8 Financial Must-Dos That Most Newlyweds Skip
Few things in life are better — or feel more magical — than finding your match, falling in love, and saying “I do” in front of your closest friends and family.
No doubt as newlyweds you’ve received a lot of (likely unsolicited) advice on marriage. We’re not here to coach you on how to determine who’s doing dishes and who’s taking out the trash tonight, though we hear rock-paper-scissors is a good tie-breaking tactic.
What we do know is that communication is integral to maintaining a healthy and thriving relationship. That includes figuring out how to handle your shared finances. We’ve put together a list of financial tips for newlyweds that’ll make it easy to encourage a healthy financial life (especially when compared to planning your wedding).
1. Have an Open and Honest Conversation
Honesty matters in money matters. Having an honest and open conversation with your S.O. lays the groundwork for the financial well-being of your marriage.
You also need to be open about where your money’s flowing and what it’s being used on. A 2014 survey by the American Psychological Association reports “31 percent of spouses and partners say that money is a major source of conflict or tension in their relationship.”
Start by sitting down together to discuss your financial history and experience, plans for the future, and who will be the one responsible for paying the bills.
And don’t forget the whole banking sitch, too. Each of you might have had bank accounts for as long as you can remember, but now that you’ve combined lives, it might make sense to combine bank accounts, as experts like Dave Ramsey suggest.
Of course, the decision to open a joint bank account is something you and your gushing newlywed will need to talk about. After all, you two know each other best, so it might be more comfortable for you to maintain separate bank accounts. Either way, it’s a choice that needs to be addressed.
2. Talk About Financial Goals
For many, getting married is a milestone of “adulting.” It’s a surefire sign that you’ve accepted all the responsibilities of being a grown-up. You know, like bills and stuff — the responsibilities you weren’t aware of when you were six and dreamt of being an astronaut and a firefighter.
But tying the knot is just one facet of your adult life. What about buying a home, having kids, and climbing the ladder of a fulfilling career?
Newlyweds need to discuss their separate and shared financial goals and dreams. You might be surprised by how much your goals differ, so try to find some common ground and compromise.
This discussion also leads to a great opportunity to learn a little more about each other! You might discover that your husband is content living in a modest home with a white picket fence (as opposed to an estate in the Hamptons). Your wife might want to pursue further education in an attempt to establish a global corporate empire.
And you both might want to spend a healthy amount of time traveling the world (who doesn’t?).
The point of discussing your financial goals, of course, is to identify how you’ll work toward achieving them.
Consider the effect of buying a home, for example. You’ll need to figure out how to save up for a down payment before you even start the lengthy home buying process.
3. Establish a Budget
I know, I know – here’s that word “budget” you’ve heard so much throughout your adult life. Sigh. A budget isn’t the most exciting thing in the world, but it’s what will support your ability to do the exciting things you’d like to. A budget helps prevent you from sinking into debt while keeping you on track to meet your shared financial goals.
In many cases, marriage wipes away many of the bills you and your newlywed were once individually responsible for paying. Even if you’ve mostly lived with one another for a while, you might have still been paying for a (barely visited) apartment of your own — just in case.
But just because you share expenses doesn’t mean you’re paying less overall. The total cost of your living arrangements, utilities, and other expenses might equal more than you’ve ever paid while single.
Sit down together and construct a budget. Address areas that have to be included — like your mortgage and credit card bills — but don’t forget to leave yourselves with some spending money. Then stick to following your budget to avoid overspending or burdening yourselves with excessive debt.
4. Conquer Your Debt Together
Marriage means working together as a team to achieve shared goals, like conquering debt.
Newlyweds don’t take on their spouse’s debt after marriage (unless they’re a cosigner for a loan, for example). However, your spouse’s debt does play a role in the financial well-being of your marriage. Lenders don’t really care if you’ve put a ring on it — they want their monthly payments.
Working as a team to eliminate debt brought into a marriage can eventually free up cash for other purposes, like a well-earned vacation or down payment for a home.
