Wedding season is in full swing this summer. While it’s likely that the future “Mr. and Mrs.” have put a lot of time and effort into planning their big day, it’s equally important for the couple to put an emphasis on another element after the wedding bells stop ringing. Combining finances and creating budgetary plans is vital for the success of the newlywed’s financial future.
Ideally, newlyweds will have discussed all elements of their financial background (and hopes for the future) together before walking down the aisle. Both partners should have a solid understanding of the other’s spending and saving personality and mindset and/or money values that were inherited or instilled as a child. Communicating why “he” may be a spendthrift, and “she” may save every penny, can be key to understanding each other’s financial motivations and decisions, and can help in developing long-term retirement and general finance plans.
Another important element that should be discussed early on is whether either partner has a past in dealing with bankruptcy, if they have poor credit, or if they have considerable debt. If soon-to-be spouses do not talk about this before marriage, it can be a shock to the husband/wife who does not know, and now is responsible for taking on that debt or experiencing challenges with one-half of the union having extremely poor credit.
Being open and honest before holy matrimony can provide newlyweds with an easier time combining their finances shortly after getting married. By having conversations about money, pre-wedding, both partners can enter the union feeling confident and comfortable with monetary decisions that are made moving forward.
In addition to an open line of communication, we’ve included some tips below for newlyweds who are joining finances for the first time. These to-dos will ensure that both partners are on the same page when it comes to monetary decisions and can help lay the groundwork for a successful (financial) life together.
Update all beneficiary forms. With a “life change,” such as marriage, it’s important to create, review and/or update all beneficiary forms – including retirement plans, wills, life insurance policies, etc.
Open a joint account and consider separate discretionary account. Often times, it’s easiest to open one joint account that the couple can use for paying bills together, such as rent, mortgage and utilities bills. However, if both partners are comfortable, opening separate accounts for discretionary spending can be helpful as well and can be used for spending needs that don’t require a big conversation with your spouse.
But avoid financial infidelity. Whether you have one joint, or one joint and two separate accounts, it’s still important for couples to communicate about purchases throughout the marriage. Avoid “financial infidelity” and be clear with your partner before incurring major expenses.
Review long-term financial goals together. We usually see that one spouse becomes the “driver,” taking control of finances and giving more thought to retirement planning, inherited funds, and motivating the other spouse to make decisions (for example, saving more or contributing more to a retirement fund). Work together (even if it means the driver encourages the other to make decisions), or with an advisor, and come up with a solid game plan for ensuring future success.
Develop a budget. Set a budget around the new, joint income and have conversations based on what makes the most financial sense, given your current level of expenses.
When combining finances for the first time, it’s crucial to “pull the sled in the same direction.” By remaining open and honest about spending and saving patterns and financial goals, couples can work together off dual-incomes and financially succeed.