When you make a lifelong commitment to another person, the way you agree to handle money can have a significant impact on your future together. The best financial advice for newlyweds is to be honest and open as you combine your finances. From general money management of your money to paying off debt and investing for the future, communication is crucial to making—and sticking to—a financial plan that reflects your shared goals.
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Money is often a major source of conflict in marriages, so start your financial planning process by having a discussion about budgeting, paying bills, handling debt, and saving for the future. The way you agree to handle money can have a significant impact on your current and future relationship.
You’ll need to be honest with each other and with yourself as you discuss your attitudes toward money, your assets and debts, and your goals for the future. For example, consider how to balance priorities if one of you is a spender and the other is a saver. Talk about your tolerances for debt, needs for personal budgets, and any individual financial goals. You should also talk about financial control and decision making: Will one of you control the finances, or will you share the responsibility?
Also, make sure you know everything you should about each other’s finances, including assets, income, investments, money history, debts, and business dealings.
After you understand each other’s attitudes towards money, financial goals, and net assets, it’s time to start talking about your shared plans and goals and agreeing on your roles and responsibilities.
How to combine finances
First, decide how you will combine finances in marriage. Will you be combining everything into a joint account, or will you be keeping a portion in separate personal accounts? Decide how to share responsibilities and contribute to the joint account.
Next, open a joint account. Establish a joint bank account, and if you plan to combine investments, open a joint brokerage account. While most bank accounts can be combined, you cannot combine retirement plans such as 401(k)s and IRAs. Note: If you or your spouse will have a new married name, it is generally best to wait until you are legally married to open a joint account.
Next, update any automatic payments that will be covered by the joint account, such as for houses, cars, childcare, utilities, etc. If you are planning to combine only part of your individual incomes in the shared account, make sure that the money allocated to the joint account is sufficient to cover your joint expenses.
Finally, start working toward your long-term financial plans by paying down debt, building an emergency fund, and investing for your future together.
How closely you combine your finances in marriage is up to you. To foster a smooth financial relationship, you should be as honest and open about your money as you are about everything else.
Discuss how integrated you want your finances to be. Decide on roles and responsibilities and research the rules in your state concerning community property. Discuss whether a prenuptial agreement is right for you.
Develop a financial plan you can both live with. Take inventory of all your assets, debts, investments, and sources of income and how they factor into your financial plans. Identify your goals for the future, such as buying a home, starting a family, and retiring comfortably.
Review your investment portfolios and retirement savings plans in light of your shared future. Decide if you will combine your investment accounts or keep separate accounts, and decide how much you will invest as a couple. Also, this is a good time to set up regular, automatic contributions to an investment account.
If you're changing your name, take the necessary steps to make it official. Order certified marriage certificate copies for agencies that require originals. Notify your employer, the Social Security Administration, and the motor vehicles agency. Order replacements for credit cards and other documents to reflect your new name. Update your name on all personal accounts and assets, such as retirement accounts and insurance policies.
Consider your income-tax-filing choices. Have a tax professional assess whether to file taxes jointly or separately. Update your W-4 forms with your employer (employee withholding allowance form) and adjust your tax withholding if need be.
Determine your insurance needs now and again in the future if you have children. Make sure you're not duplicating coverage with your life, health, or disability insurance.
Review and update files for all personal accounts and property. Update beneficiaries for your IRAs, 401(k) plans, and life insurance policies. Update your name on the titles of all property you own. For separately titled accounts, consider a payable-on-death arrangement to name a beneficiary on your bank account, or a transfer-on-death arrangement to name a beneficiary for your stocks, bonds, and mutual funds.
Consider updating your estate plan, wills, and trusts to include your spouse.
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