WRITTEN BY: CALVIN LO
The wedding is over, and it’s time for the happily ever after. But once you have unpacked the wedding gifts and written the thank you notes, you probably need to sit down for a thoughtful financial discussion to establish common goals. While you probably discussed finances to some extent before tying the knot, now it’s time to get into the nitty-gritty details. Here are a few financial housekeeping strategies to start your marriage off on the right foot.
Have the “State of the Union” Talk about Money
Have an honest conversation with each other covering items such as net worth, salary, company benefits such as health insurance, investments, retirement savings, future liquidity events, inheritance, credit scores, and debt or student loans.
Honesty is parament when it comes to finances. I also suggest discussing “what money means to you” and “what was money like for you growing up.” There is a lot you can learn about someone from those two questions.
Tweak Your Tax Withholdings
One of the first financial tasks you may want to do as a married couple is adjust the tax withholdings that you and your spouse claim on your W-4. Remember that you don’t want to over-withhold (receiving a large tax refund) or under-withhold (having to pay the IRS taxes in April). The IRS website is a good place to start if you need help in deciding what withholdings you should take to balance the numbers (of course, your financial planner can also help!).
Yours, Mine, and Ours
Next, you’ll want to take some time to discuss how you’ll handle banking matters moving forward. This is a good time to understand the legal differences between joint (what’s ours) or separate property (what’s mine and what’s yours), which can vary by state.
You might consider adding one another to your existing bank accounts or opening a new joint account. You’ll also need to decide how much you’ll deposit from each of your paychecks into these accounts to pay the bills. You may want to keep separate bank accounts for your own personal spending, but having at least one shared account is often a good idea. That way, in the case of an emergency, your spouse can pay bills and manage money as needed.
It also might be a good idea to decide which bank accounts and credit cards have the best benefits then close any other accounts that are charging annual fees and you will no longer be using. Check into how closing credit card accounts can impact your FICO score before you close them out. Just keep in mind that opening joint credit card accounts means that both spouses are responsible for whatever financial mistakes the other one might make, so be wise before opening joint accounts.
Set Financial Goals
You and your spouse should have a serious discussion about the financial goals you both have for the future. This should include things like planning for debt reduction, saving for retirement, creating an emergency fund, kids, real estate purchase(s), and any other large upcoming financial purchases. Outline a one-, five-, and ten-year plan, but remember to keep these goals flexible as things will almost certainly change. Meeting with a financial advisor who specializes in working with families to establish long-term financial plans can significantly help you and your spouse ask the right questions, get on the same page, and consider your options.
Plan a Budget
Budgets can help you and your spouse avoid money arguments by planning where every dollar will go in advance. Don’t forget to plan for expenses, savings, and possibly a little discretionary cash for each partner to enjoy. Plan for how you would handle unexpected expenses that pop up now and then. Also discuss how each partner will be contributing. Is it equally, based on a percentage of your salary, or some other setup? Make sure both partners have an equal say in the discussion and be willing to compromise. That’s what marriage is about, after all!
Have a Monthly Budget Meeting
Early in a marriage is the best time to start having a monthly budget meeting. During the first year, schedule a discussion with a financial planner to help you both solidify the best ways of handling finances. At this meeting, you both can discuss which bills need to be paid next, where the budget needs to be tweaked, tax implications, and how future plans need to change. This is a great habit to get into so that both spouses are aware of how much money is available and what needs to be paid for in the near future.
While there is no one “right” way to handle your finances in marriage, one thing is for sure – you need to have open communication and an overall plan that both parties are aware of and happy with. These two factors will greatly reduce financial stress on your marriage.
As a newly married couple, you must decide whether to file joint or separate tax returns. For most scenarios, filing joint returns makes the most sense.
Each spouse should also adjust the tax withholdings that you each claim on your W-4. Remember that you don’t want to over-withhold (receiving a large tax refund) or under-withhold (having to pay the IRS taxes in April). The IRS website is a good place to start if you need help in deciding what withholdings you should take to balance the numbers (of course, your financial planner can also help!).
Life insurance is often overlooked and usually not a priority for newly married couples. However, this is an important consideration and a way to protect the other spouse should something happy to you. This is particularly important if you are in a single income household or are planning for a child. Many mistakenly think it is too costly, but options like Term insurance can be good.
Have the money conversations upfront and on a regular basis. A healthy relationship is paramount. Being on the same page about your finances will foster a healthy financial life together.
The information and opinions provided in this material are for general informational purposes only and should not be considered as tax, financial, investment, or legal advice. The information is not intended to replace professional advice from qualified professionals in your jurisdiction.
Tax laws and regulations are complex and subject to change, and their application can vary widely based on the specific facts and circumstances involved. Any tax information or advice in this article is not intended to be, and should not be, used as a substitute for specific tax advice from a qualified tax professional.
Investment advice in this article is based on the general principles of finance and investing and may not be suitable for all individuals or circumstances. Investments can go up or down in value, and there is always the potential of losing money when you invest. Before making any investment decisions, you should consult with a qualified financial professional who is familiar with your individual financial situation, objectives, and risk tolerance.