How often do you talk about money? For many couples, finances can be an uncomfortable topic at best, a source of conflict at worst. However, it’s important to get and stay on the same page about everyday spending as well as bigger financial decisions. In this article we’ll offer tips for talking about money, combining your finances, planning for the future, and more.
Have an honest conversation about money before “I do.”
This is a conversation that needs to happen, and it should take place well before you start planning your wedding day. It’s important to have a very honest conversation about both of your financial situations, including outstanding debt, savings, financial habits, budgeting preferences, etc. This will get everything out in the open so there are no financial secrets between you. Only then can you move forward together with a shared plan to meet your future goals.
Once you have the big conversation, keep it going with monthly or bi-weekly “budget dates” where you meet at a pleasant place, such as a coffee shop, and review your budget to make sure you’re on track and discuss any new or unexpected expenses that have come up. With up to one-third of married couples reporting that money is a major source of stress in their relationship, you can reduce conflict with regular communication.
Create a financial partnership
Once you’ve tied the knot, you may want to start combining some or all of your finances. What to share is a personal decision that can vary from couple to couple. For example, some couples prefer to keep their checking accounts separate, while others put all their income into one joint account. Another approach is to share a joint account for household expenses and maintain separate checking accounts for discretionary spending. In addition to checking accounts, you should have a joint savings account for your emergency fund.
Map out your long-term plans
This is also a good conversation to have before you’re actually married so that you know your financial priorities are aligned. Discuss future goals such as purchasing a house, having kids, relocating, saving for vacations, etc.
Once you’ve written down everything that comes to mind, create a list of your top financial priorities to build a 5-year plan, 10-year plan, 20-year plan, etc. Research shows that breaking a large goal into incremental steps increases your chance of success, so take the time to do that for all your financial priorities. For example, check out our guide to the process of becoming a first-time homebuyer.
Finally, look at your budget to see if anything can be changed or a particular category reduced in order to allocate more money towards your goals. Knowing what you are working toward as you delay gratification in the moment can help you stay on track and avoid overspending or impulse purchases.
Think about retirement
Many wedding vows incorporate a version of “I can’t wait to grow old with you.” While those golden years may seem far off on the horizon, it’s never too early to start saving for retirement. Due to compounding interest, even a small amount saved early on will have more time to grow into a larger nest egg.
If you and your spouse have access to an employer-sponsored retirement plan such as a 401(k), make sure you are contributing at least enough to get the full employer match (usually a percentage of your salary). Otherwise, you are essentially giving up free money.
Individual Retirement Accounts (IRAs) are a great option for people without workplace retirement plans. You can also open a traditional or Roth IRA in addition to your 401(k) to supplement your overall retirement plan.
Finally, if you are enrolled in a high-deductible health insurance plan, you can save for future medical costs and possibly earn interest on your balance with a Health Savings Account (HSA).
Take advantage of tax benefits
Getting married changes many things in life, including your taxes. Here’s how to make the most of it (and avoid unpleasant surprises):
- Update your W-4 (Employee’s Withholding Certificate) to reflect your new “Married filing jointly” status.
- Next tax season, file your first joint tax return.
- Review the current income tax brackets to see if your combined incomes will push you into a higher bracket.
- Reduce your overall taxable income by contributing to tax-advantaged savings accounts that allow pre-tax deposits such as 401(k) and traditional IRA accounts, as well as HSAs.
Still have questions about paying taxes as a married couple? Consult a tax professional to discuss your specific situation.
Dedicate yourselves to openness and honesty
Having a conversation about your finances while you’re engaged or dating is only the start of things. You need to maintain constant open communication about your financial situations as the years pass and your relationship flourishes. Keep your partner abreast about changes to your income, debt, etc. so that you can both stay on the same page and continue working toward your goals.
Consider insurance to protect your family
As you take on more responsibility in life such as getting married, buying a home, or starting a family, it’s a good idea to consider adding insurance coverage. First, see how much life and disability insurance coverage you have through your employer. Then, look at your current income and financial responsibilities and decide if you need to supplement your insurance coverage with additional policies to protect you and your family from loss of income in the event of your death or permanent disability.
Start your married life on the right financial footing!
At SENB Bank, we offer financial products and services that are Smart. Easy. Notably Better. We can help you combine your finances and save for the future with our Personal Checking Accounts and Personal Savings Accounts. Contact us today to learn more or visit your nearest location in the Quad Cities and beyond.