Last Updated on March 1, 2023 by Prakash Kolli
6 Financial Tips for Newlyweds
6 Financial Tips for Newlyweds. Congratulations! You went ahead a tied the knot! It’s something to celebrate any year, but especially in 2021 after the lifting of the past year’s restrictions put in place during the COVID-19 crisis. Many people getting married this year postponed their celebrations from 2020. Now that states have opened up and group gathering restrictions have ended, weddings are happening again. Hopefully, before the big day, you and your spouse discussed how to handle your finances. If not, there is no time like the present to make a plan for your future together. Here are 6 financial tips for newlyweds.
In some religions, couples must take pre-marriage and counseling classes, including financial topics, to get married. When I got married in the 1990s, this was the case. As someone right out of college who was living at home, it wasn’t something I had done before. My fiancé and I had to talk about many complex topics that didn’t come up in everyday discussions. It was eye-opening!
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6 Financial Tips for Newlyweds
Banking and Expenses
One of the first things to do as a newlywed couple is to figure out how you will manage your bank accounts and expenses, whether you decide upon joint bank accounts, individual bank accounts, or a managed mix of the two. The most important part of this decision is the discussion.
Here are three separate ways of handling expenses that newly married couples can consider:
Each person would deposit their income into a joint checking account used to pay the monthly expenses of housing, utilities, food, credit cards, and other debt. All additional bills and purchases come from this account. A “what’s mine is yours” policy prevails. Any debt, even if occurred before the marriage, is shared. An emergency savings account should also be set up for any unexpected expenses or loss of employment. You look at retirement investments, including 401(k)s, as a couple.
Keep Everything Separate
In this method, couples maintain individual bank accounts. Each may pay half of the joint expenses like housing, insurance, utilities, and food, etc., just like you would with a roommate. In some cases, couples may decide each person pays a specific bill. For instance, one spouse may always pay the electricity while the other pays the homeowners insurance. No matter how the joint bills are settled, each person pays their additional expenses by themselves, including previous debt. Each funds retirement accounts and health saving accounts.
Individual Accounts and a Shared Joint Account
Couples have a joint checking account to pay for shared expenses. These common expenses are specific needs as opposed to wants. Once the couple tallies up the shared expense total, that money is put into a joint checking account from which bills are paid each month. The remaining income of each person is deposited into their individual checking accounts. Previous debt sticks with the spouse who incurred it. Retirement accounts and health savings accounts are funded from individual income.
Some Things to Consider
If your salaries are not equal, how will you handle the difference in earning ability? Will you split expenses evenly? If a 50/50 split leaves one spouse with much less discretionary money, an earnings ratio may work better and help avoid resentment. For instance, if one spouse earns 30% of the household income, expenses could be split 70/30. A fair way of splitting expenses may seem important only if you have individual accounts and a shared joint account. However, even if the couple decides on a joint account, it’s essential to discuss budgeting and spending. One person saving and the other person spending without regard will not help newlywed couples reach their long-term financial goals.
Make a Budget
Speaking of budgets, do you have one? A simple, smart budget worksheet can be helpful to tally up all your expenses. It will give couples a better idea of how much money remains after paying for needs each month. You can’t live within your means if you don’t know what they are! If one person is a saver and the other a spender, a budget can unify and help you reach shared goals like homeownership, travel, and family.
Once you have made your budget, sit down and make some plans! Think about strategies for one year, five years, and further in the future, even if it simply where you want to spend your vacations. Is homeownership your goal? Examine your income and budget and create a dedicated savings fund for a down payment. Got a daydream about where you would like to retire? Commit it to paper and work together to determine what you can afford to save towards it. Automatic transfers to your savings accounts, retirement, and emergency funds can simplify your savings routine.
How does the couple view debt from before the marriage? Many people enter marriage with both student loans and credit card debt. Will the couple pay off the debt from both their incomes to potentially pay the debt down quicker, therefore saving money on interest? Develop a strategy together to tackle this debt so you can save for future goals.
Now is a great time to examine who has the best health insurance at the best cost from your employment. You may be able to save some serious money by switching to your spouse’s plan. Since employers contribute different amounts to employee’s insurance, it might be less expensive to join your partner’s insurance than continue your own. Usually, there is a healthcare enrollment period in the fall, but a life event such as marriage qualifies you for a special enrollment period. Be sure to contact your human resources department for the rules and regulations about changing your healthcare insurance.
Group life insurance and disability insurance are often offered as work benefits. If your employers provide plans, examine them with your budget in hand to determine whether the benefits would be enough to support the remaining spouse or disabled partner. Supplemental, private plans can be purchased separately from your work policies too. Newlyweds should update any previous insurance plans to benefit the surviving spouse. The goal of life insurance plans is to provide the surviving partner with funds to pay off debt and/or maintain their lifestyle.
Make a Will
There is nothing romantic about making a will. However, it is the most important legal document for your estate. It details your wishes for distributing your wealth after your death and provides instructions for how it should be dispersed. If you die without a will, your estate will get tied up in probate, which can cause stress and financial strain on the surviving spouse.
Without a will, surviving spouses usually get one-third to one-half of the estate. Estate laws do vary from state to state, so it is recommended that newlywed couples contact an attorney for more information as soon as possible. Once created, wills should be reviewed every 3 to 5 years to address any changes in situation or lifestyle. By the way, beneficiaries on retirement accounts take precedence over instructions in a will, so make sure you update your retirement account beneficiaries as well.
Some Final Thoughts on Financial Tips for Newlyweds
The classes my fiancé and I completed before we got married forced us to discuss our future finances. We discussed my student loans, credit card debt, homeownership plans, and potential future children before we walked down the aisle. It helped us as a couple understand our financial differences due to different backgrounds and make some long-term financial goals.
Honestly, an essential part of a newlywed couple’s financial plan is the discussion. Talking about money isn’t easy for anyone, especially newly married couples. However, starting your union with a thoughtful and open discussion will encourage future financial openness and harmony. And who wouldn’t want that?
You can also read 10 Smart Ways to Spend Your Federal Tax Refund by the same author.
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Christine Seaver is a freelance writer that writes about personal finance, budgeting, and debt. She is a frequent contributor at Dividendpower.org. Christine works as an office manager by day and a cookie baker at night. She lives in Massachusetts with her family.