If someone spoke to you about the importance of financial planning for newly married couples before you officially tie the knot, you would probably snort. And post the wedding, financial planning becomes a topic that is always too serious to be considered just when you are settling down, discovering each other along the way.
The joy of finding ‘the one’ you want to share your life with is near-unparalleled. The run-up to a wedding and the ensuing honeymoon is all about dizzying excitement and dreams of a rosy future together. However, the actual marriage begins after this exhilaration settles down. That aspect of togetherness isn’t so much about date nights and candle-light dinners as it about grocery shopping, chores, and responsibilities.
This requires a fair share of adjustments, including those on the financial front. As your lives become intertwined, so does your money. That’s why having a financial plan for married couples becomes imperative for long, happy innings.
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Budgeting In A Marriage Is The Key To Success
When you were in a relationship, it was essentially all about sharing a happy space where you shared your hopes, dreams, fears, and aspirations. Perhaps, you went out of your way to indulge and pamper your significant other. Even if it meant a slightly inflated credit card bill or feeling a pinch in your pocket for the rest of the month. However, those dynamics change once you tie the knot.
Now, you have to think about debts and assets, run a household, and build a secure future together.
Even so, discussing financial goals for married couples early on is difficult. Money is always a touchy topic. It’s awkward, it’s tense and it’s personal. Yet, it’s essential. To know why it’s so crucial, you need to understand how can financial problems affect a marriage. Statistics indicate that money becomes a contentious issue between a third of all couples. Another survey finds that monetary disputes are the root cause behind 21% of all divorces.
This is primarily because the two life partners can have extremely divergent views on financial management.
For instance, if one partner believes in setting financial goals for married couples and the other has a more live for the moment outlook toward life, it can lead to some serious differences. In such cases, having honest discussions and arriving at a compromise that works for both partners is the only way to salvage a potentially detrimental situation. That’s why budgeting in a marriage is non-negotiable. You should learn how to manage finances in marriage as early as possible.
A sound financial plan for married couples is one that covers all of these aspects and then some.
Top 15 Tips For Financial Planning For Newly Married Couples
Building a financially secure future is a work in progress. One that bears the best results when setting financial goals for married couples begins right from the get-go and is adhered to throughout the journey. So, don’t wait for big milestones like buying your first house or starting a family to start exploring money and marriage tips.
Make the most of these 15 effective tips for financial planning for newly married couples to stay on track for your long-term and short-term financial goals:
1. Be on the same page
Before you start exploring how to manage finances in a marriage, it is important to get on the same page about your goals and expectations. Some of the key questions to address right at the onset are:
- How much should a couple save per month?
- Who should pay the bills in a marriage?
- How to build assets and manage liabilities?
- Which financial products to invest in?
- How much money should newly weds have?
- What are the accepted rules of spending?
- Should you combine finances after marriage?
- If yes, what is the right strategy to join finances when getting married?
These questions must be asked and answered as candidly and honestly as possible. In addition to this, also transparently discuss salaries, spending habits, bank accounts, and opening joint accounts. This will give you a broad structure to work with, and you can fill in the details as you go along.
It is also extremely important that you each put your perspective on the table without getting agitated, getting into arguments or feeling offended by the other’s take on the matter. Unless this basic etiquette is adhered to, devising a solid financial plan for married couples can turn into a nightmare that can start taking a toll on your bond.
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2. Discuss budgets
Budgeting in a marriage is a key aspect of financial planning. It helps in ensuring that you don’t err on the side of living beyond your means and swirling down the hole of a financial mess. So, as soon as you get back from your honeymoon, draw up a monthly budget keeping your short-term and long-term couple goals in mind.
For instance, if you want to buy a house in 5 years, you need to factor in saving up for that big investment. Then, create a budget that caters to your month-on-month short-term needs as well as this long-term goal. In doing so, you must take a pragmatic, realistic approach. Being too idealistic or drawing up a monthly budget that cuts too close can be unsustainable in the long run.
Once you waver from your financial plan, it can be slippery slope from there on. Keep your monthly budgets fluid and flexible. Leave some wriggle room for unforeseen expenditures and little indulgences.
Creating couples financial planning worksheet can be a great way to achieve clarity and transparency.
3. Begin goal setting
Discussing life goals plays an important role in defining financial goals for married couples. Given that you have taken the big leap of spending your life together, you and your spouse are bound to have certain shared goals.
At the same time, you’ll have mutually exclusive goals. It is important to discuss these things to be clear on which aspects you’ll be working toward as a couple, and which ones you’ll handle as individuals. Here are some things to factor in:
- Do you want joint investments or separate?
- Does one of you want an early retirement?
- Do you want to save up for a house or a world trip?
- Do you want to start saving for future children’s college right away or after you become parents?
These – and many other such factors, depending on your personal circumstances – can serve as the foundation of a sound financial plan for married couples.
