Marriage is an amazing thing but, let’s be honest, making the transition to married life can be challenging.
My husband and I have both been financially independent – to some degree – since we were teens. Even though we lived together for three years before we were married, we didn’t open a joint bank account until after our engagement.
By the time we combined our finances, we were both pretty established in the way we approached bills and budgeting. (Total discretion: He budgeted. I spent.) So it took some time to create a financial plan as husband and wife. Even now, we work at this every day. Ironically, I’ve since become kind of a spendthrift. I guess marriage can really change a person!
I’m a journalist by trade so when I do something new, I obsess over it. I want to know everything there is to know about whatever “it” is. I research like a maniac. I read ‘round the clock.
Planning our finances as a couple was no exception.
Here’s what I found. I hope you find this guide useful!
Common Mistakes to Avoid
Combining finances as newlyweds doesn’t have to be a nightmare. Here are some common money mistakes to avoid in your first year as husband and wife:
Being Dishonest: Unloading all of your financial baggage is scary, but one of the best things you can do before walking down the aisle is to have an open dialogue about money. Talk about debt. Take a close look at your personal spending habits. And set up a magic number – an agreed-upon limit that you can spend without consulting your spouse on day-to-day items.
Going-it Alone: Don’t try to pay down individual debts on your own. Make a plan to pay off what you owe together, starting with the highest interest rate and then moving on to others. Set a clear payment plan.
Not Paying Enough Taxes: Your accountant is your new best friend. Set up a meeting with him or her for a tax projection of your finances – whether you’re filing jointly or not. This will help you avoid any mind-numbing surprises (and arguments!) at tax time.
Being Unprepared: Not to be a Negative Nancy or anything, but accidents happen. Talking about the worst-case scenario isn’t the most romantic thing a newlywed couple will do, but it’s arguably the most important. Make sure you both know your financial situation – even simple things like how to pay the bills – inside and out.
Your Post-Nuptial To-Do’s
The marriage license is signed, sealed, delivered and the tan from your honeymoon is fading. You are officially husband and wife.What do you do now? Set up a financial plan!
First, some things you should know:
A good credit score can save you money when applying for car or home loans. As soon as you can after the wedding, obtain a copy of both of your credit reports. Make sure everything is accurate and establish a plan to improve your scores if needed, like paying off debt.
Your credit is tracked and updated on an individual level even when you’re married. Closing down accounts that you opened when you were single can hurt your score. It’s also a good idea to keep at least a small amount of credit in your own name. You can still add your spouse as an authorized user, even if it’s not technically a joint account.
A sudden increase in newly opened lines of credit can have a negative effect on your score, so think twice before opening store credit accounts just for those discounts. (Easier said than done when you’re trying to furnish a new home, I know!)
Over-communication is not a bad thing, especially in your first year of marriage. Too many late payments can also hurt your credit score. Set reminders to ensure bills are getting paid on time.
One of my new favorite tactics that I picked up from a seminar with Alexa Von Tobel, founder of LearnVest, is the morning “Money Minute.” This is essentially a chunk of time that you set aside daily to check in on your finances – upcoming bill payments, account balances and the like.
So how do you go about combining finances with your spouse? I really love this guide from LearnVest published on TheNest.com, which outlines six different approaches.
Here’s a quick summary:
The Equals Approach: Essentially, this financial plan keeps most of your finances separate with the exception of one joint account that both of you contribute to equally. If you and your spouse are in the same ballpark in income and debts, consider this method. Your joint account is used for rent, bills, groceries and other shared expenses.
Based on Earnings: This system is similar to the one above, except the total you contribute to your joint account is a percentage of your personal income rather than a set dollar amount. It’s a good option if one partner makes more money than the other.
“I’ve Got It”: Does one of you make significantly more than the other? Some couples in these situations take the approach where one partner pays for all expenses, for example if one of you is going to school and not working or staying at home with the kids.
Take Your Pick: Some couples just don’t want to combine finances at all. In this case, each person can pick certain bills and expenses to pay. They may not necessarily be equal. Maybe one of you pays association fees and utilities while the other pays the mortgage.
What’s Mine Is Yours: This program combines your finances completely and is good for married couples that don’t have significant individual assets. You can set up one master joint account or have a joint account for expenses and savings, plus separate checking accounts for each of you with “fun money.”
“Act As If” Approach: Even if both spouses are working, some couples choose to live off of one income and save the other’s. This can be a good approach if one of you has an inconsistent income or if you’re planning to live on a single paycheck in the future. This means living essentials like rent and groceries need to total less than 50 percent of that person’s income.
Check out TheNest.com’s guide for more information.
Tax Advice for Newlyweds
Seriously, is tax season ever not painful? You can at least avoid some of the headache by being prepared to file taxes for the first time as newlyweds. Here is some advice I picked up from LearnVest:
Know Your Filing Options: As a newly married couple, you have two filing status options: married filing jointly or married filing separately. You should know, however, that filing jointly does lower your federal tax rate. But there are some cases where filing separately makes more sense.
