Whether you're about to get married or were recently married, there are a few financial changes that you should be aware of to make your marriage even better.
If you got married recently or are engaged and planning your wedding –first of all, congratulations! Now, with respect to your finances, there are several things you should be thinking about – your taxes, goals, debts, and your accounts, to name a few. The sooner you evaluate these things – as a couple – the better.
1. Tax Filing Status
Before marriage, you either filed your taxes as "single" or "head of household." If you're married, you can file taxes as "married filing jointly" or "married filing separately." There are a few minor differences in how you pay your taxes, and generally, the change is a positive one. For the most part, the income limits for each tax bracket more or less doubles if you're filing jointly instead of single.
When you are married filing jointly, you can expect a tax refund of potentially twice the size. In addition, 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 more paperwork is likely involved, with more bank account information to gather and more income information to compile when preparing your return.
2. Bank Accounts
One of the most common questions that newlyweds face is whether to maintain separate bank accounts or to combine assets into a joint account. Here are a few things to consider when weighing this decision:
- Will you both be working, or just one spouse working? It 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?
- 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 many potential financial obstacles that will arise over the years.
It may also be beneficial to consider both – maintaining individual accounts in addition to a joint account. In this scenario, both spouses would contribute to the joint account to pay shared expenses such as bills, groceries, utilities, mortgage, and rent. The individual accounts would be discretionary funds for each party to spend as they wish.
3. Debt and Savings
Before marriage, aligning your savings and debt was likely more straightforward. You only had to consider your own goals and plans. This calculation is more complicated with two people. Have you and your spouse discussed your current savings and debt balances? After marriage, the balances of savings and debt are now a shared asset or liability.
Evaluate your combined cash flow, considering your combined incomes, existing debt payments, and savings by combining expenses such as your wireless plan or digital subscriptions. Hopefully, you'll come out ahead with savings you can direct into paying down your debts and saving.
4. Monthly Budget
If you don't already have one, this is a great time to create a family budget. Consider your fixed expenses and variable expenses, making sure you are on the same page. It's a good idea to set aside 10 minutes every month to discuss upcoming expenses, who will pay them, and when they will be paid.
A lack of financial communication among spouses is one of the leading causess of divorce. This common problem can be solved with something as little as a recurring budget discussion. A couple of things to think about when discussing your budget are:
- Will you have a dedicated bill-paying account for shared expenses?
- 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 shared goals to pay off existing debts such as personal loans and credit cards?
- What are your most important short term and long term savings plans?
5. Financial Goals
If you've been dreaming of a brand new car or exotic vacation, your financial goals will now require the approval of your spouse (that is, if you want to stay married). As a married couple, you need to communicate your goals and plans and work together to achieve them.
Along with communicating your personal goals, you'll realize that there are new shared goals you will want to work towards as a couple. Some of them might be:
- Saving money to purchase a home
- Planning a honeymoon vacation or future family vacations
- Saving for anticipated education expenses, whether for yourselves or for your future children
- Saving for and planning for retirement
All of these things important, but you must prioritize them: which are more urgent than others? Which goals could be put on hold?
A New Chapter of Your Life Is Beginning
In short, your financial picture now includes another person, whereas before, it was all up to you. Communication is an essential piece of all the financial changes that may arise after marriage. Remember that it requires a "give and take" mindset to reach agreement on how you plan out your financial future.