Among the less romantic aspects of merging two lives through marriage is the coordination of all things financial. Despite the tedious nature of these activities, it is vital that newlyweds give adequate attention to setting up a strong financial foundation for the union.
Financial stress can create problems for any marriage, even for couples with many years under their belts. According to the American Psychological Association’s annual Stress in America report, 31 percent of couples identify money as a major source of conflict in their relationships. Start your marriage off right by following these 8 steps to secure your collective financial future.
Establish a Joint Checking Account
Having an account to which you both have access (even if it is in addition to existing separate accounts) is helpful for a number of reasons:
• The Federal Deposit Insurance Corporation (FDIC) and National Credit Union Administration (NCUA) both provide $250,000 worth of federally-backed coverage per depositor on every account you open. Should you find yourself with an account in excess of that amount, it would be covered up to $500,000 if both spouses are listed as depositors.
• Finances are simplified when you have a shared account from which to pay shared expenses like utility bills, household maintenance costs, and vacations.
• Managing your finances collaboratively can make your marriage stronger as you consistently practice open communication and collective decision-making.
• Joint accounts bypass the probate process in the unfortunate event of one spouse’s death.
Create a Budget
Know what your money map looks like and work together to follow it.
• Agree on a spending to savings ratio.
• Consider your existing debt, develop a plan for reducing it (hint: pay off debt with the highest interest rates first), and decide how much debt you are comfortable carrying as you move forward.
• Prioritize your discretionary spending. For instance, between vintage wine collecting and a desire to travel, which do you value most as a couple?
• Identify future potential expenditures (both fun and functional) and decide how saving for those fits into your budget.
Coordinate Work Benefits
Figure out what perks you have at your disposal and make the most efficient use of them.
• Define your medical insurance needs and decide if it would be more economical to add one spouse to the other’s plan. Be sure to consider any future family growth and the additional cost of dependents when making this decision.
• Ensure that both spouses are making the most of company-matched retirement benefits. This is like free money for your future.
• Examine additional benefits that each employer offers (life insurance policies, medical savings accounts, charitable contributions, etc.) and see how you can take advantage of those most effectively.
Reassess Your Current Investments
The strategy you had as a single person may not meet your needs as one half of a couple.
• Consider a diversified investment strategy to mitigate fluxuations in various segments of the market. If circumstances cause one fund to flatten, make other investments which are likely to surge under those same conditions.
• Discuss your investments to make sure that they reflect your collective values.
• Have a mix of short and long-term investments about which you are both reasonably knowledgeable.
Evaluate Your Protection Plans
Hoping for the best, but preparing for worst includes providing for unexpected bumps along the road.
• Recognize that career or health dilemmas that affect your personally, now affect your spouse as well.
• Make sure that life insurance policies provide adequate coverage to mitigate a sudden loss of one income for at least as long as it will take the surviving partner to adjust.
• Consider disability insurance to prevent financial chaos if one or both spouses become temporarily or permanently unable to work.
As with a joint checking account, insurance policies with a legally designated beneficiary bypass the probate process and go directly to the intended recipient. Make sure the appropriate beneficiary is named on all of your existing financial accounts and policies.
Completely Implement Name Changes
This is neither the time nor the place for an identity crisis.
• Know your state’s law with regard to legal name changes. If your name was Hilda Elizabeth Jones and you wish for your legal married name to be Elizabeth Jones Anderson, find out how to go about this in accordance with state law. The same goes for hyphenated surnames.
• Once you’ve established your new legal name, make sure all of your financial accounts reflect it.
Maintain an Emergency Fund
This is part of hoping for the best and preparing for the worst.
• Open another joint account to which both spouses have access.
• Preserve a balance that is appropriate to your financial situation. It should equal 3-12 months of your collective household income.
• Only use it for true emergencies.
Following these guidelines early in your marriage will establish a solid foundation on which you can build a bright financial future together.