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Are your finances as strong as your marriage?

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Are your finances as strong as your marriage?
My husband delights in telling people, including complete strangers, about his "pittance." That's his word for the cash that is automatically whisked from our joint account into his separate checking account every week.

I pull out a similar sum for myself, and we use these weekly allowances as "walking around" money -- for treats, lunches out, movies and buying presents for each other without leaving a trail of credit-card receipts behind.

We had a few false starts -- and some tense moments -- before we hit on this system. But when it comes to merging money when you're married, financial planners say, trial and error is often the best approach.

"There are no rules," says Delia Fernandez, a financial planner in Los Alamitos, Calif., who advises many couples about their money. "That's the wonderful thing about marriage -- you get to make it up as you go along."

Different financial tasks and challenges arise at discrete times in our lives. Children generate a lot of financial decisions that should be dealt with as soon as they're born, including wills, insurance and college planning. Buying a home sets up its own dynamics, as does planning for retirement. Later on, you'll probably have to get involved in your parents' finances.

9 issues to talk about

The challenges of marriage and money are complex because of the interaction of love, emotion and practical realities.

What couples shouldn't do, however, is assume money matters will simply fall into place without effort. Successfully merging your finances in marriage requires honesty, communication, flexibility and trust -- the very qualities, Fernandez points out, that make for a good marriage in the first place.

Here are the issues you should talk about, whether you are just contemplating marriage, already starry-eyed honeymooners or struggling to mesh your money styles after years of conflict.

Banking and bill-paying

When it comes to handling money and bills, couples' styles are as different as their relationships. They range from the "roommate" approach -- each spouse has separate accounts and bills are divvied up -- to the "two-shall-be-as-one" style, where every checkbook, credit card and brokerage statement in the house is in both names.

Once again, there's no right answer. But couples need to figure out what works for them by asking these questions:

Should we have a joint account?

A joint account for household expenses can be handy. It's not required, however. You'll also need to decide if that will be your only checking account, or if each spouse will have a separate account as well. Separate accounts can give each partner a sense of freedom and autonomy, but some people feel these private accounts can undermine the sense of "all-for-one" unity they were hoping for in marriage.

If you can't agree or aren't clear about the right path, take your time. Couples in general should consider merging their finances slowly, says Washington, D.C. psychotherapist Olivia Mellan, as they get to know each other and build trust. This is particularly important if your money styles are different, which is often the case, said Mellan, author of "Money Harmony: Resolving Money Conflicts in Your Life and Relationships."

Where will our paychecks be deposited?

Some couples who have both joint and separate accounts have their checks deposited in the joint account to cover the bills, and transfer spending money to separate accounts. Some do just the opposite -- depositing their checks in their own accounts, then moving enough money to cover bills into the joint account.

How will we make spending decisions?

Most couples don't want to debate every $5 purchase. On the other hand, you probably wouldn't want to see a new car in the driveway when you hadn't been consulted. (This, by the way, actually happened to a friend of ours. And it was a Jaguar, no less. They're no longer married.)

Many people starting out set a limit of how much they can spend without consulting the other. Working out a budget of how much is to be spent on groceries, clothes, household items and other sundries each month can also help avoid fights. Allowances, of course, are yet another option.

It was fountain pens, of all things, that led to our decision to try allowances. My artist husband fell in love with one expensive pen after another. Since I couldn't tell a $175 Namiki Falcon from a Bic, the amounts that kept popping up on our charge card were driving me slightly batty.

At the same time, Hubby was feeling a distinct lack of privacy. With a joint account and joint credit cards, he couldn't buy me a present without my knowing exactly where he bought it and how much it cost -- often within a day, since our personal finance software is so efficient at tracking transactions.

So now we have the pittance system -- and a lot more money harmony. I get surprised with lovely gifts, and he gets to have his lovely pens, with no guff from The Wife.

Who will be responsible for paying bills?

In most couples, one person becomes the chief financial officer, responsible for most money matters. This is probably the most efficient approach, but the partner who's not handling day-to-day bills shouldn't be left in the dark. Regular "business" meetings, where finances are discussed, are essential, planners say.

"You should know what's going on," Fernandez says. "If something happens (to the CFO), you're going to need to step in and take over."

