10 Crucial Money Rules Couples Should Follow

Should you open a joint bank account? Get a credit card together? Cosign a mortgage? Money Girl Laura Adams covers ten crucial rules for first-time couples managing their money together.

Laura Adams, MBA
7-minute read
Episode #706
The Quick And Dirty

How you manage money as a couple depends on factors such as your commitment level, financial history, and goals. While managing money together as a couple is a good idea, don't do it unless you're committed to stay together in the future, as unraveling financial lives can be complicated. Understand the risks of cosigning debt and buying property together. And always turn to a financial professional when needed.

Being a new couple includes many "firsts," including managing money together or even buying a home. From deciding whether to open a joint bank account or knowing if you should cosign a mortgage, these critical life events can make or break your romance. This post will cover ten money rules every first-time couple should follow. 

10 money rules every first-time couple should follow

  1. Manage money together only when your relationship is long-term.
  2. Know your financial history. 
  3. Create financial goals together.
  4. Set a joint spending plan.
  5. Communicate about money regularly.
  6. Understand the risks of cosigning debt.
  7. Be clear about the pros and cons of buying a home.
  8. Use good financial tools.
  9. Know the spousal IRA rules.
  10. Get help from a financial professional when needed.

Following these tips will set you and your partner up for a successful financial future. 

1. Manage money together only when your relationship is long-term

In general, I recommend managing money as a couple. However, I don't recommend it unless you're 100% committed and plan on staying together forever. That's because if you break up, unraveling your financial lives can be complicated.

For example, having a joint bank account means that both parties own it and can access the funds. You and your partner can spend or withdraw any amount of your balance at any time. Being co-signers on loans and credit cards means that if one person decides not to pay their fair share, the other owner is on the hook for the entire debtnot just half of what's owed.

The bottom line is that if you're uncertain how long your relationship will last or have concerns about merging money with someone else, please don't do it!

2. Know your financial history

A huge part of a successful relationship is building and maintaining a foundation of trust, which includes knowing the details of each other's financial histories, such as how much debt you owe and your credit ratings. 

The good news is that even if your partner has bad credit, it doesn't hurt yours. However, it could make it more challenging to qualify for a joint credit account, such as a credit card, auto loan, or mortgage. 

Reviewing your credit reports for free at Annualcreditreport.com is a great place to start if you're not sure what your history is.

3. Create financial goals together

Before you merge money as a couple, it's essential to talk about your financial goals. It's the best way to know if you're on the same page. 

Talk about what you want to achieve over the next few years and the long term, such as your ideas about retirement. It's better to know sooner rather than later if you have vast differences of opinion. For instance, if your priority is to live frugally to build a sizable retirement nest egg, but your partner is a free-wheeling spender, your financial philosophies may be too far apart. 

4. Set a joint spending plan

Once you know your financial histories and discuss goals, consider how you'll handle expenses as a couple. While splitting everything 50/50 may seem like a good strategy, it may not work if one person earns much less than the other. 

In that case, you might divide costs by percentages to make things fairer. For example, if your partner earns 35% of the total household income and you make 65%, you could pay 65% of the household expenses. 

However, if you go all in and merge your finances as a couple, you won't have to worry about dividing expenses. Instead, you'll pay bills from a joint account. However, as I keep mentioning, that's a big step unless you're in a 100% committed relationship. 

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5. Communicate about money regularly

Even if your financial goals as a couple are aligned, a key to long-term success is communicating regularly. Fortunately, my husband and I share the same views when it comes to our money and lives. However, that doesn't mean we didn't have our share of disagreements in the early days that we had to resolve. My advice is to be open-minded about changing strategies and setting new guidelines if the way you manage money as a couple isn't working.

Unfortunately, many couples talk about money only after problems arise, which is the wrong approach. Instead, set a time each week or month to chat about your budget, debt, income, and plans for the future. That will help you iron out any wrinkles in your relationship and improve your financial wellbeing. 

6. Understand the risks of cosigning debt

When you cosign a credit account, such as a credit card, auto loan, or mortgage, you assume equal responsibility for it, and the payment history will appear on both of your credit reports. That means you can both build credit if the payments get made on time. 

But if one person in a couple fails to pay a cosigned credit account on time, it hurts both of your credit scores. Plus, you're both legally responsible for the entire debt, no matter who spent the money. So, if you are in a committed relationship and decide to cosign a credit account, be sure payments never fall through the cracks.  

If your partner has poor credit, cosigning a credit card or loan is one way to help them build or improve it. Another option is to add them to a credit card as an authorized user. That allows the partner to make purchases, but they won't be legally responsible for the debt. In general, the card's payment history gets reported to both the authorized user's and the card owner's credit reports. 