4. Handling personal debts
In most cases, by the time people get married they have some or the other form of personal debt to deal with. A student loan, home loan, car loan, outstanding credit card payments, and so on. When drawing up your newlywed budget, discuss how to handle these debts.
Will your personal debts become household debts now? Are you and your partner comfortable with the idea of contributing to settling each other’s debts? Or would you prefer taking care of your own? Once this has been defined, work toward paying off this debt while learning how to manage finances in a marriage.
In the eyes of the law, any debt that precedes the marriage remains the responsibility of the individual who took it. Even so, handling any debts that you may have as a couple may help you achieve the debt-free milestone sooner. Not only should married couples split finances but also share liabilities.
The specifics of how to handle personal debts depend on your circumstances. However, generally, it’s a good practice to share the responsibility of paying off any loans, mortgages, debts either of you may have brought into the marriage. Discuss how you want to handle personal debts
5. Educate yourself on marriage and taxes
Sound financial planning for newly married couples doesn’t just mean managing your money well. It also means leveraging the various tax and other financial benefits to optimize your financial standing. So, make the effort to educate yourself on marriage and taxes. These, of course, vary from country to country.
In the US, for instance, the decision to join finances when getting married can act as a catalyst to improve your monetary robustness. From social security spousal benefits to tax benefits, better estate planning, gifting concessions, sharing retirement income, improving credit scores and landing better mortgage deals, there are a host of advantages that married couples can avail.
So, if you and your spouse have been wondering should you combine finances after marriage, this ought to answer it. It helps to take expert advice on the matter to know exactly what you stand to gain if you join finances when getting married. A financial consultant can guide you on the best approach to optimize the benefits, depending on your individual and collective financial standing.
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6. Build an emergency fund
Unforeseen expenses can derail even the strongest financial plans, and that’s why setting up an emergency fund is critical for sound monetary health. Even more so in the case of newlywed budget planning, as you’re building wealth and financial security from scratch.
Set aside some amount each month to cater to emergencies such as vehicle repair, house repairs, illness or hospitalization, and so on. Even if you get by a long time without needing to use this fund, don’t cut back or use it up. You can consider setting up a joint account for this purpose, where you each contribute 10%, 5% or even 1% of your earnings each month.
Saving for a rainy day is one of the most crucial aspects of financial planning for newly married couples and one that is often ignored. For instance, say 10 years from now, the roof of your suburban home suddenly needs a complete do-over after being damaged due to weather elements. You can simple dig into this emergency fund and get the job done. Without it, you’d probably have to take a small loan or dig into your savings.
An emergency will save the day for you in troubled times – and those hit every marriage at some point.
7. Start making investments
Making investments is pivotal for building long-term wealth. However, only and only if you make smart choices. That’s why financial planning for newly married couples must include research and discussion on the best investment plans that work for both the partners. From mutual funds to shares, gold to real estate, and even cryptocurrency, there are many different ways to approach investments.
Pick one that is most in line with your long-term goals and has the lowest risk factor. It is important to factor in your spouse’s thoughts before investing, instead of shutting them out with a ‘you know nothing’ attitude. If it turns out to be a bad investment, it can come to haunt your marriage in ways you cannot imagine.
8. Prepare for the worst
Things may be going great for you and your spouse right now but life can take a 180-degree turn in the blink of an eye. A job loss, an illness, disability, or death can destabilize your life at any time, and it is imperative to prepare for such eventualities right from the beginning. Even if it sounds too morbid or distasteful to discuss things like untimely demise or terminal illnesses right at the beginning of your marriage, it must feature in financial planning for newly married couples.
Make it a priority to list your spouse as the beneficiary for all your investment schemes, saving plans, insurance policies and bank accounts. Share the details of all of these, including location of relevant documents, passcodes for safes, the point of contact in companies handling your money and so on.
This helps ensure that you and your family are protected, at least financially, even in the grimmest situations.
9. Discuss how much to save
How much should a couple save per month? There is no universally correct answer to this question. It all depends on your circumstances, and factors such as:
- Your earning
- Your debts and liabilities
- The kind of assets you want to build
- The timeline for meeting your financial goals
Based on these, decided how much you should save every month as a couple, and each partner’s contribution to these savings. Also, it is worth discussing whether you want to work together toward common savings or divide your savings into joint and personal funds.
If you’re living on pay check-to-pay check cycle, it can be difficult to find money to save at the end of the month. Even so, make it a point to direct at least 10% of your earnings toward savings. A smart way to do it is to divert this 10% toward savings as soon as your pay check comes in and get by for the rest of month with whatever you have left.
Small steps taken today can translate into big gains tomorrow. That’s what sound financial plan for married couples is all about.
