Are you recently engaged or newly married? Congratulations! This is an exciting time in your life and it is also one of significant transition. There are many things that need to be considered or updated when you are combining your life with a partner’s so below are a few tips to review with your significant other as you make your two lives into one.
Discuss Your Finances and Get Them in Order
- Create a budget: You and your partner should start by creating a realistic spending plan that demonstrates the income you each have coming in and what bills are going out every month. This can help you to figure out who will pay what and which expenses may be shared.
- Reduce or Eliminate Bad Debt: If you have large outstanding credit card loans, store credit to pay off or even an unreasonable auto loan, try to pay them off as soon as possible or refinance at a better rate for yourself. Commit to a deadline to have these items paid off by and stick to it.
- Establish an Emergency Fund: Once you know your monthly budget, determine where your joint comfort zone is as to how many months worth of bills you’d want set aside in cash in case of a job loss, injury, or illness and then make a plan to save up this amount together.
- Determine Joint or Separate Bank Accounts: There are pros and cons to both of these strategies so it is important to discuss them with each other up front. While keeping them separate may force the two of you to share the burden of managing your monthly finances and provide privacy, it can also disrupt healthy financial communication or make it difficult to get a clear idea of your financial picture. Combining them can provide transparency but also may put the burden of managing everything on one person. You will need to know yourselves well enough to determine which strategy makes the most sense for your relationship without risking ongoing financial friction between one other.
Items to Update
- Name Changes: If one or both of you feels compelled to change your name, be sure to cover all your legal bases – update driver’s licenses and passports, bank and investment accounts, social security cards, and anything else that bears your prior legal name.
- Beneficiary Changes: Consider making your spouse your primary beneficiary to help him or her carry on more easily in the event of your premature death. Beneficiary designations super cede a Will so if you want to ensure your money goes to the right person at your death, review your beneficiary designations regularly.
- Review Your Health Insurance: If you each are offered coverage through your respective employers, compare the two plans and determine which one provides better protection to your family.
- Consider Updating Tax Filing Options: There are certain advantages that are afforded by selecting Married Filing Jointly – consult your accountant or CPA to be advised on which strategy is recommended for your family.
- Estate Planning: If you do not already have a Will and Power of Attorney documents in place, see an attorney to review your options. Being married does not afford you the legal right to act on each other’s behalf or ensure assets pass to you at death so it is vital that your wishes are represented in proper legal documents if you want to protect your family.
- Life/Disability Insurance: See your financial advisor to discuss whether you and your partner are properly insured in the event of an illness, injury or premature death so that your family is not left with a mess in the event of a catastrophe.
Being married can bring you joy, partnership and long term happiness – but as you can see above, it also requires greater responsibility. Don’t leave the person you love with unanswered questions or gaps in their chances at financial success. Work together, plan together and you will succeed together!!