First comes love, then comes marriage, then comes ...checkbooks and loan payments??
Ok...maybe that’s not exactly how the song was written, but if you’re a recently married couple, you might be able to relate to my take on the classic tune.
You’ve just tied the knot and while still basking in the afterglow of all things newlywed, you realize that your life has forever changed in a positive way. Now you have to make some decisions on moving forward as a couple, and you may be somewhat overwhelmed by the number of financial decisions that await after tying the knot.
Things like deciding whether or not to combine accounts, prioritizing debt repayment, determining who will actually pay the bills, and the list just goes on and on.
As Your Financial Mom, I thought it would be helpful to provide a checklist for newlyweds that would walk through some of the important financial decisions that you’ll face shortly after saying ‘I do’.
More than anything, this is an outline of important factors to consider and topics to discuss as a newly married couple. And while I can’t guarantee that these will be the most romantic moments the two of you will spend together, the importance of establishing your family’s financial well-being early on, is one of the keys to creating a healthy and happy marriage.
For many people, marriage is the first time they’ve had to have a frank discussion about money with another person. And since finances are such an important part of a relationship, it pays to get everything out on the table upfront, and develop a plan for handling money as a couple.
Are you a saver while your spouse is a spender? Is your spouse an aggressive investor, while you prefer to play it safe? Getting to know each other’s financial personality and tolerance for risk is the first step toward successful money management as a new couple.
Here’s are a few topics you should discuss:
- Your current financial situation: Does your income adequately cover your expenses? Do you have an emergency fund? Retirement Plan? Investments?
- Credit History: What is your credit score? Any credit related issues?
- Debt: Student Loans? Credit cards? Auto or Personal Loans?
- Expenses: What are your fixed and variable expenses?
- Risk tolerance: Are you an Aggressive or Conservative investor?
Even if you find that you are both very different when it comes to the way you view finances, don’t worry! Couples with conflicting financial personalities can get along just fine in a marriage as long as both parties know what to expect and can agree on a path forward.
A good book to help you understand married life is called Men are Like Waffles Women are Like Spaghetti by Bill and Pam Farrel. Check it out.
Update Your Information
If you (or your spouse) are planning to change your name, you should start thinking about what documentation will need to be updated. Here is a list of common items that may need updates:
- Driver’s license and/or ID Card
- Social Security Card
- Bank/Investment Accounts
- Loans: Mortgages/Auto/etc.
- Credit Cards
- Car Titles
- Real Estate Deeds
And don’t forget all your employer information:
- Health insurance
- Life insurance
- 401(k) information
The most important document you will need to get these change started is a Certified Marriage License, which is usually issued by your County Clerk's office. Be sure to get LOTS of copies of these and save the extras. Take your marriage license and any other required documentation to each of the places where you are looking to update your name. To save time (and frustration) call or check online to be sure you have all of the appropriate documentation before making the trip.
A great place to start is MissNowMrs to help you with the documents needed for your name change.
Change Your Beneficiaries and Insurance Coverage
Getting married is a perfect reason to update your beneficiaries. Start by checking all the accounts that hold assets you would like your spouse to inherit should something happen to you.
- Bank and Investment Accounts
- 401(k) plans, IRAs and other Retirement Plans
- Life Insurance Policies
- Group Term Insurance at Work
Although you have the ability to designate who receives those assets in a will, naming your new spouse as the beneficiary is the easiest way to ensure a smooth transition of those assets. Also, most employer plans require a spouse’s signature if you want to designate someone else to receive retirement funds, so be sure to check with your employer when making this kind of update.
Next, review your auto, health, and homeowners (or renters) policies and determine if you need to increase or decrease any of your plans. In some cases, combining your insurance policies into one plan may qualify you for discounts.
Review Your Combined Financial Goals
As a newlywed couple, it’s important to discuss what you want in life and determine the financial steps necessary to reach those goals. Do you want to buy a home? Start a family? Send your (future) kids to college? Maybe it’s all of the above!
Reviewing your combined goals is arguably the most important financial item on the ‘to-do’ list for newly married couples, but many couples shy away from these conversations. In a perfect world, you and your new spouse would have had this discussion long before tying the knot. But in real life, things are far from perfect, and if you didn’t talk about these things before walking down the aisle, there’s no time greater than the present to start.
Believe it or not, these money conversations can be romantic. It’s great to dream about your future life together so revisit these conversations often.
Create a Plan
Now that you’ve started the “money conversation”, changed your legal documents, and discussed your financial goals; it’s time to get into the nuts and bolts by defining some tasks.
This is the step where you get on the same page in terms of how you will combine finances. Here are a few questions to consider:
- Will you maintain separate accounts or combine all banking relationships?
- Do you want to use a “His, Hers and Ours” strategy for checking and savings accounts?
- Will you split expenses equally or will the person that earns more be responsible for a larger percentage of the bills?
- Do you want to try to live off of one income in preparation for a stay-at-home parent?
- Who will be responsible for paying the bills each month?
- Do you want to use a cash system to help keep expenses in check?
- Do we have a positive net worth?
Remember, there are no right or wrong answers, but it is critical that you both agree. You may want to revisit these blog posts together: Ladies, A Man is not a Financial Plan and The Truth Behind Happy Wife, Happy Life.
To make things a little easier, consider assigning financial tasks based on each person’s strengths. For example, in my house, I pay all the bills, so I make my husband file all the paperwork. This way, even though he doesn’t have to deal with the minutiae of every item, he gets a big picture view of where the money is spent.
Once every month, schedule some time for the two of you to sit down and discuss your financial situation. If you are the one paying the bills, it will be incumbent on you to initiate this meeting with your spouse, so make sure it happens!
Review your income versus expenses, check for ‘money leaks’ and track your progress towards achieving your financial goals. Depending on what you discover, you may realize that you need to adjust your goals or -- or in some instances -- your effort.
Live Happily Ever After
Managing your financial future with another person is a daunting, yet-manageable task. That’s why it is so important to go through each of the steps above and incorporate them in your new life together.
And although the brief financial planning lesson included in this checklist was probably not on your wedding registry, if implemented correctly, you’ll soon find that it’s one of the best gifts you received.
Want more specific details about how to manage your finances as a newly married couple? We should talk! Click here to schedule a complimentary meeting to discuss your specific situation.
Pamela J. Horack, CFP® of Pathfinder Planning LLC provides personal financial planning advice and asset management for a simple fee to young adults and working families in North and South Carolina through group classes, one-on-one planning, and ongoing advice.