There are a million and one decisions to make once you decide to get married. And, with wedding season upon us, I’m getting a lot of questions from clients on how to financially prepare for a future together.
When you get married, you want to start your shared life together on the right financial foot. (As an aside, that’s not by maxing out your budget or depleting savings on a wedding.) Most people are so involved with wedding planning that they put off having necessary money conversations that always arise after you tie the knot. If I’m honest, even as a financial planner, I still had some money fears after saying “I Do.”
Based on my years working as a financial planner (AKA a marriage financial therapist) and personal experience, there are six major money decisions you must make in order to set you and your spouse up for financial success.
When Two Become One
Sounds romantic, right? But I’m not talking about you and your spouse. I’m discussing bank accounts.
Do you or don’t you merge your bank accounts?
I say, yes.
When you get married, you are fusing together two different personalities and styles of managing money. I’ve found working with couples, that utilizing one bank account helps reinforce the partnership element that is critical in marriage. You make joint decisions, you evaluate pros and cons of spending and saving together, and you have open money conversations that you wouldn’t enter into with separate bank accounts.
If you want to stick with separate accounts, think about having a big joint account for all the major bills, and then opening two separate accounts for your individual play money. I always suggest couples create a “don’t ask, don’t tell” amount of money that each spouse can spend every month with no questions asked. This allows some level of freedom without running into the financial infidelity territory and keeps you from feeling like you need to go to your spouse for every expense.
Budget Times Two
I was working with a couple once who had just gotten married, and they were already having tension about money. I started to ask them a few questions to figure out what might be the issue, and when I got to the “do you have a budget” question, their reply was, “why do we need one of those if we now have more money now with two salaries?”
I hate to be the bearer of bad news, but having a strong budget is, in my opinion, even more important as a married couple than when you are single because you’re adding another layer of complexity into your finances.
One of the first decisions you should make after you tie the knot is who is going to manage the budget, and how you plan on tracking it. This point person will be actively involved in the day-to-day budgeting and management of money, tracking daily expenses and staying on top of debt payments.
Your budget reflects so many money decisions that you make each month. How much should you be saving? How much income will be applied to debt? What are your financial and life goals that you are saving for? How much do you spend on that gym membership? A budget holds you both accountable for not flying off the handle with spending or slacking on your important savings goals.
Your first order of business is to figure out what system you will use for your budget. Do you DIY or use a mobile app? DIY is perfectly acceptable if you can both agree on the format, and it shouldn’t take you more than 20 minutes per month to manage your budget. If you’re an app fan, YNAB and Mint are good choices.
From there, figure out how to combine your two budgets together reflecting any additional debt and income you may now have. This new and improved budget should be what you use going forward to chart each month and plan for your future.
Do You Share Debt Burdens?
There is both an official and unofficial answer to consider with this question.
Whether you officially inherit your spouse’s debt depends on which state you live in. There are nine community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. In these states, whatever debt you bring into the marriage is your debt only. And, any new debt you or your spouse incurs is jointly owned. For example, if your spouse opens a credit card and you don’t know about it, you are also on the hook for that debt. However, if your spouse comes with a lot of student loan debt that was incurred before you, it’s not legally yours.
Common law states, which by default there are 41 of, work a bit differently. Like community property states, the debt you bring into the marriage remains your debt only. However, in these states, any debt that your spouse incurs without your name on it becomes their debt only. There are a few small exceptions when the debt would be considered joint, like if the debt was for your basic necessities such as food, clothing, shelter, child care and additional education.
The morale of the story is that you get a carfax report before you buy a car, right? With your spouse, you should fully understand their financial history and what debt they may have and if it becomes yours when you get married.
From a non-official standpoint, if you’re working as a team to budget and be financially successful together, you need to help each other reach individual financial goals. Your marriage is a partnership, and sometimes that means making sacrifices with your finances. For example, say your spouse has significant student loan debt that they are making a financial priority to pay off. While it’s not your debt, you may decide to pick up a larger portion of the rent to help them achieve their goal of paying off their student loan debt. At the end of the day, you both need to be happy and feel that you are fulfilling your financial goals together as a couple, and not just individually.
