Nowadays it is not a must for spouses to have a common savings account. Savings accounts are managed by private financial organizations and are strictly used for investments. This is because debts that have not been paid by one party may affect the couple. By having a separate personal account one feels free to use his or her money without having to account for every single cent they have spent. In a common account, the couple that owns that savings account must notify each other before they deposit or withdraw money from the account.
It is therefore recommended that before couples merge their saving accounts into one unique account they first discuss the underlying issues to avoid problems in the future. This is because retrieving money from saving accounts is expensive due to the high service charges imposed. Common accounts require both couples to observe a very high level of discipline in keeping records of all banking transactions. This can be done by tracing all withdrawals and deposits made via Automatic Teller Machines (ATM) (Vohwinkle, 2010).
Another workable option for managing savings accounts is to establish a common account that will be used to hold all the contributions of the couple and hold on to individual accounts. To create evenness, the couples who maintain this account must make equal donations. The good thing about this method is that each couple retains his or her freedom and sovereignty which helps to keep power struggles at bay.
The couples must then draft a budget that clearly explains how monthly expenses are shared and how much money is to be deposited into the common account. If the couple’s earnings are the same then they should make similar donations towards the common account. In contrary, if their earnings are different donations should be based on a given percentage.
For instance, spouse x earns $25000 annually and spouse z earns $50000 annually. When their earnings are added together, the total is $75000.This means that in order to determine the percentage that should be contributed by each couple, the earnings of couple x is rationed by the total earnings of both spouses ($75000) which is equal to 33%. This percentage should multiplied by the monthly expected amount that should be deposited into the account, therefore 33% multiplied by say $4000 is equal to $1320.This result should then be deducted from the money that is supposed to be deposited every month hence $4000 minus $1320 is equal to $2680 which is the appropriate donation for spouse z.
The next step is establishing a common account where spouses make their donations that are used to cater for collective expenses. Having a common savings account does not mean that couple should cease from clearing the debts that existed before the merger. Nevertheless, the couple should continue paying back their personal previous loans and debts.
Vohwhinkle (2010) argues that a written budget is very important because it helps to command how money will be used and hence avoid over spending because it can ruin your future goals. This is necessary because if one spends more than he already has, he will always be in debts and that’s why I recommend that expenses should balance with couples’ earning. For the budget to be efficient the couple must be keen to notice something that can be avoided to cut back on expenses. For instance if a couple has two cars, they should keep one and sell the other one to cut back on fuel expenses.
There financial management, there exists bad debts and good debts. Bad debts should be avoided at all costs because they can interfere with a couple’s future objectives. A good example of a bad debt is where someone buys items on impulse without considering his or her earnings. An example of good debt is when a couple takes a low interest loan to buy a residence. This is a good debt because the value of such an asset can never depreciate. For a couple to be financially stable they must get rid of their debts.
The easiest way to clear an outstanding loan is to make contributions that are above the money that is normally paid on monthly basis which ensures the loan is fully paid for in the shortest time possible. This lowers the interest rate because the longer it takes to reimburse a loan the higher the interest rate.
According to Garman and Forgue (2007) saving for retirement is very important for a couple because at old age they will not be in any form of employment. At retirement age the couples rely on the extra bucks that were saved in their youth. Most people argue that they don’t have enough money to save for retirement because they hardly spare any money after paying their monthly bills. Saving for retirement has been further enhanced by the introduction of special tax advantaged accounts and special retirement accounts and also special personal accounts.
It is advisable for a couple to buy insurance cover policy which will shield the family- to -be from disasters like illnesses and accidents. In today’s world, insurance policies have been customized to cover anything that one may desire. By anything I mean from livestock to electronics. It is also possible to insure property against violence.
Health cover is also very crucial because it makes sure that the couple will not be negatively affected by the expensive medical bills. It is therefore important to plan ahead because illnesses and accident come when they are least expected. If one spouse is covered by his or her employer, the policy is extended to cover the other spouse and their children if they have any. Most organizations have appreciated the importance of insuring their workers hence there is no excuse for not taking health insurance cover. This policy is also available to those people that are self employed or their organization does not provide insurance cover for its employees.
Another important coverage is life insurance. Life insurance is best suited for people who are married or have kids. In a situation where the wife does not have a job and the husband being the only bread winner dies, the family life will be halted because there would be no one to pay for the bills. This policy covers against such instances. Life insurance has proved to be very reliable because it also includes the funeral expenses and guarantees that the beneficiaries will be well taken care of. Some organizations provide life insurance for their employees while some advise employees to buy their own at a very subsidized rate.
A home is a very valuable possession and hence it is also important to insure it. When one is buying a house from mortgage providers insurance cover is mandatory. Most mortgage companies integrate house insurance premium into the payment. This is done to the benefit of the buyer because incase of fire or any other disaster the owner can recover his property.
It is against the law to drive a vehicle that has not been insured. The car insurance cover is used to ensure that in the event of an accident the car owner can have his car repaired or replaced hustle free. The main reason for buying a car insurance cover is to cover for any injuries that may be experienced by the car owner or any other person who may be involved in an accident.
Financial crisis may result from sudden loss of job or an ailment that siphons one’s savings to a point of exhaustion. The best way to deal with this sudden lack of money is to identify what has brought this situation. One should focus on remaining a float, which might include doing away with the things that are considered less important. In a case where one is finding it difficult to pay for their mortgage, its advisable to inform the mortgage company because they will understand incase you don’t make payments as agreed. The mortgage company could also subsidize their interests to make it flexible. It is also advisable to consider applying for loan but beware of the attached high interest rates which may vary depending on payment period (Garman & Forgue, 2007).
True friends and close relatives can be very helpful in this case. If you want to borrow say $5000 you should not expect to get the full amount from one relative but should rather borrow in small amounts to make sure they don’t feel pinched. Make sure you pay them back accordingly because you never know when the next crisis will strike.
Retirement benefits can also be retrieved to help in dealing with the situation at hand but doing so can put retirement security at risk. If the crisis is due to sudden layoff from work it is advisable to claim retrenchment benefits. Networking with friends can be very helpful towards securing a new job. If still employed, one can consider applying for a soft loan from the employer.
Once you have recovered from the financial crisis, you have to prevent the recurrence of a similar incidence in future by setting aside money that can be used incase of an emergency. Therefore, it is essential to manage savings through proper budgeting to ensure that financial crisis is avoided.
Garman, E.T. & Forgue, R.E. (2007). Personal Finance. 9th Ed. U.S.A: Cengage Learning.
Vohwhinkle, J. (2010). Financial Planning Guide. Web.