Keep the “his” or “hers” on bathrobe embroidery — don’t apply it to debt. Treat any debt as “our” debt and pay it down together. Your marriage will be stronger for it.
5. Save, Save, Save
Married couples generally spend less money on housing, healthcare, bills, and groceries than their single counterparts. What should newlyweds do with all the money they’re saving by combining expenses?
Your first and foremost goal should be setting up an emergency fund. An emergency fund will tide you over in case one of you unexpectedly lose a job, your car breaks down, or an *ahem* emergency springs up. Having sufficient savings available means you’ll avoid the added stress and tension caused by an unexpected emergency.
It’s also worth tucking some cash away for retirement. Reassess your retirement planning, 401(k), and investments. Your goals for your golden years might have changed now that you’ve tied the knot. Make sure your retirement savings and investments are working to both of your benefits.
6. Reconcile Any Wage Differences
Earning less than your partner can lead to feeling as if you’re worth less, but that’s not the case. Not all jobs are created equal, even if you work just as hard. Confront pay disparity head-on, before it has the chance to cause illogical resentment and tension.
There’s no one tried-and-true solution for approaching income inequality in a marriage, though. You’re going to need to figure out what works best for you and your boo. Doing equal amounts of work or using a rewards system can help negate the downsides of pay disparity in your marriage.
Experts like Suze Orman suggest splitting expenses by percentage so that you’re each contributing fairly and still able to pocket a healthy bit of spending cash. This should be a chunk of change that either of you can spend on anything you want without needing to answer for it or feeling judged in how it’s spent.
7. Assess Your Life Insurance Needs
Like many Americans, you probably haven’t looked at your life insurance policy in awhile (or don’t have coverage at all).
When was the last time you assessed your needs for life insurance? Now that you’re married, consider protecting your spouse’s financial future. Nowadays, you can get an affordable term life policy online without a medical exam (and we know just the place to apply… 😉).
Seriously though, term life insurance is effective for protecting the financial well-being of your marriage at a time when you’re most vulnerable — before you’ve had the opportunity to really increase your income or savings and you still owe significant debt.
If you have existing coverage already (go you!), ask yourself if it provides enough of a death benefit to protect your growing family in your absence. Will it pay off a mortgage if you’re no longer around? What about your auto loans or credit card debt?
Tying the knot is also the perfect time to review who’s going to get the policy’s proceeds if you pass on. Check your existing policy to see who you’ve listed as your beneficiaries. (Think about it: Do you want your life insurance proceeds to go to your ex if that’s no longer your intention? Ew.)
Life insurance for young married couples protects everything you’ve worked for while you’re alive and healthy. It’s lasting protection that helps demonstrate your undying love and desire to provide for your family.
8. Understand How Marriage Affects Your Taxes
Since we’ve already talked about death, let’s not forget taxes! (The two always go hand-in-hand, don’t they?)
First, you’re going to want to update your W-2 tax withholding. Since your taxes may increase due to the “marriage penalty,” it might be prudent to have more taxes taken from your paycheck by claiming “0.” This will save you from a large bill at tax time.
Your joint income might actually push you into a new tax bracket and your filing status is likely to change, too. In most cases, it’s likely you and your spouse will choose the “married filing jointly” filing status, in which you fill out one tax return (and are both accountable for all the information you provided). However, it may sometimes be advantageous to choose “married filing separately,” particularly if one of you has high medical expenses or too little federal income tax withheld.
All of these changes can be overwhelming and a little bit confusing, so it’s generally a good idea to meet with a CPA or tax professional to put everything in proper order.
Say “I Do” to Creating a Healthy Financial Life as Newlyweds
Marriage requires hard work, dedication, and communication to maintain – as does the financial well-being of a young married couple. These financial tips for newlyweds will help you not only learn more about one another (like your S.O.’s near-obsession with growing a collection of cat artwork), but create a framework that supports and protects your financial goals, dreams, and integrity.