Combining finances can be an extremely stressful event for all of us. Especially when it comes to our personal finances. Afterall, this includes not only our life savings, but it means you’ll most likely have to alter your spending habits to align with another’s.
Combining finances doesn’t always come during marriage, but many times does. Unfortunately, many of us were not taught one way to handle our finances. Instead, we sort of found our own way. Maybe you got into some credit card debt or maybe you’re a natural saver. Whatever your financial process is, it may not match your new partner’s.
Magnify Money shared a study which found that arguments over money is one of the leading causes of divorce. This post isn’t meant to scare anyone, but rather emphasize the importance of open communication with your spouse before and throughout your partnership.
Open communication with your partner is not only great for your finances, but your personal life as well. Hopefully our Newlywed Checklist can get you off on the right foot.
Budgeting & Finances
First things first, analyze where you both are financially and talk about it together. It’s hard to know where you’re going if you don’t understand where you’re coming from.
Take a look at the money coming in and the money going out. Thoroughly analyze both of your expenses. Maybe you’re a big spender and your spouse is a big saver. Maybe you go out for lunch every day and your spouse brown bags it.
It’s possible that debt can cause a lot of friction in young relationships, especially if one person carries more than the other. But – I’ll play marriage counselor for a second – you’re not getting married to create a financial empire. You’re getting married because you love that person. Hopefully. Work through your debt together.
If you have any debts at this point, we recommend the Dave Ramsey 7 Baby Steps. During this process, it’s recommended that you list out your debts from smallest to largest and start knocking out the smallest debts first.
Once you get through discussing your finances/expenses, you can begin to share your dreams and your goals. Where do you want to be in 20, 30, 40 years?
Do you want kids? Is someone going to stay home with the kids while the other works? Are you going to need childcare? Do you want to travel? How long until you want to retire?
Discuss this early and often to make sure your short- and long-term goals stay aligned. Once you discuss where you want to go, you can establish a plan to get there. I’ll touch on this later, but it’s important to continuously meet and discuss these plans. Don’t just talk about it once and leave it at that. Plans can change.
Goals & Expectations
Prior to getting married, you may have utilized different processes to paying bills. Perhaps you had a roommate who paid all the bills. Perhaps you were the roommate who paid all the bills. Perhaps neither you nor your spouse were in charge of paying the bills.
Decide who will handle timely bill pay and budget tracking. There is no sure-fire way to deciding who does and doesn’t do this. Just discuss it and create a plan.
With that said, budgeting and family finances should not fall upon one person’s shoulders. Continually discuss finances with your partner. We recommend meeting weekly or even bi-weekly in the early stages of your relationship. After a few years, you can think about toning it back to monthly meetings. Even if you’ve been married for 40 years, we still recommend meeting at least monthly with your spouse to discuss your finances.
Something else to discuss with your spouse are your account types – joint vs. individual accounts. We’ve seen folks who decided to keep their checking account separate. He has an account for his personal spending and so does she. It works for them.
On the other hand, one account for all expenses can be easier in the sense of simplicity, but find what works for your family.
Other important Items
Finally, review and update your insurance policies, your will, and your bank accounts. Add your spouse as a beneficiary to all bank and investment accounts even if you chose not to combine them. Combine insurance policies so you’re no longer on two separate plans.
If you need help with this, we suggest meeting with a financial planner and tax professional. Each will help you best address your financial future.
I won’t restate all the points made throughout this blog post, but I will provide you with a link to download our Newlywed Checklist again.
At the end of the day, the most important takeaway should be discussing your finances openly with your partner. This is a team effort. Make decisions together and get on the same page.
This checklist comes from our Standard of Care. We have a checklist for many more life transitions. Keep an eye on the website as we are currently working to upload them, otherwise, call/email/message us and we would be happy to send you a checklist for your specific life transition.
For more on the Newlywed Checklist, check out the Mind of a Millionaire podcast.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
No strategy assures success or protects against loss.
This information is not intended to be a substitute for individualized tax or legal advice. We suggest that you discuss your specific situation with your tax or legal advisor.