Uniting in marriage also means the joining of financial futures. Suddenly, decision-making is done by a team of two. Often, spouses are not of the same mindset when it comes to how to spend, save and plan for their future. For instance, it isn’t unusual for one spouse to be more of a spender and the other a saver. Typically, however, it isn’t the difference in personalities or priorities that leads to money issues within a marriage. Rather, it’s a lack of communication and an absence of agreed-upon ground rules.
Below are some tips to help with communication and planning in this new, married chapter of life.
Before getting married:
- Get everything on the table about current income, savings, debt, credit rating and financial responsibilities to other family members such as aging parents.
- Set financial goals together. Allow each spouse to safely communicate short-, intermediate- and long- term goals for the future family.
- Establish both a short-term and a long-term budget together based on total household income and agreed-upon financial goals.
- Decide if financial accounts and invested assets are to be fully merged or some held jointly and some individually. Will each maintain their current Financial Advisor, combine to an existing one or hire a new one?
- Determine who is responsible for what. For example, will one spouse be responsible for paying all the bills and from which accounts? It helps to clearly define each spouse’s financial responsibilities early.
- If both individuals have not yet accumulated substantial wealth and are not in line for significant inheritances, a prenuptial agreement may not be needed. However, if this is not the case, consider meeting with a family law attorney to get informed about a prenuptial agreement.
After getting married:
- After the wedding and honeymoon, review the budget and goals to make sure both are on the same page.
- Work towards establishing an emergency fund as a safety net for an unplanned financial emergency such as an illness or job loss. A general recommendation is saving six months of living expenses.
- Update workplace tax withholding allowances, contributions to 401(k)s, and Healthcare Savings Account contributions to minimize taxes and maximize retirement savings.
- Change beneficiary information on property, titles and assets that currently name someone else as beneficiary.
- Update other “paperwork” such as driver’s licenses, passports, Social Security and credit cards.
- Review, update and when needed purchase different types of insurance including life insurance (to protect the new spouse), health insurance, disability and auto insurance.
- Each spouse should draft a will or modify an existing one as appropriate.
- Update living wills and medical power of attorney.
- Regularly maintain and monitor the progress being made toward meeting financial goals and adjust as needed to stay on track. Discuss what is working, what isn’t and potential changes.
- At least annually, meet with a Financial Advisor to review spending, current asset allocation, the performance of investments and how near-term and long-term goals may have shifted with married life.
The earlier and more often spouses discuss financial matters together, the more comfortable these conversations will be. Seeking professional guidance can also help tackle the more complex matters.