We’re “Official.” Now What?


Dear Alicia,

We’re getting married soon and are wondering if there are any particular financial steps we should take once we’re “official?”

-Ned and Nancy the Newlyweds

Congrats Ned and Nancy! Getting married is an exciting and hectic time. Here are the financial steps you should be taking once you are “official.”

Goals

Start by discussing your financial goals now and in the future. Do you want to buy a home, start planning for a baby, or create an emergency fund? Write down your joint and individual goals and when you would like to achieve them. Make sure to decide which goals will be jointly or individually funded.

Credit Check-Up

Review your credit scores together (free from most credit cards) and pull your full reports at annualcreditreport.com. If one of your goals requires you to apply for a loan, it is good to know in advance if either of you needs to work on increasing your credit score.

Balance Sheet

Decide if you will combine or not combine your money. There are many things to consolidate like; checking and savings accounts, credit cards, and investment accounts (ex. brokerage or trust accounts). Start by creating a simple balance sheet, one page showing all assets and liabilities you own. This is a great way to see what each of you has and to review how your situation looks as a whole.

Expense Management

Managing the household bills usually falls on one individual. Regardless, it is essential to make sure someone takes on the specific responsibility of paying joint bills on time. Creating a joint cash flow, showing all income coming in and expenses going out, will help both spouses to visualize how much each of you spends and saves. You will also want to decide what types of expenses you will discuss together before purchasing. Couples often set a dollar limit, like $500, for a large purchase that should be discussed.

Investment Strategy

Also to be considered is whether you will have a joint investment strategy and joint savings strategy or if you are going to save and invest for your own separate goals. Do you both have the same risk tolerance when it comes to stocks? Review your current investment accounts, the holdings (funds invested in), and overall asset allocation (% stock and bonds) to see if you are currently invested similarly.

Taxes

Review your taxes currently and decide how best to manage them after marriage. You may need to change your tax withholdings to “married status” on your W4 at work. Also, determine whether you will file your taxes Married Filing Jointly or Married Filing Separate. You will also need to agree on if you want to prepare your taxes on your own or find a tax preparer.

Insurance

Once married, your spouse most often becomes dependent on a second income to support the lifestyle you build together. Do you know how much life insurance you currently have? Discuss and decide if it is enough. Also, look into who has a better health care plan at work. Most often you can combine your health coverage into one family plan. You may also want to consolidate your Auto, Home/Renters, Umbrella and Earthquake Insurance under one carrier to save with bundled prices. Make sure each spouse is named on all policies as a covered individual. It is also wise to consider insuring your engagement/wedding rings on a separate rider. Your home or renters insurance may have provisions for covering jewelry, but if you have expensive rings, it can be a good idea to get more coverage in case they are lost or stolen.

Estate Planning

Most often Newlyweds don’t have estate plans already created. So now is a good time to get them done, especially if you own a house or have kids. Discuss who you want to have your belongings and money if something were to happen to one or both of you. Remember that assets acquired before marriage are separate property, but if commingled with joint funds, it becomes marital property (each state’s laws are different, this is related to CA). You will also want to change the beneficiaries of all your retirement accounts and life insurance to your spouse. Lastly, update the titling of your non-retirement assets to both of your names “Joint with Rights of Survivorship” or in the name of your Trust, if created. An estate planning attorney can help you decide the best titling for your assets as well as create your estate plan. Always review these issues with a licensed estate planning attorney, in your state, before taking action.

Once you become “Official,” you are now a joint financial team. Set up regularly-scheduled meetings to review your finances and any financial issues you may be having. Commit to communicating actively and openly about any money issues. If you ever get stuck or are too overwhelmed, always get help from a fee-only and fiduciary CERTIFIED FINANCIAL PLANNER™ for any tasks that seem beyond your grasp.

Planning Within Reach serves Newlyweds and helps their clients with financial planning and tax preparation. If you are interested in how we help our clients, see our Newlywed Plan Package and our Tax Preparation Service.

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