Credit and debt

Like it or not, your credit histories, like your finances, are probably going to be intertwined after marriage.

Technically, you could try to keep things separate. But if you apply for a mortgage together, add each other to your credit cards or even buy stuff that benefits you both, your partner's credit sins can become your own. If one or both of you has bad credit, improving it should be a priority.

That's why it's important to know each other's debt situation early on -- whether you're marrying for the first time or a second time. Then, make plans to deal with it.

What do our credit histories look like, and how can we make them better?

You're entitled to a free yearly copy of your credit report from each of the three major credit bureaus: Experian, Trans Union or Equifax. You can also obtain a credit report through MSN Money.

You can also get a copy of your report and your credit score, a three-digit number that lenders increasingly use to evaluate your creditworthiness, at this page or by visiting My FICO.com. Talk about what you see on the reports, make plans to correct any errors and read the information at MyFico.com about ways to improve your creditworthiness. Paying bills on time, reducing debt and applying for credit sparingly are all ways to improve your ability to get credit when you need it.

What do we own, and owe?

Totaling up your assets and your liabilities in what's known as a "net worth statement" is the first step in financial planning. It gives you a snapshot of where you are now -- and can help point where you need to go.

Use this balance sheet as a starting point for discussions about your goals. Do you want to retire early? Have kids? Buy a home? Travel the world? Figure out together what's important to you, and prioritize your goals. Then you can use personal finance software like Microsoft Money or Quicken to start planning for those goals, or you can consult a financial adviser. MSN Money's Advisor Finder can help you find the right one.

What's our plan for paying off our debt?

Not many people come to marriage without some financial baggage, often in the form of credit-card debt, car payments and student loans.

Each dollar you spend on interest, though, is a dollar you don't have for your other goals. And debt is often a signal that you're living beyond your means, which could mean never achieving your dreams.

Creating a debt repayment plan will require that you first find out how much you spend, and determine a realistic budget for future spending. This is a joint effort not something either one of you can do alone.

Legally, you're probably not required to pay off your spouse's student loans or credit cards if the debt was run up before you said "I do," said divorce expert Violet Woodhouse, an attorney and financial planner in Newport Beach, Calif., who co-authored "Divorce & Money." Some insist that payments for pre-marriage debts be made from separate accounts, rather than the joint account. Others take a more "all-for-one" approach, reasoning that they're a team now, and whatever benefits the team financially is the right thing to do. Discuss which way you want to handle it.

Debts incurred during marriage, of course, are a whole different matter. You're often on the hook for a spouse's spending, whether you knew about it or not. That's why honesty and continued communication is so important, financial planners say.

(By the way, if you really want to keep things separate, talk to a lawyer. There are ways to create a his-and-hers financial situation, but they typically take a lot of work and some detailed legal agreements. If you don't have a lot of assets to protect, it's probably not worth the bother.)

Final thoughts

Your financial obligations to your spouse don't end at death. And should you die prematurely, you could be leaving behind a real mess.

If both of your incomes are needed to pay the mortgage, for example, you both should have life insurance. Otherwise, your mate could end up homeless.

You should also check -- and usually change -- the beneficiaries of any existing life insurance policies as well as beneficiaries for all your bank, brokerage and retirement accounts. I've received letters from parents who wound up with life insurance proceeds after their adult children died -- because the children forgot to change the beneficiaries on their policies when they got married.

In most cases, the parents wanted to give the money to the surviving spouses. But this often created gift tax problems for the parents. This is not the legacy you want to leave behind.

Here's the checklist of what to talk about:

Do we need a will? Typically, the answer is yes. Otherwise, your state will distribute your assets, and its plan might not gibe with your wishes. Wills become particularly important if you have minor children and you both die together. If you haven't named a guardian, you could be setting up a devastating court battle over custody.

Do we need life insurance? If your spouse depends on your income, or vice versa, the answer is yes. MSN Money's Life Insurance Estimator is a tool you can use to determine how much.

Are all our beneficiary designations current? Call your brokerage, your bank and your life insurance agent, if you have one, to update their files. Your human resources department at work can help you check and update the beneficiary for any company-provided life insurance or retirement accounts. As you can see, a lot of work lies ahead. But calm discussion and a workable plan can help head off lots of money conflicts later. The time you spend taking care of these issues is an important investment in your marriage.

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