationship.

Financial planning for partners

Financial planning can look different for different couples. However, roughly, you can break this into the following phases:

1. The moving-in-together phase
2. The newly married looking to start a family phase
3. The retirement planning phase
4. The divorce phase (if it comes to that)

Now, let’s break it down to what can be done during each of these phases.

     1. The moving-in-together phase

Moving in together is a big step. It is exciting, no doubt. It feels like a significant milestone. However, while you may be merging your lives, you are not legally bound to each other, which makes couples’ financial planning in this phase especially crucial.

Plenty of couples live together for years, sometimes even their whole lives, without getting married. And that is totally okay. However, these relationships may lack the legal safeguards that marriage provides. Therefore, you may need to be more intentional about managing your finances and household responsibilities.

     a. Let’s start with the basics: Do you want to combine your finances or keep them separate?

Some couples choose to maintain individual bank accounts and split shared costs evenly. Others open a joint account for household expenses, such as rent, groceries, gas, heat, and water. Many also choose a hybrid approach, where they maintain their own accounts but contribute a fixed amount each month to a shared fund.

What you decide here depends on your comfort level and, frankly, how much you trust each other.

You need to consider factors such as how long you have been together, whether you are open to having uncomfortable conversations about money, and whether your partner is financially responsible.

You must not ignore the risk factors. Unfortunately, financial fraud between partners is not unheard of. This becomes even more complicated if one of you has a child from a previous relationship. The child would have needs, like education, healthcare, and day-to-day expenses. And if things go south, you would want to make sure their future is not disrupted just because you did not protect your own.

     b. Budgeting is your next must-do

Create a budget for shared expenses, such as rent, electricity, water, Wi-Fi, groceries, and any other regularly used items. Sit down and actually map out both your incomes and fixed expenses. Then decide who pays for what.

Will you split everything 50/50 or divide costs based on income percentages?

The latter can be a good choice when both partners have different incomes. You can also develop a system based on convenience. Say, one of you takes care of rent while the other handles groceries and utilities.

     c. Be careful when drawing up new agreements

When it comes to your living space, be mindful of lease agreements. Landlords usually prefer that all tenants sign the lease. That way, everyone is legally responsible for rent and damages. Even if one of you is earning more or moved in first, both names on the lease can help avoid messy situations later.

     d. Do not overlook your individual financial independence

Yes, you are a team now. However, that does not mean you should abandon all financial privacy. Keep your own savings. Continue contributing to your retirement account. Hang on to your individual credit cards and work on building your credit score.

If things do not work out, you need to be in a position where you can move forward without complete financial devastation. You need to give yourself a cushion, both as a couple and as individuals.

Also, have an emergency fund. Breakups can be expensive. And you would not want to be the person who gave up everything for romance.

     2. The newly married looking to start a family phase

First off, congratulations!

If you’ve just tied the knot or are planning to start a family, this phase is one of the most exciting stages in life. But financial planning as a couple becomes even more critical now.

If you have already been living together, some of the basics may feel familiar, such as deciding whether to keep separate accounts, open a joint account, or maintain a mix of both. The difference now is that you are legally married, which brings more structure to how your assets and liabilities will be handled. In the event of a separation or divorce, the division of finances is a legal process that can simplify many aspects.

So, what should you be focusing on?

     a. For starters, sit down together, understand each other’s finances, and look at the big picture

Talk about things like:

• What do you both earn?
• What are your financial goals?
• Who is a spender and who is a saver?
• Are you open to risky investments?
• Do you financially support another family member, such as parents, siblings, or children from a previous relationship

     b. Discuss debt

Debt can be a tricky topic, and it is impossible that one of you came into the marriage with a student loan, or the other is managing a mortgage or business debt. You must talk about these openly.

Figure out whether you will tackle these debts jointly or separately, and why. If it is a home loan you are both living under, it might make sense to pay it off together. However, if it is a personal business loan that one of you took out before marriage, that may remain individual.

     c. Talk about emergencies

You need an emergency fund. If both of you are working, consider keeping separate funds for added independence and better financial security. But if one of you is currently not working, have at least one strong joint emergency fund that covers three to six months of your living expenses.

     d. And yes, the big one – starting a family

If you plan to have children, are already expecting, or are adopting, you will need a financial plan tailored specifically to your child’s needs. You need to prepare for prenatal care, delivery expenses, vaccinations, daycare, school, and eventually, college. Start budgeting for these early.

