When it comes to finances and newlyweds, there is no one “right approach” that fits all. Every relationship and situation is unique. What matters is that you are honest about your finances, agree on a money management plan, and are open to changes as needed throughout your life together. It is important to have these financial discussions early and often. Some topics to discuss are outlined below:
1) Fully disclose your finances.
Money issues can be a root cause in failed relationships, so it is wise to not only disclose all aspects of your financial situation, but also your views on finances. A couple may have been raised very differently in the way finances were handled in their households, which can cause a significant difference in the way they handle and view money. Money management may come naturally for some, but not for others, which can cause tension and resentment in a relationship. Discussing this early can help bring an understanding of each other and is the starting point to creating a plan together.
2) Layout your financial goals.
Defining your goals together can help give you a clear path to reaching them and a better chance of faster progress towards realizing these goals. This could include becoming debt-free, buying a home, or funding your retirement. Goals, just as couples, will evolve as time goes by.
3) Decide how you are going to structure your finances.
Do you want to keep your bank accounts and credit cards separate? Join all finances? Or, do a combination of the two? There is no absolute right answer to these questions, but the main thing is, to have the discussion and make a decision together. It is also important to decide such things as:
• How will spending money be accessed?
• Who will have the task of paying the bills?
• Who will review accounts to make sure financial transactions are correct and there is no fraudulent activity?
• Who will be responsible for filing taxes?
4) Make a budget.
Although it is not fun for most to create a budget, it is vital to a healthy financial household. A budget tells your money where to go each month so you are not left wondering where it all went. As a couple, decide together how to spend your income and give every dollar a purpose. This may take some time to create a budget that will work well for you, but it is well worth it.
Some helpful sites for planning a budget:
Every Dollar Budget Tool: Dave Ramsey
5) Build your household emergency fund.
Building an emergency fund should be a priority because it will bring financial security when an unplanned emergency happens. The unexpected, such as a major car repair, family illness, or loss of a job can strike at any time. A suggested amount of savings is 3-6 months worth of your household expenses.
6) Tackle debt together.
Make reducing debt a priority. If there are multiple debts between the two of you, discuss a strategy to pay this down. One option is to start with the debt with the highest interest rate first. Another is to focus on the smallest one first to knock the debt out quicker, which may help keep you motivated to continue bringing your debt down to the desired level.
7) Review insurance options.
When you are married, you may have more health insurance options once you are married. If you both have coverage at work, compare the two plans and determine which one would be more cost-beneficial. If you both have a vehicle, you may want to research if your auto insurance company will give you a discount for bundling all of your vehicles under one policy.
8) Update beneficiaries.
Change your beneficiaries on any existing retirement accounts and insurance policies you may have to your spouse if you desire.
9) Update tax status.
Claiming an additional allowance and/or changing withholding to the “married” rate on your W-4 form would mean that less taxes are withheld from your paycheck. Meeting with a professional to determine if you would benefit financially more to file together or separately can also be beneficial.
10) Create a will
When there is no will, state law dictates who gets your assets when you die. Those laws vary widely state by state. Traditionally, your spouse would most likely inherit your property even if you die without a will, but it is not something you should leave up to chance. Also, you can include in the will if you would like anyone other than your spouse to receive any of your assets.
Being intentional about your money management plan together can help set the foundation of your financial house. Reviewing, planning, and adjusting your finances regularly is a great opportunity to achieve the future you desire together.
Carol Chaudet
(Updated 3/25/2019)