May and June were big wedding months… so it makes sense for Kari Faber with The Penny Hoarder, to lay out some important thoughts for new couples. Every partnership is unique, but one topic tends to introduce stress more often than others in a relationship: money.
Do we get joint bank accounts? Do we invest separately? How do we split the bills? Do we have to tell our partner about every dime we spend?
Finances can be a touchy subject — whether you’re married or not — but it’s an incredibly important one. What you do today can affect your future together (think: buying a home, going on vacations, retiring) and you need to be on the same page.
But “same page” doesn’t always mean sharing the same accounts. Here are the times you should combine your finances — and when you shouldn’t.
1. Combine: Car Insurance Payments
Did you know you could save money by combining your car insurance with your partner’s? Yep — by putting two cars on one insurance policy, you could be eligible for discounted rates. Some up to 20% per additional car.
You should check this out every six months or so — it could save you some serious money. However, it’s probably not the first thing you think about when you wake up. But it doesn’t have to be. There are a lot of great tools out there to determine the best way to approach this concept.
2. Combine: Emergency Funds
If you share a life together, you’ll likely share the emergencies, too. Sick kids, company-wide layoffs and natural disasters don’t pick and choose their victims.
So having an emergency fund together is a smart move to ensure everyone is protected and has access to it.
If you’re looking for a place to safely stash that money — but still earn money — don’t waste your time with a typical savings account. The 0.04% national average interest rate is nothing these days. Again, there are great options to explore… just ask your Credit Union for advice.
3. Combine: Homeowners Insurance
Did you know that even if your home’s mortgage isn’t in your name — just your partner’s — you can still be on the homeowners insurance? In case something were to happen, you want to make sure you can access the benefits — so combine this, too!
If you’re a homeowner, you probably have homeowner’s insurance, but you hardly ever think about it. That’s good — it means you haven’t needed to use it. It also means you’re not aware if you are being overcharged for it.
It’s easy to find out, though. To see if you’re overpaying for your policy, check out some of the digital marketplaces for quotes and rate comparisons.
Homeowners can save hundreds of dollars when they switch home insurance companies this way. It takes just two minutes to get quotes from multiple insurers, so you can see all your options side-by-side.
4. Combine: Some of Your Credit Cards or Loans
You’ve got big plans. Maybe you’ve got your eye on a new car. Or you’re hoping to buy a house in the next few years. Or you’d even like to start your own business. But here’s the thing: No matter what your goals are, you might not realize how much your credit score is standing in your way.
But if you and your partner work together to pay off debts and keep low balances on credit cards, you can both benefit from any advances in your credit score.
What could adding 300 points to your score mean for your goals? It could easily save you thousands of dollars over the life of a car loan or mortgage.
5. Combine: Investments
When you invest in the stock market, you could earn an average of 7% year over year just by holding your investments.
And if you invest alongside your partner, you’ll also get an average of 7% — but 7% of a larger sum. That’s why it could be a smart move to combine your account with your spouse’s or open a new one together.
You can invest in pieces of well-known companies, such as Amazon, Google, Apple and more for as little as $1. The best part? If these companies profit, so can you. Some companies even send you a check every quarter for your share of the profits, called dividends.1
6. Combine: Tax Returns
This combined financial strategy might not work for everyone — it depends on how complicated your tax returns are or what your financial goals are.
But for most married couples, the tax credit you’d get on your yearly tax returns is enough to make it worthwhile. In 2020, a married couple filing jointly was able to take a $24,800 deduction, while filing solo only allowed for a $12,400 deduction.
7. Separate: Life Insurance
Ok, so you can’t combine life insurance policies even if you wanted to. But you should both have life insurance policies with each other as the beneficiaries.
Why? Because you need to think about how your family would manage without your income after you’re gone — Like how they’ll pay the bills or send the kids through school. Now’s a good time to start planning for the future by looking into a term life insurance policy.
Some policies start at less than $20 a month. The peace of mind of knowing your family is taken care of is priceless.
8. Separate: Personal and Emergency Savings
Sharing an emergency fund is important — but so is having one all to yourself. Whether it’s for something fun like buying surprise gifts or having a financial layer of protection in case you break up, make sure you’re saving for yourself.
You can easily set up a secondary savings account to use as your “allowance,” or to save for something special – ask us for details!
9. Separate: 401(k) Retirement Investing
Setting aside money from your paycheck to put into your 401(k) is literally one of the smartest things you can do for your future. And if your employer matches each contribution, that could mean hundreds of thousands of extra dollars in your account when you retire.
It’s free money — and it’s only available to you. If your spouse’s employer offers them a match as well — double free money!
