Getting Married? 5 Financial Considerations to discuss FIRST
As many of you may know, Ryan got married last fall. As someone who has spent his whole career in finance as a banker and financial advisor, you would expect the comingling of finances to be a breeze. Not so fast! During that career Ryan has seen many different strategies work for managing finances. The key is to be on the same page work and work as a team. But where to begin? According to a survey offered by Psychology Today, 27 percent of respondents found money to be the biggest stressor in their marriage.(1)
Having hard, truthful discussions about money beforehand can help lay the foundation for an honest and open financial relationship later down the line. As you prepare to tie the knot, take these five financial considerations into account first. Even if you have been married for some time, going through a discussion may strengthen your bond and prove you’re still on the same page!
At this point, you’re likely familiar with what your partner’s childhood was like. But one aspect of their past you may have yet to discuss? How finances were handled in their household. You may truly be surprised how things affected your experience with money that you’re not aware of!
Were your fiancées parents frugal, coupon-clipping savers? Or maybe they splurged on dinners out and shopping trips every weekend? Now’s the time to dig deep into how your partner’s parents may have shaped the way they think about money. With all expectations out on the table, you can begin from the ground up determining together how your future family will be handling your finances.
Some people are stress-spenders, others spend when they’re bored. Many splurge when they feel social pressure to do so. Whatever it is that causes you to go over budget, it’s important to identify it and make your partner aware. Having your spouse as an accountability partner can really help both of you stay aware and on top of the poor spending habits either of you may have.
One of the biggest financial decisions to make together is determining whether or not to combine your finances into a joint account, or keeping things separate or even some hybrid of the two. For example, if you both earn an income, you may decide to keep things separate in order to reserve your own discretionary income. On the other hand, you could find it useful to funnel a certain amount of your earnings into a joint account dedicated to paying off monthly bills like internet, a mortgage, car payments, etc.
If you do choose to combine your finances, this will make it even more critical to sit down and discuss your spending/saving strategies with one another.
Does one of you cook and the other cleans? Maybe somebody makes the bed and the other takes out the trash. Just as you’ve developed a chore system between the two of you, you’ll want to determine who plays what financial role. If one of you is more interested in the stock market, they could decide to take the lead on your portfolios. If one of you is more organized than the other, that spouse could be in charge of paying the monthly bills. Either way, you’ll want to sit down and draw out a list of any and all financial tasks before determining who should do what moving forward. Play to your strengths!
While we tend to only think about taxes one time per year, you may want to get a jump on determining how you plan on filing next year. As a married couple, you’ll have several options including married filing jointly, married filing separately, choosing a head of household, etc. You may want to meet with your accountant early on to determine which filing strategy may be best for you. This could potentially influence other aspects of your finances, which is why it may be a good idea to determine your strategy early on.
Getting married is an exciting time, and the days after you both say “I do” will feel like a whirlwind. Before you tie the knot, sit down with your partner and have a serious discussion about your finances as a family moving forward. Getting organized now could save you time and headaches later down the line. Also, as with anything do not be afraid to seek outside council. Especially if your financial advisor deals in behavioral finance. Going through the above discussion as well as bringing your core values into alignment will make for a less stressful financial life and you may learn even more about your spouse on a deeper level!
(1) https://www.psychologytoday.com/us/blog/in-it-together/201807/the-top-4-stressors-couples-today