Planning a first home as a couple can be one of the most exciting parts of the newlywed year. You are creating a place that is truly yours together. Deciding on the specifics is can be a bit tricky, but if you managed to get through the wedding, you can certainly get through this. The main buzzwords to keep in mind are “budget” and “fairness”.
Establishing a budget involves not just looking at what you have spent in the past but what you plan to spend in the future. Your spending habits will naturally change as you become a couple. You may also have some things you need to save for like planning to have children.
Two Can Live As Cheaply As One?
There’s an old saying that two can live as cheaply as one, but in most cases that’s wishful thinking. There are certain categories in which this is truer than others. You will want to look at insurance coverage as one place where you can combine coverage and potentially save money. Categories to consider for consolidation include medical insurance, auto insurance, life insurance, and homeowners or renters insurance.
True Debt Confessions
Hopefully if you are planning to marry your financial futures to each other you know both what your partner makes and how much debt they carry. If you don’t, now is the time to come clean. It’s also important to make sure you know your credit scores and if there are any problems that need to be addressed or resolved. If you are planning to buy a home or looking for a new rental it’s important to get any potential problems solved sooner rather than later. This will also help you going forward if you are thinking of buying a home.
Even though you have merged hearts and households, you don’t merge credit scores: those are tied to your individual Social Security number. When the two of you jointly apply for something, both of your credit histories will be evaluated. If one of you has a poor credit score that will be taken into account. You can help your spouse’s credit by adding them to your credit card accounts (if you trust they won’t run up the balance). If one partner has both better credit and better income, that person can also apply for a home loan individually and may have a stronger chance of getting approved.
Know Your Habits
One thing that can be particularly helpful is to determine each of your individual spending patterns. Often we spend money without knowing exactly how much we spend in a particular category each month. Analyzing spending behavior for a three-to-six month period can give you a better idea of where your indulgence places are. Just about everyone has little extravagances where they tend to spend a lot of money. For most couples these aren’t necessarily the same categories. One person may spend a lot of money on dining out each week, while the other spends money on creating a record collection. To begin your financial life together, map out your spending habits. There are a variety of tools to do this. You can look back at past bank balances and credit card statements to get a general idea of categories. Another helpful tool is Mint.com, which can map out your spending in easy-to-read graphs. Be willing to look at each others past spending without judgment. Neither person should have to give up spending money on the things they love completely, but deciding on an amount or a percentage of the total budget that can be allocated to these wants is important.
Saving money is often a tough topic for couples. Most financial advisors recommend that couples each keep separate bank accounts as well as a shared one that they each contribute to. Both people should contribute what seems fair and agreed upon. Generally, two people don’t make the exact same amount of money so agreeing to contribute a certain percentage of income often makes most sense.
When it comes to saving money for a home you can also enlist wedding guests and family to help. Some couples set up a homebuying fund instead of a registry. There are several services including HatchMyHouse.com that allow you to do this in an easy and fun way. At the wedding you can create a money tree, house-shaped piggybank or other fun way to encourage people to participate. All that money can be a temptation so if you aren’t going to buy a home – immediately tuck it into a savings account and agree not to touch it so it’s ready when you need it!
Talking about money isn’t always fun, but it is necessary to help keep your relationship strong and prevent financial fights and surprises. Above all, keep the lines of communication open. Honesty, trust, and willingness to be share thoughts and feelings will help ensure many happy years to come.
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