Money can be a major source of stress and disagreement for many couples, and in fact, research shows that it may be one of the biggest things couples fight about. So, whether you’re a newlywed gearing up for your wedding, recently said “I do,” or have been together for years, planning for your financial future together is a key step in setting your marriage up for success. Here are our top tips for making your money work for both of you.
One more thing: It’s essential that you and your partner both be honest, forthcoming, and realistic when having money conversations. It doesn’t do either of you any good to lie about, hide, or understate things if you are going to spend the rest of your lives together. In fact, being dishonest about finances can be a form of infidelity.
One of the first steps you should take in planning your finances is discussing each of your financial philosophies and habits. Are you a spender or a saver? What kinds of things do you spend your money on and what do you value most? Understanding how each of you handles your money will help you set expectations as you begin to map out plans for the future.
Next, determine how you want to handle your finances during your marriage. Will you have one main joint account into which you each deposit your income and from which you pay most of your bills? Or will you maintain separate accounts and divvy up the expenses so that you’re each responsible for covering certain bills? There’s not one right way to do this; go with whatever works best for you and your partner. (Psst, a Maryland prenuptial agreement or postnuptial agreement is a great way to help you delineate things you want to keep separate).
Now you need a budget. Start by making a spreadsheet listing your assets, income, expenses, and debt. Calculate your regular and variable expenses, and identify all your sources of income. If you have a surplus, decide how you want to allocate that. If you’re coming up a little short every month, consider ways to reduce your expenses or increase your income.
Plan your budget based on both your current situation and your longer-term goals, such as having kids, starting a business or pursuing further education, etc. Don’t forget to set aside some money for emergencies and unforeseen expenses so you’re covered if the unexpected happens.
We’ve all seen the commercials where a husband (or wife) hands their partner a small wrapped box on Christmas morning. Inside is a key, and waiting on the driveway with a giant bow is a brand-new car. Big smiles and hugs abound. Surely this is a great idea, right? WRONG.
Making large purchases (like a new car) without discussing it first with your life partner is usually a huge mistake, and can cause major problems. Of course, there may be situations where it’s practical for you to surprise your spouse with a big gift, but in general, you and your partner should agree on how you’re going to handle large purchases, especially if you’re using shared funds to finance them. Make sure you understand what your partner defines as a “large” purchase and consider setting a threshold for how much you can each spend without discussing it with the other person.
Now that you’ve got the basics sorted out, it’s time to divide and conquer. Decide who is going to handle each financial responsibility you share, from managing bank accounts and paying the credit card bill to checking your credit reports and filing your taxes when the time comes. Consider setting up automatic payments for certain expenses to reduce the need to remember exactly when things are due and avoid late fees or other penalties for missed payments, or put due dates on a shared calendar so you can each help keep track.
Check in regularly to make sure the current division of labor is still working for both of you, and adjust as necessary. (That recurring marriage planning date you set up is a great time for this).
When you get married, the benefits you and your spouse are entitled to may change. For example, marriage is considered a “qualifying life event” in the context of health insurance, so you may be eligible to make changes to your benefits outside of regular open enrollment periods, so do your research, compare your benefits, and figure out what makes the most sense for you and your partner. Then, make any necessary changes shortly after you walk down the aisle.
Now is also the time to update your tax documents and withholdings to reflect your marriage status (and whether you plan to file jointly or separately), and review and update your beneficiaries and emergency contacts.
You’re working hard to set your marriage up for success so that you and your spouse can grow old together. So, it’s important to make a plan for that!
Talk about your goals for retirement. For example, do you want to travel? Are you hoping to move somewhere else to be nearer to family, or do you dream of spending your days in a beautiful cabin in the woods? Then, identify any retirement savings plans you each already have, and review your employer-sponsored benefits (e.g., pension, 401(k) match, etc.). Start setting savings goals and figuring out how you’ll meet them.
There’s no denying that talking about money can be stress-inducing for many, or just plain boring for others. While these won’t be your most romantic conversations, they are an essential part of sharing your life with another person.
If you need help getting your finances together and planning for the future, consider working with a financial planner or other money professional who can provide you with expert advice, and make sure you understand all your options.