10. Who should pay the bills in a marriage?
This is a crucial question to address for financial planning for newly married couples. When both spouses are working – as is the case for most couples today – it cannot be presumed that the man of the house will bear the burden of household expenditures. Discuss who should pay the bills in a marriage and make sure you’re both honestly on the same page about it.
How a married couples split finances is an entirely personal choice. You can either split the finance to cover recurring monthly expenditures equally and use the rest of your earnings on savings, investments etc. Or one of the partners could take the responsibility of keeping the household running while the other uses their income in savings and investments. In this case, it is important to make sure that the person who is spending does not end up getting a raw deal if the marriage doesn’t work out.
If you choose the latter, consider drawing up an agreement on how the returns on investment or capital created through savings will be divided between both partners. Don’t overthink whether broaching the subject of a written agreement will come across as lack of trust in the marriage. Financial decisions have to be taken pragmatically, almost with a clinical approach. It’s not wise to let them be governed by emotions. In a time when nearly half of the marriages end in divorce, neither of you can – or should – overlook protective you own interests.
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11. Place limits on monthly spending
If there is one item every newly married financial checklist should have, it is a limit on monthly spending. This is crucial because you and your partner are both still learning the ropes of running a household in conjunction. It is also possible that you’re doing up your house alongside, which comes with a huge risk of overspending.
A little self-discipline right in the beginning can save you from poor monetary habits and financial distress later on. When setting a spending limit, also discuss how much you can each spend on yourself in a month. Also, make it a point to set aside some portion as ‘fun money’ that you can dig into to pay for dates, outings and other indulgences. Do your best to stay within these limits, month after month.
12. Stay organised
Newlyweds must commit themselves to stay highly organized to keep their finances on track. Carefully filing bank statements, receipts, payslips, bills, and more can be instrumental in making that happen. It can be mundane to keep up with this system but do not procrastinate. File things straight away as and when you receive them.
If you inculcate this system in your financial habits as a couple, you will find that there fewer expenses are consigned to the miscellaneous category. Since every thing is in front of you in black and white, there will be little room for bickering and blame-game over who is a spendthrift and who is the cautious one in the marriage.
When you need to audit your financial status, you’ll be thankful for this habit.
13. Track spending
You may pride yourself on acing financial planning for newly married couples with all the essential elements in place. However, creating a solid plan on paper is one thing and executing it in real life quite another. That’s why tracking your expenditures periodically is a must for saving money successfully. Without it, there is just no way to quantify whether or not your financial plan has been working.
Honest communication and regular analysis are essential elements of a robust financial plan for married couples, as these allow you to assess and understand what’s working and where you need to make amends. Working with a couple’s financial planning worksheet, adding in all earnings and expenditures, as they happen – and maintaining your custom-made balance sheet – is the best way to do it successfully.
14. Consolidate your expenses
Before you got married, you both had your own thing going on. Your own place, your own car, your own credit cards, your own Netflix subscriptions and internet plans. Now that you’re sharing a life and home, consider consolidating these expenses. It can be a small saving through one canceled Netflix subscription or a big one incurred by liquidating an asset such as a house or car. They all add up to sound financial health in the long run.
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15. Get help
If both you and your spouse are not experts at financial matters and find yourself struggling with containing expenditures or finding the right investments, consider getting professional help. Work with a financial advisor to evolve your customised plan and then just stick to it.
It can be a great one-time investment when building up a financial plan for married couples. An expert can lend direction to your efforts of building a financially secure life together by advising you on the best savings and investment plans as well as the right insurance or mortgage products based on your current and projected financial standing.
Even though money is a touchy subject in most marriages, it is also one that holds the key to happiness and security. There are several ways in which financial planning for newly married couples can save them from a lot of trouble and uncertainty later in life. Communication, planning and transparency are the cornerstones that help you set sound financial goals and work toward them with success.
The best way for married couples to handle finances is the join their monetary assets and liabilities, and set clear distinct goals. These goals can serve as the foundation for your savings and investment plans as a couple.
The decision to join finances when getting married can act as a catalyst to improve your monetary robustness. From social security spousal benefits to tax benefits, better estate planning, gifting concessions, sharing retirement income, improving credit scores and landing better mortgage deals, there are a host of advantages that married couples can avail of.
There is no single figure that one can point to, as every individual and couple has a unique financial journey. That said both partners should be financially stable enough to cater to their existing liabilities as well as those that they may incur on account of getting married. Besides, you should have enough to start working toward a financially stable future not just as a couple but also as a family, if you see children in your future.
Not necessarily. The financial responsibility in the relationship should be proportional to the earnings of each partner. If one earns significantly more than the other, it’d be unfair to expect them to pitch in equally.
Getting married if financially smart because you can cut back on a host of expenditures when you start sharing a home. Besides, you can avail of state-sponsored benefits in taxes, social security schemes, retirement plans and so on.