Tying the knot means sharing everything, including your finances
Successfully managing your finances is one of the keys for a rewarding life together
A wedding marks an exciting new chapter in life. With all the decisions to be made — band versus DJ, whipped cream or buttercream on the cake — it’s easy to lose sight of yet another crucial aspect of tying the knot — money. Open communication is one of the secrets to a long and happy marriage, and that means discussing your finances — early and often in your relationship. Many couples can be challenged by the realities of adjusting financial habits developed as a single person to their new lifestyle as a couple. Compromise is inevitable and expectations will need to adjust in order to share the next major milestones in life as a couple.
Discuss your personal financial styles before you get married
When entering any long-term partnership, you should know something about a potential partner’s finances. This is particularly the case in marriage when you are entering into a financial and legal relationship, in addition to an emotional one. The time to be upfront about financial matters is well before wedding bells ring.
There are many online quizzes you can take as a couple to determine your financial style such as Guardian’s Financial and Emotional Confidence Quiz, which assess your priorities and understanding of financial concepts and can provide practical tips for improvements.
Do you routinely run up a large credit card balance or are you meticulous about paying each card balance completely every month? Did you start contributing to a 401 (k) with your first lemonade stand or do you prefer to live for today and will worry about retiring in your fifties?
When it comes to establishing any new credit lines on a joint basis, such as sharing a new credit card, your debt history will impact your partner’s credit rating. Depending upon your status, an unreliable payment record could make it much more difficult to obtain a mortgage.
Before your vows are exchanged is a good time to confront any issues in your personal financial styles. Making an appointment with a financial representative to organize your joint finances can get things off to a nice start.
Consider a joint account
Many couples today have successful careers and established credit histories well before they are married. Giving up some control over the financial aspect of your life can be daunting. It’s important to establish a system for paying bills that feels fair to both of you. Some couples pay their household bills from a joint account to which both spouses contribute. Others divide the bills, with each partner paying his or her share from their individual accounts.
As a first step, consider a halfway measure. It might cost a bit more in fees, but you could each keep your separate checking accounts and credit cards to start. You can open up a new joint savings account that you both contribute to each month.
Reaping the benefits of togetherness
After successfully testing the waters, you can go deeper. You’ll find that you can save on fees at most banks and brokerage houses with a joint account and the larger the balance, the better the pricing. By joining your money together and letting the interest compound itself, you’ll watch money accumulate faster. Focusing as a couple on your bigger goals such as buying your first home is a way to make them happen faster, and combining your resources and energy is the quickest way to obtain that focus.
A budget can keep you on track
The key to managing a successful family budget is determining what income is coming in, how you can meet your financial obligations, and how to simultaneously grow your bank balances to achieve major milestones.
Take advantage of benefits already provided at your job such as insurance and retirement savings plans that automatically get deducted so you pay yourself first. Then pay down your debt such as mortgage, credit card bills, student loans, etc. The balance then goes toward your basic living expenses and savings.
Protecting your life and income takes on new significance
As you are busy building your life together, it’s important to plan for the unexpected because things doesn’t always happen as planned. If you weren’t able to work due to sickness or an accident, would the mortgage continue to be paid? If you own a business, would your company survive a protracted, unexpected absence on your part?
There are ways to protect yourself and your loved ones in these circumstances. First step is to see what is already offered at work and compare your coverage to your partner’s. Look beyond medical insurance to see what’s covered for dental, vision, and even disability income in case you become too ill to continue at your job.
Now is also a good time to make sure you’re adequately protected. Evaluate how much life insurance and disability insurance you need in case something bad were to happen to either of you. Look into the coverage you get at work and consider adding whole life insurance and private disability income insurance, which would cover you if you ever become too sick to work and can’t earn a paycheck. It can help ensure that your new life partner would be financially secure if anything happens to you.
Celebrate your progress
It’s important to keep track of your progress and reward your achievements.
By finding the right ways of making your finances work harder, you and your partner will enjoy working toward your shared goals together.