Money isn’t everything in a marriage, but it certainly is important. Earning, managing, and spending money will consume a great deal of time as a married couple, and your success at handling finances can lead to success in other areas of life. Since financial strains and disagreements about money are one of the leading causes of marital trouble, managing your money effectively can be a key factor in keeping a marriage healthy.
Since we are headed into wedding season, it is the perfect time to share some wisdom for those couples who will be tying the knot this summer. If you are already married, do not worry — these ideas can be just as helpful to you too.
Talk about your financial goals and habits
Start your money conversations with the big picture topics. Discussing together what you wish to achieve in your lives can provide a unifying and positive aspect to your finances, regardless of whether the goals include children, early retirement, or world travel.
Take a look at all of the numbers
Have a meeting with your spouse to review all financial documents. Create an itemized list that combines all assets including savings, checking, retirement accounts, real estate, and collectibles. Also include any debt such as student loans, credit card debt, mortgages, etc. Then determine your net worth by subtracting your debts from your assets. This will provide a snap shot for your current financial picture and can be used to build a cohesive plan.
Discuss the level of financial togetherness that is desired
The key here is full disclosure of everything that each of you owns and owes. What accounts should be merged in order to pursue your shared financial goals? What accounts do you want to keep separate to allow some autonomy and independence for each spouse? Put your decisions in writing, like any well-governed partnership.
Set financial goals
While the goals of each couple may differ, it is important to focus on a few different areas. First, set a goal to save at least three to six months of expenses for emergencies, as this will help to create a cushion and will keep you from tapping other accounts for expenditures. Second, maintain a debt repayment schedule that will help to strengthen credit scores and eliminate debt. Third, keep an eye on retirement. This long-term goal requires a systematic approach and can result in a retirement lifestyle that allows you to enjoy the golden years as a couple. Finally, keep it motivating and set short-term goals for travel and entertainment.
Create a budget and stick to it
Review essential household costs, including housing, transportation, utilities, groceries, and discretionary spending. If unsure about spending levels, track your spending for at least a month either by hand or with a service like Mint.com. Compare income and expenses in order to determine a surplus or a monthly shortfall. If a surplus is present, allocate the funds according to the financial goals that you have set as a couple. If there is a shortfall, have an honest conversation regarding areas where spending can be cut back.
Determine who will handle the household bills and accounts
It is not unusual for one person to enjoy doing the day-to-day management, while the other does not. For efficiency purposes, it is common for one spouse to take on this responsibility. Remember that it is still vital to be accountable to each other and regularly schedule joint reviews regarding household money flows.
Review your beneficiary designations
If you want your spouse listed as the beneficiary on your accounts including IRAs, employer sponsored retirement plans, or life insurance policies, this is the ideal time to make that change.
Contact your tax advisor
Getting married will change your filing status and it is a good idea to have your tax advisor evaluate your situation and run projections regarding your potential tax liability. In certain instances, your tax liability may increase and this is a great time to get ahead, adjust your withholdings, and plan for the future.
Marriage and money can be tricky, but the best thing you can do is be open and honest. Start off on the right path by talking about money management and coming up with a solid plan to deal with budgeting, spending, and investing. The sooner you do this, the better. If you form good money management habits as a newly married couple, a foundation will be laid for a bright future.
Andrea L. Blackwelder, CFP®, ChFC and Joseph D. Clemens, CFP®, EA are the founders and partners of Wisdom Wealth Strategies. Their shared passion is simple: to bring financial empowerment, understanding, and peace-of mind to people who wish to improve their financial future, build wealth for their families, and achieve financial independence. Click here to find out more about how you can work with Wisdom Wealth Strategies.