Becoming engaged and getting married is an exciting time in anyone’s life. Like most couples who begin their lives together, you’re undoubtedly focused on your own version of “happily ever after.” The rush of being newlyweds is a terrific experience. However, don’t let it obscure those other important milestones in your life — the financial ones. Whether you and your partner are hoping to buy a home, start a family, or just save for an eventual retirement together, your shared finances are now more important than ever.
In fact, how to handle the sharing and combining of finances is one of the most critical issues for newly-hitched couples. Money can be an emotionally-laden subject for many people. It may bring up deeply-seated issues for both individuals and couples alike. That’s why it’s so important to openly discuss the topic with your partner early on in your life together.
Communication Is Key
Like any other important conversations you’ll have with your significant other, sharing your attitudes, issues, and concerns about money with each other will lead to mutual understanding. That knowledge ensures a secure groundwork. Hopefully, it will allow you to visit (and revisit) this issue from a shared perspective. That will help you both make informed joint decisions concerning how you spend and save.
If you planned and paid for some (or all) of your own wedding budget, you have more experience with money management than you may think. You’ve already learned how to figure out how much your lifestyle costs, create a budget (and stick to it), financial allocation, and (maybe most importantly) compromising with others. These issues are all extremely similar to the “real life” money management issues you’ll encounter as a couple.
Couples starting out without a lot of individual wealth can probably sort out the basics on their own. If, however, there is significant money, property, or investments brought into the relationship, accountants or attorneys should probably be consulted. It’s always a good idea to take whatever steps necessary to protect everyone’s interests.
If you want to keep your financial life as blissful as the rest of your newlywed situation, here are some important questions to ask your spouse. And yourself, for that matter.
What Are Your Individual Money Philosophies?
Who’s the spender in the family? Who’s the saver? Is the goal to accumulate as much wealth, as quickly as possible, and retire early? Or do you want to spend money more earlier in life, knowing that you will likely need to work a bit longer to afford a more glamorous lifestyle?
No matter your answers, it’s important to talk about and understand your differences. If one of you wants to save every penny while the other wants to see the world while you’re still young, you may end up having financial conflicts. You truly need to come to a consensus that is comfortable for you both, in the long run. Otherwise, you’ll constantly be arguing about money — where it goes and why it always seems to run out.
How Much Do You Make?
This may sound strange to some couples. It’s a pretty simple piece of information to know, and should be an obvious thing to share with your partner. However, I actually know some people who legitimately don’t know how much their significant other makes — even after decades of being married.
Remember that you are a team. There’s no reason to keep this a secret. (And it’s arguably a pretty big red flag if you or your partner is reluctant to share this information.) Go ahead and lay all your cards on the table, so that you both have a clear understanding of the household income. Keep your spouse updated as your career changes or advances too.
How Much Do You Have?
We’re no longer just talking about annual income. What other assets should be counted when considering your combined net worth? Whether you decide to keep finances separate or together, it’s still important to plan your life together with all assets in mind.
This is especially important for those marrying later in life. Both sides could be bringing in considerable assets that need special consideration. It could be something relatively small, like a fully paid off vehicle. It could be something large, like one of you already owning a house with significant equity. Or maybe it’s something tricky (and a bit sensitive) — say, for example, an inheritance from a deceased former spouse that should go directly to their children instead of being allocated as a joint asset in a new marriage.
Whatever assets the two of you may be bringing to the table, it’s best to be up front and honest about them from the beginning.
Are You Going to Combine Your Income?
There’s really no right or wrong answer here. There are plenty of couples who merge their entire financial lives and it works just fine. There are just as many others who swear by keep separate accounts. Whatever you ultimately decide is fine. Just make sure both partners are on board and aware of how the household ledger is going to work.
As with all things personal finance, just do what works for you. Just make sure that you don’t start hiding assets and income if you do decide to keep separate finances. Financial infidelity is a real thing and nothing ever good comes out of that.
Who Pays For What?
One of the reasons you’ll want to lay out your income is to figure out and divide the expenses fairly. You are also using this exercise to make sure every bill is taken care of.
This step is easy if you decided to combine all your assets. Throw all your income into the joint account and pay the bills from it. However, if you keep your finances separated in any way, it gets a bit trickier. Do you divvy up the bills? Does one person simply pay them all and then their spouse transfers them their half at the end of the month? It can get complicated.
