Getting married is both hectic from seemingly unending planning, and absolutely exciting at the same time. As a result, an often overlooked change to plan for after marriage are finances and taxes.
5 Financial Changes After Marriage
What could possibly change financially after getting married? You’d be surprised at how many might think this way. The biggest financial difference between being single and being married is after marriage, you now have to account for another person. This means a little give and take, teamwork, and coming to agreement on goals, budgets, savings and debt financially.
1. Tax Filing Status
Before marriage, you either filed your taxes as “single” or “head of household.” Now that you’re married (or getting married soon), you can file taxes as “married filing jointly” or “married filing separately.” This brings a few minor changes in how you pay your taxes. For the most part, the income limits for each tax bracket simply doubles if you’re filing jointly.
However, when you are married filing jointly you can expect a tax refund of potentially twice the size of what you are used to. This also means that your total tax burden may be less from the added deductions and tax credits that are available to married couples.
On the other hand, it also means that there is potentially more paperwork involved, more bank account information to gather and more income information to compile for your accountant.
2. Bank Accounts
Deciding on how you manage your finances after you’re married is a very important discussion that gets forgotten about too often. Consider the following questions:
- Will you both be working, or just one spouse working? This may affect how you split up bills and expenses each month.
- If there are two household incomes, how will you manage expenses and from which accounts do you plan to pay them with?
- Do you plan to change bank accounts if both you and your spouse use a different bank?
The answers to these questions may affect your answer to the biggest question of all: do you plan to combine bank accounts or have separate bank accounts? Every situation is different, but if you ask most experts, combining bank accounts can avoid a lot of potential financial obstacles that will arise over the years.
3. Debt & Savings
Before marriage, all you had to do is align your savings and debt to your own goals and plans. After marriage, “what’s yours is mine and what’s mine is yours!” which means your financial decisions now include the two of you. Have you and your spouse discussed your current savings and debt balances? After marriage, the balances of savings and debt are now an asset or a liability to the both of you!
Perhaps you didn’t know your spouse was a heavy saver or spender, posing an important point to address when talking about financial goals. It’s important to have plans in place to adjust your savings goals, pay off debt, and plan for upcoming major purchases for both short term and long term timeframes.
4. Monthly Budget
There are both fixed expenses and variable expenses, and you both have to be on the same page. This means having a 10 minute discussion every month or every two weeks at least on upcoming expenses, who will pay them, and when they will be paid is vital to communicating financially.
The lack of financial communication among spouses is one of the number one causes of divorce, and this common problem can be solved with something as little as a recurring budget discussion on a regular basis. A couple things to think about when discussing your budget are:
- Will you have a seperate bills account to set aside money for upcoming payments?
- How will you account for discretionary spending on things like entertainment, fast food and restaurants, and other “fun-money” expenses?
- Do you have an emergency fund in place for unexpected events?
- What are your goals to pay off bad debt such as personal loans and credit cards?
- What are your most important short term and long term savings plans you both want to work towards?
5. Financial Goals
If you’ve been dreaming of that brand new car or vacation to another country, it now requires the approval of your spouse (that is, if you want to stay married). This isn’t to say your current savings goals are all gone down the drain, it just means that now that you are married you need to communicate your goals and plans and both work together.
Along with communicating your personal goals, you might note that there are now a plethora of new goals you wish to work towards as a couple. Some of them might be:
- Saving money to purchase your first house
- Planning your honeymoon vacation or planning any future family vacation
- Talking about education expenses, whether for yourselves or for your future children and how to save for them regularly
- Saving for and planning for retirement
- Financial goals for charitable donations
Of course, money doesn’t grow on trees which means an important discussion around your finances will be which goals are a priority, which are more urgent than others, and which goals are worth putting on hold until finances change.
Summary: Financial Changes After Marriage
Here is a brief summary of the five big financial changes to account for after marriage:
- You now have to file taxes as “married filing jointly” or “married filing separately.” This means a potentially bigger tax refund and the possibility for more tax deductions and credits.
- Determine whether you wish to combine bank accounts, and where your bank accounts will be held.
- Who is the spender and who is the saver in the relationship? What are your plans to pay off bad debt and continue saving?
- Meet on a regular basis for 10 minutes to review and update your budget.
- Make sure you are on the same track for financial goals both short term and long term.
In short, your financial picture now includes another person, whereas before it was all up to you! Communication may be considered the most important piece to all the financial changes that may arise after marriage, and remembering that it requires a “give and take” mindset to come to an agreeable conclusion on how you plan out your financial future.