The best financial decision I ever made wasn’t a financial decision: I got married. Much to my surprise, my financial life turned around once I found my beautiful bride. Mine is not an unusual situation — according to Barbara Dafoe Whitehead and David Popenoe from Rutgers University. people who marry are, on average, four times richer than those who never marry. Here are some of the reasons why:

Marriage makes you pay attention. You are no longer that idle bachelor, you’re in a partnership. Stupid decisions that you make now don’t just affect you, they affect someone else.

Marriage encourages long-term thinking. It’s not until you start planing ten, twenty, or thirty years ahead with someone that you understand what long-term savings really means.

Marriage cuts many bills in half. The moment you move into an apartment or buy a house together, every communal expense such as rent, heating, and property taxes has just been divided. Many other bills such as food and electricity are much cheaper for two people than for one. Just watch out for lifestyle inflation and, for heaven’s sake, don’t have a baby.

Marriage lowers taxes. Most countries, like the United States and the United Kingdom, give tax benefits to married people.

Marriage Makes Men Work Harder. According to Avner Ahituv of the University of Haifa and Robert Lerman of the Urban Institute, married men drink less, take fewer drugs and work harder, and earn 10% and 40% more than single men with similar backgrounds. (From The Economist, May 24th, 2007 The Frayed knot)

Marriage clarifies your thoughts. The big advantage of getting married is that you now have to say out loud your financial plans to another human being.

The first time you try and plan your finances with your spouse, you’ll probably realize that you don’t have a plan. You thought you had one, but when you try to articulate it, you discover that the details are missing — like trying to recall a dream hours after waking.

Working with someone else forces you to clearly articulate your goals. When you make a budget together you have to decide what your priorities really are, and it helps to talk them over with your partner. Do you really want to eat out that much, or would you rather put that money into the ‘early retirement’ and ‘vacation’ funds?

Marriage makes millionaires. In both The Millionaire Next Door and The Millionaire Mind, the author Thomas Stanley, states many times that one of the factors Millionaires credit as the source of their wealth is their spouse.

I don’t recommend you go out trying to find a fiancée so that you get wealthy, but if and when you do get married, don’t forget about the financial benefits.

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Header photograph by cedarjunction

The number one cause of divorce in the United States is disagreements over money. If you want to keep your marriage in good condition regular, open financial talk must be a part of your relationship.

Arguments over money are probably such a large issue in relationship because the way you spend money shows, in an undeniable way, where your priorities really are. If you talk about how much you want to save for retirement, but actually spend money on eating out, then eating out is really your priority.

Making a budget is actually a priority setting activity — which is exactly the kind of important thing that you should be regularly doing in a relationship.

Here are the steps that Noelani and I follow at the start of each month for a successful couple finance meeting:

1. We gather all the information about our incomes from the preceding month.
2. 15% of our pre-tax incomes goes toward long-term savings and retirement before any other discussion. No negotiation.
3. We estimate the month’s bills, and put that amount of money into our joint bills account. We pay the bills proportionally to our income e.g. if Noelani makes 45% of the household income, she pays 45% of the bills and I pay the remainder.
4. We review any medium-term savings plans we have, such as travel or large joint purchases. This money is put into separate ING accounts and is also split proportionally.
5. The money we individually have left over after our joint budgeting is our discretionary money. We can each do whatever we like with our respective remaining money without needing to consult each other. Having a little financial space of your own is important for releasing some of the pressure.

While it sounds like a hassle, it only takes us fifteen minutes to complete the steps, but that’s after the practice of years. Our first time took an entire night (mostly because estimating bills is difficult the first time through), but it gets faster with each repetition.

More important than sorting out the bills is the communication about our future, common goals. Some of the big changes we are making in our lives are the direct result of conversations we’ve started in these meetings. A couple finance meeting is a dedicated time to talk about the shape of the future you want with your partner — so make sure you get started on them if you haven’t already.

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Header photograph by neona

A while ago, I ran a question on if couples should combine their finances or keep them separate. Since then, my wife and I have been tweaking our system to come up with what we think is the best of everything:

The hybrid financial system

My wife and I, by our nature, are independent people — the more we thought about combined finances, the more it repulsed us. From a practical standpoint, however, there are numerous times when joint bank accounts make financial transactions simpler. So we decided to compromise and do both.

We have separate checking accounts where our respective employers deposit our paychecks. This allows us to keep our independence and not feel that every purchase will be scrutinized by the other person.

We did, however, open a joint checking account. Our joint expenses such as rent, the bills, gym memberships come of of this account. On the 3rd of every month, we have a couple finance meeting where we total the bills for our joint expenses and deposit that amount into the joint checking account.

We split the bills proportionally to our income. A spreadsheet in open office does the calculations for us. For example, last month my wife took home £1800.00 after taxes and I took home £2000.00. Our total income is £3,800. My fraction of that is £2,000/£3,800 or 53%. I pay 53% of the total cost of the joint bills and my wife pays 47%.

By paying proportionally, if one of us starts earning more money, it also helps reduce the bills of the other one. If one of us loses a job or their salary decreases, the burden on them for the bills is also proportionally reduced.

We also contribute in the same proportional way to the joint savings account for things that we will want to do together, like vacations or large purchases for our flat.

What are the methods you use in your relationship to split the bills? Do you see any problems with ours or have any suggestions?

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Header photograph by kevindooley

Recently, I tied the knot with a beautiful, geeky woman.

So, the question arises: how should we manage our financial lives together? Do we merge our accounts or do we keep them separate? Here are the reasons we see for each.

Reasons to Merge Finances:

• Simpler record keeping
• Forces us to make decisions together

Reasons to Keep Separate:

• Maintain feelings of independence
• If there is a divorce, separation is cleaner

There is also the question of how to handle the joint expenses, like bills. When the rent comes in, how do we divide it? Each pay half the rent? Do we trade bills? Do we each pay proportional to our income? Do we just throw all the income and expenses into the same pot and not worry about it?

So what do you, dear readers, do with your partners? Joint, separate, or some mixture of the two?

Please leave a comment and give us newlyweds your advice.

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Header photograph by jpockele