Consider opening a 529 education plan. These come with tax advantages and will give your child a financial cushion.

     e. Do not forget insurance either

Life insurance becomes crucial once you have dependents. A life insurance plan can ensure your family is financially secure if anything happens to you. Health insurance should cover your entire family, and if you have purchased a home, ensure you are also covered with homeowners’ insurance.

     3. The retirement planning phase

This phase is all about long-term thinking. Ideally, you should start thinking about retirement early, maybe even the day right after you tie the knot. It may sound too soon, but it really is not.

Retirement is the one phase of life where you will no longer earn a paycheck, but you will still have expenses to cover. So, it is never too soon to start planning for it.

     a. Invest in those retirement accounts you keep hearing about

• Start by checking if both of you are working and have access to employer-sponsored retirement accounts, such as 401(k)s. If you do, great!
• Next step? Check if your employer offers matching contributions. If they do, take full advantage of them by contributing up to the maximum permissible limit yourself.
• If you are both in your 50s or older, be sure to consider catch-up contributions. These allow you to contribute extra to your retirement accounts.
• Now, let’s say one of you does not have access to a 401(k). No problem. You can open an Individual Retirement Account (IRA).
• If you want to be even more strategic, consider mixing things up. Say, one of you has a traditional 401(k). In this case, the other might open a Roth IRA. If neither of you has a 401(k), one of you can open a Roth IRA while the other one can open a traditional IRA. That way, you will diversify your tax exposure. Some money will be taxed now, while some will be taxed later.

     b. Insure yourselves  

Insurance is a big part of financial planning for couples. In retirement, you will need health insurance, life insurance, and long-term care insurance. These can be expensive if you wait too long, so it is smart to lock in good premiums while you are still relatively young and healthy.

     c. Build an emergency fund or maintain the one you have had so far

Emergency funds are still crucial at this stage. Keep a solid cushion for those just-in-case moments by building or maintaining an emergency fund that covers you both for at least three to six months.

     d. Consider hiring a couple’s financial planner

Finally, consider hiring a financial planner who specializes in working with couples. Retirement planning can be complex, with numerous factors to consider. A good financial advisor can help you account for both your visions and retirement goals and ensure you can achieve them together.

     4. The divorce phase

If it ever reaches this stage, you need to be both financially and emotionally prepared. Divorces can be extremely messy. People are hurt, grieving, and many times, angry. When such emotions run high, having a clear financial plan in place considerably helps.

     a. Evaluate your assets

There are several critical money matters to address during a divorce. Some of the most common financial concerns include dividing your assets. You can do this by first identifying and valuing their worth. You may have bought these together and now need to decide whether to split them equally or have one person keep some while the other keeps the rest. Assets that often come into play during a divorce include retirement accounts, such as 401(k)s and IRAs, homes, business investments, and collectibles.

     b. The issue of debt and other obligations

You need to determine your joint liabilities, such as loans. You will need to determine whether these liabilities are shared or separate, and, more importantly, who will be responsible for repaying them. Additionally, you should discuss future liabilities and obligations, such as alimony or child support, in the event of children.

     c. What about estate planning?

One thing many people overlook during this phase is estate planning. If you have wills, trusts, healthcare directives, powers of attorney, or even retirement accounts and insurance plans that name your former spouse, you will have to update these documents immediately.

Hiring a couple’s financial planner who specializes in working with divorcing couples can be a game-changer. They can help facilitate a fair and equitable division of assets, calculate future financial needs, and ensure that aspects such as alimony and child support are not overlooked during the process.

Note: If you have not yet gone through a divorce but want to protect your financial interests in case of a future separation, it may be worth considering a prenuptial agreement. These agreements are commonly used by couples who may have significant assets, high incomes, and who come from extremely influential and wealthy families. Prenuptial agreements specify how a couple’s assets and debts will be handled or divided in the case of a divorce.

To conclude

No matter where you are in your relationship – whether you’ve just moved in, are getting married, have been married for years, or are even going your separate ways, financial planning for couples matters. And the sooner you start talking about it, the better.

Financial planning is for every couple who wants to avoid unnecessary stress, stay on the same page, and protect each other. Financial infidelity is more common than you might think. Talking openly about your money can save you from misunderstandings, arguments, and even heartbreak.

Sit down, talk it out, and if things feel too complicated, consider consulting a couple’s financial planner. The Wiser Advisor’s free advisor match tool can help you find a financial advisor who is qualified to help couples manage money. You can hire someone who can help you and your partner together or even guide you individually, if that is the route you wish to take.