Every couple looks for the secrets of a successful marriage. When it comes to money, financial planning professionals and couples agree on several strategies that can smooth out or even eliminate many of the trouble spots that commonly affect newlyweds.
Develop a budget together that covers your needs and some of your wishes: Set a realistic spending plan that considers your living expenses, shared priorities, and includes an agreed-upon amount for each individual. Budgets often fail because they are too rigid. They should allow modest amounts to each individual to use as needed. Decide how accurately you will track expenses. Who will track budget expenses? How will you track daily expenses?
Set short-term, intermediate and long-term financial goals together: Think about the future. Clarify what you want, how much money you need to save, how you plan to accumulate the money and how long you expect it to take.
Establish a protective net before you begin to save for the future: Medical, property, liability and life insurance should be agreed upon early in the marriage. While nobody wants to consider that the worst will happen, a plan for this in the beginning allows you and your new spouse to feel safe as you move forward in life.
Save and invest: As soon as you are engaged, begin saving. Try to set aside 10 percent–15 percent of your pay. That goal is easier to accomplish if you reduce current expenses. Consider money saving ideas that can boost your account balance without much effort: Dine out less frequently, go to the library instead of buying books and magazines, choose a credit card with the lowest possible interest rate, shop for bargains, adjust your utilities, use public transportation or carpool, save your pay increases instead of spending them. When you get a salary increase, contribute more to your employer-sponsored retirement plan and IRA accounts (not to exceed IRS guidelines). Pay yourself first. Make automatic deductions from your pay into a savings or investment account, or through regular automatic transfers from your pay or checking account into a savings or investment account. The savings can become a down payment on a new house, a vacation or any one of your shared goals.
Establish an emergency fund equal to 3–6 months of basic living expenses: This financial cushion can soften the blow of an extended illness, an unexpected job loss or other emergency. Make sure these funds are located in a safe and liquid account.
Pay debts in full as quickly as possible: If one or both of you have debt when you come into the marriage, pay the debt balance as quickly as possible. Although your spouse generally is not liable for the debt you incurred before you married, both of you will be affected by each other’s credit history if you apply for future loans together.
Resist the temptation to overspend on big purchases: Yielding to the temptation to buy beyond your means can leave you in debt and put your marriage in jeopardy. Choose a more measured course toward big purchases by planning, saving and then buying what you need only when you can afford it.
Commit yourselves to a lifelong conversation about money: Periodically, schedule at least one hour of uninterrupted time together to discuss your finances. Talk about the everyday problems and challenges that need resolution. Discuss the future as well. What is working? What is not working? Does your budget need an update? What progress have you made toward your financial goals? What new goals do you want to set?
Plan for tax day: Once married, you have two choices for filing tax returns — married filing jointly and married filing separately. You will want to get advice from a tax accountant about which is most advantageous to you. If you are married, you may pay more on tax day. By meeting certain income requirements and other provisions (including whether you or your spouse are active participants in a retirement plan), you may both be able to claim deductions for your IRA contributions on your tax return. Contact a financial planning professional for the most current information about IRAs.
Find and reduce financial duplications: You can save money when you find duplications in employee benefits, insurance policies and financial accounts. First, compare benefits plans from you and your spouse’s employers. Whose benefits provide the best offerings for the best price? Based on what you learn, you might, for example, choose the health insurance coverage from one employer to cover you both and take the other employer’s more generous supplemental life insurance and dental plan. Also compare each employer’s policies about matching 401(k) contributions. If one individual ’s employer matches at a higher rate, you may want to consider maxing out that individual’s 401(k) up to the matching percent first. If you both bank at one financial institution, make sure your various accounts — individual and joint — are connected at the bank or credit union.
The connection could help qualify you for lower service fees, higher interest rates on savings or other valuable benefits. Do not forget to check with your insurer for possible savings. Combining individual auto policies into one could get you a discount if you insure more than one vehicle, for example. Review your insurance policies to see if they still meet your needs. Review your coverage limits on combined personal property. Maybe you can afford a higher deductible now and reduce your premiums. Or perhaps a policy you had as a single individual no longer makes sense as a couple. Other areas where you may find duplications include subscriptions, memberships and services, such as Internet, phone and cable.
Decide how you want to hold title to property you own together: Assets, including real estate, investments and other financial accounts, can be owned by a married couple in more than one way. State laws dictate how the ownership of some marital assets is treated. Your own financial circumstances and wishes can also affect your decision. Because of the legal consequences, consult an attorney for advice about the ownership arrangement for these assets that is right for you and your spouse. Depending on applicable state law, property that the two of you own together may be titled in one of several ways: tenants in common, joint tenants with a right of survivorship or tenants by the entirety.
Tenants in common: each own a separate piece of the property rights, although not necessarily an equal share. Each individual has the right to sell, give away during the individual’s life, or at death through a will, the individual’s own part of the property to someone else without affecting the other tenant’s ownership rights to the property.
Joint tenants with a right of survivorship: each own the entire property, not just a part of it. If one joint tenant dies, the surviving joint tenant automatically receives the deceased tenant’s interest in the property without being subject to probate. Joint tenants must generally both consent to the sale of real property or to any loans made against it.
Tenants by entirety: is a form of ownership recognized by 30 states for legally married couples who own real estate. Neither tenant can transfer property while both are alive without the other’s permission. When one tenant dies, however, the surviving tenant automatically receives the deceased tenant’s ownership rights.