In marriage as in life, there are few guarantees, and one of them is this: You will have to address your finances together, and in some depth. Whether you get married in your 20s or your 50s, you may suddenly find yourself party to someone else's credit-card debt, child-support commitment, student loans or foreclosure history -- or you may be involving your spouse in your own financial baggage.
Romantic? No. But it's a fact of modern coupling. Even if you have no monetary skeletons in your closet, marriage links you to someone else financially in a way that requires, at minimum, some thoughtful decisions. Who will pay the bills? How will you divide expenses? Will you combine everything? Nothing? Some things?
Another guarantee: If you don't talk about money now, you will be talking about it later, and perhaps not quite as calmly.
These five tips can help the newly married begin to work out their new, joint financial status and hopefully avoid the fiscal marriage meltdown that affects so many couples down the road. The first bit of advice is the most obvious one -- and is, in fact, a key to overall marital bliss.
Practice saying this phrase: "Let's talk about it."
This sentiment may be the most important one in your life together, and it's crucial in your new financial situation. Unfortunately, many couples leave financial discussions for some future time when they become unavoidable -- in a crisis, or when someone makes a major purchase solo, or when long-buried debt suddenly comes to light.
Money can be an awkward topic. It's personal and the very opposite of lovey-dovey. But the time to talk is now -- perhaps not on the honeymoon, but as soon as you get back home and settle in. The glow of your new life together can actually help here, since you may be more inclined toward financial compromise or a general generosity of spirit than later on, when life goes back to being life with all its stresses and distractions.
Set aside a couple of hours, sit down with a pad of paper, your bank statements and other financial documents and dig in. You don't need to address everything immediately, but getting started early is important to the practical success of your marriage.
As is the next tip on the list ...
Hopefully, you and your new spouse tell each other everything -- or just about. And hopefully you at least tell each other all of the important stuff and will continue to do so.
Guess what: Near the top of the list of "important stuff" is what you do, have done and will do with your money.
If you have financial skeletons, disclose them completely, and right away. Are you in debt? Do you have a bankruptcy in your past? Can you no longer afford the car you drive but can't bear to part with it?
Even basic, neutral fiscal traits ought to be shared in order to avoid major conflict down the road. What's your money personality? Are you a spender? A saver? Do you lean toward the risky or the safe side on the investment spectrum? Do you live within or at your needs? (Living above would probably fall into the "skeleton" category.)
These things will come out, so there's no point in keeping them secret. Reveal them now, when "How could you hide that from me?" is not part of the discussion.
It's not just an issue of honesty in your relationship, though. There are steps you can take in your new situation to make money matters more manageable. For instance, if you keep your finances separate until one spouse manages to raise his or her credit score, you may have the option of applying for loans solely in the more financially healthy spouse's name. Or, if one of you is a big spender and the other is a big saver, you can lay some ground rules early on and adjust your budget accordingly, which reduces the likelihood that one partner ends up feeling financially babied, stifled or insecure.
Which brings us to the next newlywed money tip ...
Whether you've made it to your 20s, 30s, 40s or 80s before tying the knot, you've probably had at least a taste of financial independence. Some people are perfectly fine with establishing completely joint finances as soon as they get married; but for others, it can be a struggle.
There's no law saying that when two people tie the knot, they have to close all individual accounts and open only joint ones. You can, of course, combine everything, and if only one spouse is working, that may be the best move. But if both spouses get a paycheck, it sometimes makes sense to divide your earnings in other ways. These days, lots of couples have a joint checking account for joint expenses (such as rent or mortgage, groceries and entertainment), into which each puts a percentage of his or her earnings. On top of that, they'll also have two separate, individual accounts where they keep "their own money." They may even have both joint and separate savings accounts. Some spouses don't combine their earnings at all.
The advantage to separate accounts is that both of you get to retain some level of fiscal independence. Many working adults can find it somewhat restrictive to suddenly need "permission" before buying a new set of speakers or pair of shoes. Keeping something aside that's just yours can go a long way toward alleviating any issues of independence that may arise with a joining of the finances.
Still, lots of couples find it ideal to have only joint accounts, which makes sense considering your lives are now legally and financially tied together. But that's not the only acceptable way to do it. Consider whether you and your spouse would benefit from maintaining some degree of financial independence, even if that simply means some "mad money," and go with it. What matters is what works for you, not what your parents or your friends did.
Of course, there are some things that every couple should do ...
When couples are first starting out, the road ahead can look so bright, so new, so unencumbered by the unforeseen. It can almost seem like nothing could go wrong.
Or maybe not -- these days, with both grocery store clerks and stock brokers seeing pink slips at record rates, it's become rather obvious that financial security is, well, not all that secure. Those who find themselves without a cushion can end up in really hot water if one or both spouses' jobs disappear, or if a health emergency arises.
Putting money aside is a necessity. An emergency fund should hold at least three months' worth of living expenses, and preferably more. This kind of cushion can be the difference between serious, long-term debt and a temporary setback.
An emergency fund, though -- kept in an interest-bearing account -- is just one of the necessary recipients of the money you set aside. If you plan to buy your own home, you'll need to start building up that down payment as soon as possible. There's also retirement, which may seem pretty far off now but can really sneak up on you. One of the worst surprises couples can face is an unfunded retirement, and most experts recommend putting 10 percent of every paycheck, or else whatever you can afford, starting now, into a tax-deferred retirement fund to make sure you're not caught off guard a few decades from now.
And finally, a somewhat unpleasant but very important task for the new couple ...
You probably don't want to think about anything that incorporates the line "In the event of your untimely death." Nobody does. But now that you're married, even the remote possibility requires some attention.
You don't need to make a big thing of it. There are just two documents that should be produced in order to protect your spouse from potentially damaging financial repercussions: a will and sufficient life insurance. Preparing a will makes it clear who will inherit your estate, and life insurance helps ensure your spouse doesn't find him- or herself unable to meet your formerly joint financial obligations if you're gone.
What exactly goes into your will and how much life insurance you need depends on your individual circumstances. There are guides online to help you decide, or you can talk to a financial adviser for even more detailed, customized assistance. You can create a will and purchase life insurance online or do it in person with an expert. What's important right now is that you establish at least a bare minimum of legal and fiscal security, just in case.
The point here is not to be morbid or pessimistic; it's to create the most financially stable situation for your new life together. When you get right down to it, it's not even about money. Taking all of these steps to secure your financial future can help you on the road to creating a low-stress, high-happiness life together -- and that is romantic.
For more information on joint and individual finances, check out the links on the next page.
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More Great Links
- Bourke, Lorna. "10 Financial Tips for Newlyweds." CityWire. April 28, 2011. (Dec. 6, 2011) http://citywire.co.uk/money/10-financial-tips-for-newlyweds/a488765
- Hardekopf, Bill. "Getting married? Six steps in financial planning for newlyweds." Christian Science Monitor. July 13, 2011. (Dec. 6, 2011) http://www.csmonitor.com/Business/2011/0713/Getting-married-Six-steps-in-financial-planning-for-newlyweds/Know-your-partner-s-spending-habits
- Goldman, Lea. "Eight Financial Tips for Newlyweds." Forbes. June 2, 2004. (Dec. 6, 2011) http://www.forbes.com/2004/06/02/cz_lg_0602newlyweds.html
- Todoroka, Aleksandra. "The Six Financial Mistakes Couples Make." SmartMoney. June 11, 2008. (Dec. 6, 2011) http://www.smartmoney.com/spend/family-money/the-six-financial-mistakes-couples-make-15414/