Don’t Forget Your Name: Sounds silly, right? But it’s easy to forget! If you changed or hyphenated your last name after you got married, remember to report the change to the Social Security Administration and use your new last name on your tax return. Otherwise you could be hit with delays or issues come tax time.
Adjust Withholdings: If both of you work, a joint income could put you in a higher tax bracket. Be sure to make any withholding adjustments for the next tax year by filing a new W-4 with your employer. If you’re a freelancer or independent contractor, adjust your estimated tax payments accordingly.
Money & Your Relationship
OK, here it comes – another totally unromantic but totally necessary reality check: issues with finances are one of the top reasons couples get divorced. I know – I’m sorry! I’m not saying this to rain on your newlywed parade. I’m just trying to help you (and myself!) be better prepared.
Oftentimes in a relationship one person ends up taking on much of the financial responsibility. This inevitably leads to that spouse being blamed if things go bad and that can lead to some serious marital issues.
What’s that you say? Your spouse is better at crunching numbers and keeping things organized? That very well may be the case, but you should still both be in the know.
Try scheduling regular financial check-ins (I like doing this over wine and chocolate) to make sure you’re both aware of your current situation and that you both know how to pay the bills. This includes sharing login information and payment due dates.
Here are some other common financial obstacles couples face and advice on how to conquer them, courtesy of Savvy Sugar and LearnVest:
The Issue: Downsizing! For example, one of you lost your job, took a major pay cut, or is staying home to take care of a newborn. Scaling back on your lifestyle is tricky and could possibly affect your relationship.
The Resolution: Be prepared. Think ahead. And consider whether you can live off of one income. (The link to TheNest.com’s article under the Your Post-Nuptial To-Do’s section above has some great information.)
The Issue: Kids. This can include: housing and food costs, college funds, extracurricular activities and everything else under the sun. Children are great but they’re expensive, and this ever-growing list of costs can be stressful on a marriage.
The Resolution: Obviously, things don’t always work out as planned but if you want to avoid child-induced anxieties, make sure you’re both financially established before starting a family. Have an open and honest discussion about the sacrifices you’ll have to make, and keep having that conversation, well, for the rest of your life.
The Issue: Taking care of your parents.
The Resolution: Supporting an aging or sick parent can be straining on your finances and your marriage. Even if this isn’t expected to be a reality for you in the near future, start discussing options now.
The Issue: LIFE! Sometimes just the day-to-day responsibilities of managing your finances can feel like it’s too much to handle.
The Resolution: It’s important to plan, but it’s also good to adapt. Things don’t always go as you expected. Understand that, as your financial situation changes, so will your saving and spending practices. Adjust your goals accordingly and share the responsibility with your partner.
Money Advice for Married Couples
Here’s a good wrap-up on financial tips for newlyweds. It’s a resource from LearnVest that we’ve used regularly since tying the knot last year.
Share Your Financial Goals: Tackle the uncomfortable questions head-on. There’s no better way. How do you plan on reducing debt? How much money do you want to save? Will you split all living expenses evenly or do you plan on setting up a different system? The more you lay out in advance, the better prepared you’ll be.
Establish a Budget: Categorize your expenses and create a spending plan together. You can use the ever-trusty Excel sheet or get fancy with a budgeting program or software. (Psst…I love this one.)
Strike a Balance: Does one of you make significantly more than the other? Don’t toe the line on this issue. Discuss it. Consider how this will affect not only bills and living expenses, but also spending on fun things like dates and vacations.
Build That Nest Egg: It can take a while to get into the swing of things. Once you’re comfortable enough with your budget and financial plan, it’s time to consider savings. Start putting money into an emergency fund and factor in your savings goals to your monthly budget.
Be Honest: We all have things that we like to spend money on. Me? I love travel, shopping and trying new restaurants. My husband likes techie gear, playing soccer, and (something we can agree on!) travel. Be upfront about your spending habits and don’t judge your spouse’s small pleasures. And the same goes for unexpected issues. If you run into financial troubles, tell your partner immediately.
Trim Together: No, not body fat. Spending. Sure, being married can increase your income but it also increases your expenses. Cut down on unnecessary expenses as a couple. Set goals for home, luxury or travel purchases together.
My Favorite Resources
I’ve already mentioned these websites throughout this article, but here are some financial planning resources that I can’t live without (bonus: they’re not boring!):
Savvy Sugar: Everything from information on tax freebies to advice on how to save money when planning your wedding and even helpful information on maintaining a home.
LearnVest: If LearnVest can help me understand finances, it can help anyone understand finances. My husband and I use their budgeting tool to track our spending and income.
The Nest: OK, so I may spend more time browsing through articles like “Adorable Bathroom Ideas” than “10 Bills to Cut Today,” but TheNest.com has some great financial advice, too.
Do you have any tax tips for newlyweds that you want to share?