When Should You Have Money Dates?
As I mentioned above, you should name one person “in charge” of the budget from a day-to-day standpoint. Once you designate a point person, you need to get regular money dates on the calendar pronto. It may sound like a silly idea, but trust me, it can save a lot of time, energy and frustration when it comes to managing money as a unit. And, it keeps you both in the loop of what’s going on with your money.
I suggest once a week “dates” to regroup about any money decisions that need to be made throughout the week, such as tracking where you are on with debt repayment and setting weekly budgets for things like groceries and eating out, and check in with each other regarding your monthly money goals. It’s so easy to get off track each week and lose focus on what you’re trying to achieve as a couple.
The money dates can be as formal or informal as you like. Many couples keep it to five minutes flat. What’s important is that the “in charge” person runs over the budget, and the “not in charge” person gets a chance to be involved and make decisions in a non-confrontational way.
So what do you talk about in these money dates? Make sure you cover these topics:
- Set a grocery budget for the week
- Decide how much to spend on eating out and entertainment
- Create a plan for any extra income, like a bonus or a raise
- Ensure you are on track with debt repayment
- Discuss any large expenses that might be coming up, such as a car repair or property taxes
- Touch upon anything that caused tension the past week. For example, maybe one person spent more than the other thought necessary.
Think About Life
One important, long-term money decision to make after you tie the knot is whether or not you both need life insurance.
Life insurance for couples helps ensure financial security if you or your spouse were to die. While it’s hard to consider the possibility of death when you’re starting a life with someone, the reality is that death happens and can be financially devastating if you aren’t prepared.
Life insurance becomes relevant once you get married, and I’d argue even more important once you have kids. As a team, it’s likely that your income has increased, but building a future can also bring debt. (Unfortunately, that house doesn’t buy itself.) With a life insurance policy, you make sure that your partner can stay financially stable if your portion of the income isn’t around to help pay the bills.
If you work for a company, likely you will have some life insurance already that is a multiple of your income. This often times is not enough to cover your expenses and provide a stable flow of extra income if something were to happen to one of you. Most people recommend having a policy that 7 to 10 times your income.
Life insurance isn’t a one-size-fits-all decision, so you’ll want to take some time to research whether it’s the right decision for you and your family. However, the good news is that purchasing a term policy is inexpensive when you are young and healthy.
Who Gets What?
“Who gets that?” may sound like a simple question to answer, but it’s actually far from it.
A will is another one of those not-so-popular money decisions that I encourage couples to make after they get married. You don’t need to wait until you have a family or have accumulated a lot of stuff to create your will as a married couple.
A will becomes your voice if something were to happen to you. You’ll name an executor of your will, AKA the person who is in charge of carrying out your will. The executor will carefully read through all the assets and debts you have and disburse those assets to whomever you designate. Almost anything is considered an asset – your prized stamp collection, your jewelry, the 5-piece china set you inherited, and even things like your DVD collection. All of those items have value to you, and they should go to the person that you intend them to go to.
This wasn’t one of my favorite money decisions to make, but honestly, I felt so much better once my husband and I had created our will. There’s a sense of peace you feel when you know you’ve got a plan in the worst case scenario. You can create one with an attorney, or go online to sites like LegalZoom and create a will fairly easily. Just create one for each of you… and knock that money decision off the list before life creates a million reasons why you don’t have time to.
Talking About Money = A Happy Marriage
Sure, you should talk about these decisions loosely before you get married. However, it’s a whole other ball game when you’re faced with making these decisions for real and as a legally married pair.
Money discussions can be uncomfortable, but I can promise you from personal and professional experience, that they reduce the amount of ridiculous arguments and help create a great partnership. Don’t waste time fighting about money, when you can easily and painlessly get on the same page from the start of your marriage.
Shannah is a CERTIFIED FINANCIAL PLANNER™ professional and is a millennial money financial strategist. She runs the blog Your Millennial Money, and is host of the Millennial Money iTunes podcast. Her husband, Jeff, is a travel journalist, but when they aren’t traveling she loves to challenge herself in the kitchen by creating a culinary masterpiece worthy of Food Network fame. (She can make a mean risotto).