Getting Married? 5 Financial Considerations to Discuss.
I can certainly testify that after getting engaged a few weeks ago, my mind has been going full speed! But before we officially tie the knot, I plan on sitting down with my fiancé and having a serious discussion about our finances and how we plan to move forward as a family. Hey—he knows he is marrying a financial planner!
So I thought it would be a good time to discuss some financial considerations for newly engaged couples.
Between popping the question and saying “I do,” there is plenty to plan. And while it’s not as fun as choosing between chocolate or raspberry cake (Who puts fruit in their dessert? Bleh.), you’ll want to sit down with your partner and discuss the expectations you have about your future finances. According to a survey offered by Psychology Today, 27 percent of respondents found money to be the biggest stressor in their marriage.1
Having hard, truthful discussions about money before marriage can help lay the foundation for an honest and open financial relationship later down the line. As you prepare to tie the knot, take these five financial considerations into account first:
Consideration #1: Your Financial Influences
At this point, you’re likely familiar with what your partner’s childhood was like. But do you know how finances were handled in their household?
Were their parents frugal, coupon-clipping savers? Maybe they splurged on dinners out and shopping trips every weekend. Now’s the time to dig deep into how your partner’s parents may have shaped the way they think about money and what their earliest memories of money are. With all expectations out on the table, you can begin from the ground up determining, together, how your future family will be handling your finances.
Consideration #2: Discuss Your Financial Triggers
Some people are stress-spenders, others spend when they’re bored. Many splurge when they feel social pressure to do so. Whatever it is that causes you to go over budget, it’s important to identify it and make your partner aware. Having your spouse as an accountability partner can really help both of you stay aware and on top of the poor spending habits either of you may have.
Consideration #3: Determine Joint or Separate Savings
One of the biggest financial decisions to make together is determining whether to combine your finances into a joint account, or keep things separate. For example, if you both earn an income, you may decide to keep things separate in order to reserve your own discretionary income. On the other hand, you could find it useful to funnel a certain amount of your earnings into a joint account dedicated to paying off monthly bills like internet, mortgage payments, car payments, etc.
If you do choose to combine your finances, this will make it even more critical to sit down and discuss your spending/saving strategies with one another.
Consideration #4: Decide Who Does What
Does one of you cook and the other one cleans? Maybe somebody makes the bed and the other takes out the trash. Just as you have developed a chore system between the two of you, you’ll want to determine who plays what financial role. If one of you is more interested in the market, they could take the lead on your portfolios. If one of you is more organized than the other, that's who could be in charge of paying the monthly bills. Either way, you’ll want to sit down and draw up a list of any and all financial tasks before determining who should do what moving forward.
Consideration #5: Talk About Taxes
While we tend to think about taxes only once a year, you may want to get a jump on determining how you plan on filing next year. As a married couple, you’ll have several options including married filing jointly, married filing separately, choosing a head of household, etc. You may want to meet with your accountant early on to determine which filing strategy may be best for you. This could potentially influence other aspects of your finances, which is why it's a good idea to determine your strategy early on.
Getting married is an exciting time, and the days after you both say “I do” will feel like a whirlwind. These are important discussions to have and getting organized now could save you time and headaches later down the line.
Rhea Ravindran, CFP®
Rhea is a Financial Advisor at Rappaport Reiches Capital Management. Please connect with her below. She loves to talk about investing, financial planning, and her favorite movies.