Thursday, February 07, 2008

Husband and Wife : Who should be The Financial Controller ?

It's said that 60-80% of failed marriages have money problems at their core. Especially for the newly-weds, some financial problem only surface after marriage. You might not know how deep in debt is your spouse, unless he or she told you before signing the marriage certificate. In this post, we are going to discuss about certain issues regarding combining finances for husband and wife. Topics include:

  • Should married couples combine finances?
  • Pros and cons of combining finances.
  • Who should be the financial controller?

Should Married Couples Combine Finances

Money is the root of most evil (if not all). In the US, it is very common especially for wealthy people to have a Prenuptial Agreement before getting married.

Prenuptial Agreement
A contract between two potential marriage partners specifying how the property owned by each prior to marriage and owned individually or jointly during marriage will be divided should the couple divorce.

It is definitely a hard decision to make whether you should commit a long term financial commitment with your spouse. When we are thinking of combining finances between spouses, it has a lot to do with individual comfort and trust levels. Some separates their bills and saving even after years of marriage. For me, I combine and manage my whole household finances even before we get married. My wife trusts me with all her money. The same thing happened to my parents, but my mother is the one who control the finance.

In order to decide whether or not you should combine your finances with your spouse, take these issues into considerations:

  • How much you trust each other with money?
  • Who spend more money? You or your spouse? I suggest to let the more frugal one to be the “financial controller”
  • What are your financial goals? Do you have the same financial goals? Short-list and prioritize them. You need to compromise to come out with a set of agreeable financial objectives.
  • What is each person’s responsibility? (such as handling bills, credit card, parents’ allowances etc.)
  • Discuss about the monthly cash flow, budget and net worth. Use this list of financial tools and application to help.
  • Make a commitment to discuss about your money at least once a month if not more frequent.

Advantages of Combining Finances

Photo by shutupyourface

Love is about “us”
Try saving to your wife, “This is my money!” Most probably this will cause a major fight and hard to put off the fire for weeks. Combining accounts seems to be a major step to show that how much you care for each other. After getting married, my financial goals become “our” financial goals. My money becomes “our” money. If your spouse earn less or stay home to take care of your family, combining finances create a sense of security.

More efficient
When you are combining accounts, it is easier to manage. Either one can sign documents or withdraw cash during emergency. Besides that, you only need “one” instead of “a pair” of the material things. You only need one TV set, one audio set, one house to stay, one car (maybe). You only need to meet one really good financial planner to plan for both person assets.

Better Investment Opportunity
By combining your total income, your assets, you can better manage them. The more money you have, the more opportunity you are exposed to. Some investment such as buying properties, or investing in hedge fund overseas require larger initial lump sum. You will be able to invest in those larger investments which are not available to you before.

Better Tax Planning
This is even better for those who has business income. You can plan your account and distribute your income more evenly, so that your income won’t be at the highest tax bracket. For both working spouses, you can opt for separate tax

Share the load
You will get to make financial decision together, usually through thorough discussions which will enhance bonding between spouses. You’ll share you opinion, before committing a whole life insurance plan. You’ll educate each other on money matters. assessment and claim for many relief. Ask your tax agent for advice.

No more “I owe you”
When you are short of cash and ask your husband to pay for the meal, do you pay him back later? It’s ridiculous right? If you have combined your finances, you will by default, know that whenever you spend and save, the money is yours together. It was added or deducted from your “joint account”.

Who Should Control the Finances?

Usually, one person of a couple acts as the family accountant or “financial controller”. He/She will be responsible for managing investment, tracking expenses, budgeting, and making other financial decisions. If you are one of those couple who opt to combine finances, it won’t be hard to appoint the person responsible. Use these criteria as a guide:

  • Who is more frugal?
  • Who is better in accounting?
  • Who is better in personal finance knowledge?
  • Who is better in investment skills?
  • Who is more convenient to handle the accounts - attends seminar, meets financial planners, goes to the bank etc.?
  • Who is more dominant?

Do you combine your finances with your spouse?

I do combine our finances. My wife trusts me with all our money and assets. We both know that I am more frugal and smarter in financial planning. I make most of the financial decisions.

However, I still get consent from my wife to make major financial decisions, such as buying another house, or vehicle. My wife still has the freedom to spend, within the budget.


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