I suggest to have one joint checking account (and maybe one joint credit card too), where all bills are paid from. If you do that, then you just need to periodically decide how much each partner needs to contribute to the account. You can fund it equally (50/50) or relative to your respective incomes (70/30, for example). Then you don’t have to break down every single bill. Once the bills are taken care of with the joint account, you can keep your remaining money separate.
What Can You Afford?
Finances change a great deal once you are married. You no longer need two places to live, so your shared living expenses will likely drop. You are probably going on fewer dates, so entertainment expenses may also drop. (Pro tip, though: keep going on dates, even after you’re married.)
On the other hand, your taxes are likely going up. Tax brackets aren’t as generous for married couples as they are for two unmarried individuals, filing separately. Figure out your new situation and see what you can afford.
What Should You Be Saving For?
What are your saving priorities? Every couple is likely to have a different answer. If you’re still renting an apartment, you might be saving for a house. If you already own a house, you might be saving for a college fund for your (potential) children. Or maybe you’re not interested in starting a family, but want to start building that retirement next egg. Heck, maybe you just want to save enough to enjoy two weeks in Europe next summer.
Regardless of your larger financial goals, sit down with your spouse and figure out what your collective priorities are. If you don’t know where you want to end up, it’s hard to come up with a plan to get there.
Do You Need a Budget?
Budgeting can work wonders, but only if the two of you are disciplined enough to track every expense. If only one of you has really been budgeting up until now, then figure out how to get both of you onboard. A workable budget is one of the most important parts of individual financial success.
Perhaps one of you can track both partner’s expenses. Or maybe you might find a compromise and just make sure you’re paying yourself first by putting money from every paycheck straight to savings. That could give you the freedom to spend the rest of whatever it is the two of you fancy most.
How Do You Pay Off Existing Debt?
Much like savings, paying off debt is a journey. You need a plan for the long haul. This is especially true if you enter into a marriage with pre-existing debt. It could be those old student loans, a car note, or even that ultra-pesky (and expensive) credit card debt. Now that you’re a partnership, you need to tackle those things together in some way. Tally up what each of you owe and then chip away at it.
You don’t have to necessarily agree to pay off each other’s debts. Although it can make sense to tackle the highest interest debts together, getting married doesn’t legally obligate you to cover your new spouse’s previous debts. You should, however, be honest with your partner about your debt obligations. Then you can come up with a collective plan to make sure all the debts are covered appropriately.
How Much Should You Be Saving?
You want to be saving for a rainy day. But you also want to put some away for the medium term. Do you want to go on a nice vacation in a foreign country? Are you planning to start a family? What about buying a house? These are wonderful ways to spend money — but they all require quite a bit of capital.
Then there’s retirement. It may seem far away right now. However, the earlier you start, the easier it is to save for that inevitable day that you’ll quit work forever. That’s because the longer your money is invested, the more compound interest will do the heavy lifting. Retirement is getting closer every second of every day. Don’t delay saving for it any longer.
How Much Life Insurance Do You Need?
What protections should you put in place for your spouse in case of tragedy? It’s not fun to think about the tragic what-ifs of life. However, an accident (or other major medical issue) would be devastating enough, without the additional financial stress it’s likely to cause the surviving or healthy spouse.
The good news is that these events are rare. That means the protections you can buy via life insurance is probably relatively cheap. So make sure you have adequate coverage. You want the basics covered — money to cover a funeral, pay off the mortgage, and/or get the kids through college. And speaking of life insurance, it’s also important to update any legal documents or insurance policies immediately after becoming married. You’ll want all the beneficiary information to be accurately recorded.
Have A Plan For Your Investments
Just like with your own finances, you should sit down with your partner and pool the assets together. Then make a plan to grow the combined nest egg. Look at your separate 401(k)s and IRAs to start. You should seriously consider starting a taxable account, if you don’t already have one.
What kind of investments are you comfortable buying? How safe do you want them to be? How will money flow into the investment accounts? Who will handle the trade executions and withdrawals? If one partner knows more about investing than the other, then it’s time for them to educate the other. The more the both of you know, the better the family finances will be long term.
The Bottom Line
No matter how uncomfortable or awkward you may feel having the money conversation, it’s very important to discuss it in detail with your spouse. You’ve committed to sharing a life together, and money is no small part of that. You’ll want to be on the same page as you approach your shared finances.
The last thing you want to happen is for all the details to come out in a financial crisis. At that point, it could be too late to repair any serious damages done — both to your finances and to the trust of your relationship. So do yourselves a favor after your honeymoon and ask each other these questions. You’ll be glad you did.