It’s wedding season, and as you or someone you know is tying the knot, there is another not-so-romantic topic that all newlyweds or engaged couples should start to think about: finances. While it’s easy to get caught up in the details of the wedding and honeymoon, overlooking financial planning can lead to serious problems. But if you take the time to discuss your finances, you can help keep the peace in your long-term relationship.
More than a quarter of married couples say disagreements over finances are most likely to lead to arguments, according the American Institute of CPAs. Talking about money with your fiancé not only reduces future fights but can also get you on a path towards a successful financial future.
Before you say “I do,” (or for those of you who are already out of the honeymoon phase and are just sick of fighting about money), here are some important topics to discuss:
Get to know each other’s financial histories.
Gather all of your paperwork, statements, bills, and personal financial information and really evaluate your finances so you both are on the same page. Do either of you have student loans or credit card debt? What kind of retirement plans or saving vehicles do you contribute to? How much are you paying for your cell phone and cable bills? Do either of you have an emergency fund? What is your attitude toward money?
Here are a couple of items you should take a very close look at:
- Beneficiaries: Revisit all of your accounts, from retirement plans and insurance policies, and update your beneficiaries where you see fit.
- Insurance: Review your medical, life, and car insurance plans. You may find that combining coverage may save you money or that your plans have some overlap.
- Name change: If you or your spouse is opting for a name change, it is important to notify the Social Security Administration and the DMV. You will also want to notify your financial institutions.
Joint or Separate Accounts–or Both?
At this point, you should know what each one is bringing to the table financially, which means there shouldn’t be any surprises down the road on that front. Next, you need to decide if you are going to merge your accounts.
Long gone are the days when it was assumed that marriage meant newlyweds would open a joint bank account and share credit cards. Some couples are now keeping separate accounts while others still choose the traditional route, and everything in between is a viable option. It really depends on where each person is financially and how each wants to approach finances.
Here are a few options to consider:
- Set up a joint account and have both people contribute a percentage of their take-home pay or a flat amount each month. With this money, you pay for things like your mortgage and other shared expenses, as well as shared lifestyle expenses like vacations and other outings. Meanwhile, each person keeps his or her already established accounts for personal expenses.
- Keep everything separate and distribute the bills. This option isn’t the best approach for people who are buying a home together, but is seen as a viable option for many second-time marriages in which both people are already independent financially.
- Open a joint account and close all other personal accounts. This is the “traditional” option and is still seen as the best option for some couples who aren’t entering the marriage with significant separate assets.
Determine a budget and financial goals.
Hopefully each of you already has a functioning budget so you can easily combine them and adjust where you see fit. If one or both are new to budgeting, getting married is a good time to start this invaluable practice. You will want to evaluate all of your expenses against your income and create a plan that reflects your shared living situation.
Once you have a joint budget, you can evaluate your discretionary income and determine both short-term and long-term financial goals. Are you saving up for a car? A vacation? A dream house? What are your retirement goals?
With a defined budget and goals, you can avoid debt from big-ticket items like new furniture or a fancy honeymoon. One of the worst things newlyweds can do is get in trouble with debt–talk about stress! Your budgeting mantra should be this if you want a peaceful marriage: “If you can’t afford it, don’t buy it.”
In all of these financial discussions, the key is open communication. Otherwise you and your spouse are signing up for future conflict. Use an app like Mint.com that tracks spending, bills, bank accounts, and other investment accounts so both of you can stay on top of your finances.
Best of luck to all you brides, grooms, and newlyweds! Be sure to browse our other articles to help establish your family’s firm financial foundation.