More households have become two-income-earner households, building a starker contrast to the male breadwinner households in which most Americans were raised. Add to these differences the facts that people are marrying later in life, marrying more times, and combining families in ways we never anticipated.
Whether the two-income marriage is a choice or a necessity, it raises issues we can’t ignore. The political and psychological issues may take generations to figure out, but the financial issues—how to allocate, protect, and build assets in the two-income marriage—are a practical necessity that can be made quite simple.
The first step is simple: talk about it. Couples who openly discuss marital finances, financial goals, details, and duties are much more likely to achieve their goals than are couples who treat money as a taboo subject (and, incidentally, they’re also more likely to stay married). A relaxed, candid discussion over complete records of assets and individual financial liabilities should establish who agrees to do what and how the spoils and duties are divvied up.
Below are tips for organizing and evaluating day-to-day needs and obligations.
• Organize. Decide who’ll handle each financial responsibility. For example, one might pay the bills and review insurance coverage, while the other keeps tax records and manages investments. Once these fiscal chores are assigned, arrange to keep receipts, banking records, tax documentation, and other financial records in an orderly fashion, filed in clearly marked folders, boxes, or drawers.
• Title assets. To minimize taxes, avoid probate, or formalize the desired degree of financial interdependence, couples must decide how assets should be titled. This applies to houses, condos, cars, valuable possessions, credit cards, and investment certificates, as well as to bank and brokerage accounts. If assets are large, consult an estate attorney to determine which assets should be kept in a single name, which in a joint name, and which might best be put in a revocable living trust. Also, review beneficiary designations on company pension plans, IRAs, annuities, and insurance policies to see whether they should be changed to pay your spouse.
• Agree on day-to-day money management. If household expenses are to be paid from a joint account, will both partners contribute to that account from their paychecks? In what amounts? How will major purchase decisions be made? How will major purchases be paid for? A clear but somewhat flexible agreement on these questions will reduce household stress and increase the potential for achieving longer-term goals.
• Identify financial obligations. Does either partner have personal or educational loans to pay off? Alimony or child support payments? Financial responsibilities for aging parents? Pre-existing health problems that could add to insurance or out-of-pocket medical expenses? Agree which obligations will be taken on jointly and which should remain individual responsibilities. The monthly cost of such obligations should be projected, totaled, and subtracted from other living expenses from projected monthly income. Only then can you determine how much discretionary income you can budget for leisure or long-term objectives.
• Compare tax filing choices. Brackets often are higher for married couples than for singles. You may need to calculate taxes for both filing options to see which is more advantageous. For most two-income couples, married, filing jointly is the wisest choice. TPW