The first thing you think about when you dive headfirst into married life isn’t going to be your finances. Some couples consider it beforehand and take steps like setting up a joint bank account or a joint savings account. But many couples want to wait until they’re settled into married life to have a finances conversation. Will bills be split 50/50, who will put more into the savings account, and who will cover for things like a broken washing machine? Some people might find the conversations awkward or daunting, but one conversation every couple should openly have is how to become financially healthy.
Financial health is essential, especially currently in the US, as inflation rates are at 8.3%. Although that’s .2% lower than it was in March, it’s still 8.3% higher than it was this time last year. That means that anyone without at least an 8.3% pay rise is losing money – thus, financial health is all the more important at the minute.
Below, we’ll look at what priorities a couple should have if they want to be financially healthy.
First, Think About Your Financial Health
The first thing any couple should do is consider their personal financial health before merging it with a partner. By definition, financial health is an umbrella term for your current monetary situation. Considering your financial health means considering income, savings, expenses, debt, investments, and anything relating to your finances.
Some aspects of our finances will always stay unique to us, like our credit score. Credit scores have become increasingly important because they essentially give you and lenders an overview of how trustworthy you are to lend money. Your credit score will determine how seamless it is to acquire loans, what interest rate you get, whether stores will give you credit, or whether you’re ready for a mortgage.
Based on research, the average credit score in the US is 698 out of 850, which isn’t bad going, but it still isn’t the best possible score that will open doors to more lucrative forms of lending. Improving your credit score fast is relatively easy to do by meeting minimum payments and clearing down high-interest debt, taking out credit builder cards, and spending wisely. 90% of major lenders use the FICO scores – the average score being 698 – so it’s wise to understand your score and how to improve it.
Address Personal Money Wounds
Relationship experts believe that one of the foundations of any healthy relationship is understanding a partner’s wounds, including personal money wounds. Personal financial scars are often related to debt and poor credit scores – but 8 in 10 Americans have some form of personal or shared debt, and the average amount of money owed per household is $38,000.
Address these wounds by either finding ways to get rid of the debt or by simply being open and honest about your personal financial circumstances. As the statistic shows, 8 in 10 people have debt, so chances are, so does your partner. Why is it so essential to be open about money owed? When an individual owes money they can’t pay back, lenders come knocking at the door to look for personal possessions they can take to pay off what a person owes.
Get Your Credit Utilization Down
Credit utilization relates to your credit score and the amount of money you owe or are allowed to lend. Your credit utilization is essentially how much money lenders will give you compared to how much you’re actually using. Most experts agree that a person’s credit utilization ratio should be below 50%. That means that if multiple lenders have agreed to give you $5,000 through different credit cards, for example, and you spend $2600, you’re using slightly over 50% of your available credit.
Multiple credit score apps will highlight your credit utilization. The lower it is, the more likely lenders will give you more when you need it, and the more likely you are to get accepted for new loans. One factor that works alongside credit utilization is missing or making payments. Some people can use well over 50% of their credit utilization and still have the ability to take out new loans seamlessly – but missing payments highlights to lenders that you’re not responsible, and thus, lenders will stop dishing out the money.
Calculate A Personal And Joint Budget Plan
Once you have cleared all the financial cobwebs and you’re both on the same page about your personal finances, it’s time to get budget planning. There are two types of budget planning, individual and financial.
You’ll still need to work out a personal budget plan for the things you use that your partner doesn’t, like gym memberships, phone bills, shopping needs, and more. Sometimes, however, when budgeting for things like the gym and phone bills, you’ll notice bundle deals for people living in the same household.
A joint budget plan should include payments like household bills, savings, and any expenses you both need to pay for because you both use. Most married couples make life easier for themselves by opening a joint account and depositing money there each month and connecting the relevant bills to them. It’s also wise to have a joint high-interest savings account or start a CD ladder investment.
Making Joint Financial Goals
Combined financial goals are essential if you want to grow as a couple and become financially healthy. These can include savings, investments, cutting costs, or earning more money. Financial health as a married couple stems from being open, honest, and finding mutual grounds that make it easy to create combined financial goals.
Married life is initially a whirlwind of happy emotions. When the dust settles, speaking about financial health and how to grow together financially should be an essential conversation. Financial health is an essential component of a healthy marriage.