However, as I mentioned, I only recommend combining your credit accounts if you're in a solid, committed relationship built on trust. Otherwise, you could end up with a large amount of credit card debt if an authorized user abuses your card.  

Also, note that if you decide to apply for a joint credit card with a partner and already have cards in your name, you don't need to close them. In What to Know Before You Cancel a Credit Card, I cover multiple reasons why closing cards can hurt your credit.  

7. Be clear about the pros and cons of buying a home

An increasing number of unmarried couples and partners are buying real estate. It may be more affordable to team up and buy a home or an investment property in some cases. You can use an online mortgage calculator to help crunch the numbers. However, buying real estate with someone else can damage your finances and relationship if you're not careful. 

When you buy property, you receive a document called a deed, which shows the owners' names and how you legally own the property. If you're not married, you have the following options:

  • Tenants in Common gives each person a share of the property, such as 50/50 or 75/25. When one tenant in common dies, their share goes to their heirsnot to the other owner(s). And each owner can sell or give away their interest in the property.

  • Joint Tenants with Right of Survivorship gives each person the right to own the property when the other owner(s) dies. So, their interest automatically passes to the survivor, not to their heirs. 

Although married couples can own property as tenants in common or joint tenants, they have another option:

  • Tenancy by the Entirety allows spouses to own property together as a single legal entity. It protects each person because a creditor of one spouse can't attach and sell the interest of the property that the other spouse owns. And when one spouse dies, their interest passes to the surviving spouse, just like joint tenant ownership.

You'll also need to decide how to finance a home as a couple. Do you have equal amounts of money for the down payment? And do you each want to be on the hook for a mortgage? Each mortgage applicant must show ample income, job history, and credit scores to get approved. 

If one partner has low income or poor credit, the other could be the sole mortgage applicant. Just remember that you're not legally responsible for repayment unless your name is on a mortgage. Being named on the deed indicates ownership, but that isn't the same as having financial responsibility for a mortgage on the property.  

In the excitement of buying a home, don't forget that you're making a considerable investment, and a financial or legal mistake could jeopardize your entire financial future. So, it's wise to get advice and even create a formal ownership agreement outlining every potential issue you can think of.  

Being named on the deed indicates ownership, but that isn't the same as having financial responsibility for a mortgage on the property.

For instance, what happens if you disagree on managing the property or if one person has a financial hardship and wants to sell out? What if your romantic relationship turns sour and you break up? These are the kinds of issues that need to get worked out before you commit to buying real estate as a couple.

Don't assume that you'll talk through any future disagreements when the time comes because your relationship could be different in the future. 

8. Use good financial tools

Whether you decide to merge money as a couple or not, it's essential to use good financial tools. They certainly make managing your finances as easy as possible, and some tools are even free. 

For example, a free personal finance app, like Mint, imports your bank and credit card transactions, allowing you to keep track of your spending and financial goals on the go. If you prefer a desktop product with more functionality and reporting, I'm a huge fan of Quicken

Quicken's starter version costs $35.99 per year and allows you to see your financial accounts and transactions in one place, create a budget, and manage bills. More expensive versions of Quicken are also available with increased functionality, such as creating savings goals and simplifying taxes and investments. 

Suppose you and your partner have your own financial accounts. In that case, you can assign expenses you want to splitsuch as a mortgage, rent, insurance, groceries, and utilitiesto a separate account named "joint expenses." That way, you can see how much you owe and settle up each month.

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9. Know the spousal IRA rules

Saving for retirement is vital to a secure financial future, but what if one person in a couple isn't working? Typically, if you're unmarried and don't have income, you're not eligible to contribute to a tax-advantaged retirement account. 

However, if you tie the knot, married couples filing taxes jointly qualify for a spousal IRA. It allows a working spouse to make a maximum contribution to an IRA for a non-working spouse.

For 2021, if both spouses are under age 50 and have a household income of at least $12,000, you can each contribute up to $6,000 to your own IRAs. If you're over 50, the maximum contribution increases to $7,000. 

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10. Get help from a financial professional when needed

Even if managing money is a breeze for you and your partner, it's often wise to get help from a financial pro, such as a financial advisor, retirement planner, tax accountant, or estate attorney. 

Yes, professionals cost money; however, getting good advice for retirement planning or navigating financial challenges can really pay off. You might consult with a financial pro once or work together over the long term to meet your financial goals as a couple.

About the Author

Laura Adams, MBA

Laura Adams received an MBA from the University of Florida. She's an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers is her newest title. Laura's previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.