Once you have just tied the knot and all the excitement is over, you now have to face the real world of finance as a couple. Hopefully your first conversation about money has taken place before your marriage but if not, better late than never! Even though you have the rest of your lives to spend together, you should accomplish these five important financial tasks within your first year of marriage.
Set Financial Goals
Your financial goals will determine how you live your lives from here on out. It is important for you to establish where you stand on certain financial topics such as savings, credit cards, and risk tolerance. Is one of you a spender and the other a saver? Some view credit cards as an easy way to build credit while others see them as an evil temptation. There are plenty of people who prefer to take on a high risk for the chance of gaining a high reward, while others tend to be more conservative and prefer more dependable savings or investment strategies. Once you have disclosed these opinions, you can move on to setting more specific, achievable goals. Common goals include buying a house, paying off student loans, financing children’s college education, saving enough for retirement; however the possibilities are endless and depend entirely on your specific situation.
Once your financial goals are all laid out, you must work out how to practically achieve them. Budgeting is a key component of this. You should write down your combined monthly income, subtract monthly fixed (necessary) expenses, and see how much you have left to spend. Together, you should decide how much of that should be put into savings or investments. Building an emergency fund with enough to fund three to six months’ worth of expenses is a fantastic place to start. From there, you should decide how you are going to manage your finances. Will you have one joint account, two separate ones, or a joint account for household expenses and separate accounts for each of your personal use? Who is responsible for paying the bills? Who will manage the budget and keep track of expenses? It is important to make sure you are specifically assigning these tasks but sharing the financial responsibility.
Update Your Paperwork
You have just confessed your love in front of all your friends and family—now it is time to do it for the government. If one of you is changing your last name, you will need to get a new driver’s license, then Social Security card, passport, and credit cards as soon as possible. Make sure to bring your marriage license with you! You should also review your tax withholding. You will both need to fill out a new Form W-4, Employee’s Withholding Allowance Certificate, to update your marital status and number of W-2 withholding allowances. Additionally, you will also likely want to add each other as a beneficiary in your will, investments, and all insurance accounts.
Create A Will
If one or both of you do not have a will or trust, marriage is the time to start one. Many newlywed couples believe they do not need a will because they are usually young and in good health. No one anticipates an early death, however, so it is important to be prepared for the worst. If you care who gets your property, money, and responsibility of your children, you need a will. To get started, there is software available to create a legal, binding will in every state from home (as long as the guidelines are followed in regards to having it signed and witnessed) or by hiring an attorney. At minimum, a will should appoint a guardian for any minor children, appoint an executor to administer the will in the event of death, and explain exactly how all your property should be distributed.
Evaluate Your Insurance Coverage
Marriage is the perfect benchmark opportunity to take a look at your combined insurance policies and review them for insufficient, duplicate, or missing coverage. There is a potential to save on automobile insurance premiums by combining policies. Since marriage almost always involves living under the same roof, one of you will probably cancel your homeowner’s or renter’s insurance policy if you have one. It is important to take the time to ensure that all of your combined property (jewelry, electronics, collectibles, etc.) is covered under that remaining policy. It might be time to purchase a life insurance policy for one or both of you to protect the other from the significant income loss that would occur as the result an early death. If both of you have health insurance, you should look at your policies carefully from a benefits standpoint to see whether it makes more sense to cancel one plan or keep both. Procrastination alert: insurance companies usually only allow 30 days following the wedding to add a spouse as a dependent without providing evidence of insurability, so this is a priority!
Communicate, Communicate, Communicate
While many people find discussing money uncomfortable, couples should NOT make finances a taboo topic in their relationship. As financial decisions affect all members of the family, big decisions and purchases should never be made without both of your consent. Even if you have decided to hold separate banking accounts, there cannot be big financial secrets between the two of you otherwise there is a breach in trust. It all comes down to respect, accountability, and honesty: both of you need to stick to the budget, set spending boundaries, and compromise with each other in order to be successful and achieve your financial goals. These ideals will not only help you in your finances, but will also benefit you in all aspects of your marriage.
Change can be daunting, especially when it comes to such a big transition as marriage. However, you don’t need to stress, as long as you set realistic financial goals, get organized, update your paperwork, evaluate your insurance, and simply communicate well with one another. Starting off on top of these things will help you to develop a happy and healthy marriage for years to come.
If you’d like to join your partner in learning more tips and trick for merging finances, SAVE THE DATE to attend our Marriage & Money Seminar on February 13, 2018, at 7:00 pm in Union room 227!
Peer Counselor I