The merging of financial lives can be both an exciting prospect and a cause for anxiety. Tackling this crucial task can help newlywed couples start shaping their financial lives.
If you're feeling overwhelmed, our checklist can help.
1. Discuss Your Plan for Blending Finances
Some couples choose to combine all of their finances, whereas others keep some — or all — accounts separate. There is also the matter of paying off any debt you each acquired before the marriage. While these are practical concerns, they tend to have emotion tied up with them. Some key questions to ask yourself as a couple include:
Is it important in your relationship to keep track of what each person is contributing financially? If so, will keeping separate accounts help you keep better track or wind up stressing you out?
Are you aligned in your spending and saving habits? Is it important for you each to have some discretionary funds to spend, where you don't need to run the purchase by your partner? How much?
Did one person come into the marriage with significantly more debt than the other? Do you regard it as your debt as a couple or his/her debt as an individual? If one person comes into the marriage with more income, and pays off his/her partner's debt, will it create resentment or will it foster partnership?
2. Track Your Spending and Create a Budget
How will you track your spending? Consider using apps that can help you track expenses and help you create a budget. Of course, you can also create your budget with a spreadsheet or a pencil and paper.
Though the technology has changed, the basics of budgeting haven't: You need to compare incoming money against outgoing money. After listing out your expenses, it's a good idea to set some financial goals, such as saving for a down payment on a home. Having concrete goals (with numbers behind them) will help you stay motivated to stick to your budget.
And, if you are still in the wedding planning stages, don't forget to start your marriage off on the right foot by creating a budget for the wedding itself!
3. Review and Update Accounts
A few action items to complete to as soon as possible after the wedding include:
Changing your address (if you moved) and getting a new driver's license that reflects your new address. Moving soon? Keep these financial considerations in mind.
Updating your bank information, including adding your spouse's name to accounts.
Changing the beneficiary to your spouse on your retirement or life insurance accounts. (Learn more about why it's important to keep your beneficiaries up to date.)
4. Define Your Short- and Long-Term Goals
Ideally, your short- and long-term goals work together. For example, if your long-term goal is to be able to retire at age 67, then you might set a short-term goal of increasing the amount you're putting into your retirement account by 1% each year.
First, define the big picture, whether it's paying off student loan debt by age 35 or buying your first home, and then create a series of smaller goals in the service of the larger goal. The key is to be aligned on your goals, and come up with a plan together - even if that plan needs to be continually tweaked.
5. Avoid Financial Secrets
According to a CreditCards.com January 2019 survey, 19 percent of U.S. adults who are co-habitating reported hiding a checking, savings or credit card account from their partner. Millennials were almost twice as likely to be hiding an account as those in older generations (28 percent versus 15 percent, respectively).
While the survey found that hiding an account rarely had dire consequences for the relationship, it does beg the question: Why hide? Each partner comes into a marriage with their own fully-formed thoughts and emotions surrounding earning, spending and saving money. You may not always agree, but trying to maintain openness and honesty in your discussions will certainly help you work together as a team to achieve your financial goals.
6. Insure Your Future
After the lists are made and the papers are signed, don't forget to protect your future together. Life insurance is about making a promise to those you love, so once you're married, it makes sense to assess life insurance options for you and your new spouse. As a single person, you may have purchased a small life insurance policy through your job. Now that you're married, you need to think in terms of the two of you. There are several options to explore, whether it's increasing your policy through your job or buying a separate policy.
Find out more about what newlyweds should know about life insurance.