Getting married is a major life event that comes with many changes, both personal and financial. It’s important to have open and honest conversations with your partner about your finances before you tie the knot. This will help you avoid any surprises down the road and set a foundation for a financially secure future together.
“Money is often a stage upon which couples fight, disconnect, and feel threatened… and for other couples a stage upon which they connect, join forces, pull-in-the-same-direction, and find a teammate. How does money function in your relationship? If it’s a source of repetitive conflict, hire a professional (or get some help) and straighten things out. Simple.” –Matt Morris, PhD, LPC-S, LMFT-S
What does the data tell us about love and money? When you marry or simply share a household with someone, your life changes—and your approach to managing your money may change as well. The good news is it’s usually not so difficult. At some point, you will have to ask yourselves some money questions—questions that pertain not only to your shared finances but also to your individual finances. Waiting too long to ask (or answer) those questions might have some consequences.
The Tax Implications of Marriage
When you get married, you need to decide whether to file your taxes jointly or separately. Filing jointly can offer some tax benefits, such as a higher standard deduction and lower tax rates on certain types of income. However, it’s important to note that filing jointly also means that you will be jointly responsible for any tax debts that either spouse owes.
Consider your income and tax liability, if one spouse has significantly higher income than the other, or if one spouse has significant tax deductions, filing separately may be more beneficial. Likewise, your tax debts, credits, and deductions will all considerations to be made aware of.
If you need to decide whether to file your taxes jointly or separately, it’s always a good idea to consult with a tax professional. They can help you to assess your individual situation and make the best decision for your family.
Cash Flow Planning for Married Couples
Cash flow is one of the most important financial considerations for married couples This refers to the difference between your income and expenses each month. It’s important to have a positive cash flow to cover your living expenses and save for the future.
When creating a budget, include all of your shared expenses, such as housing, food, transportation, and utilities. You should also factor in any individual expenses that you have, such as student loans or credit card payments.
Marriage changes everything, including insurance needs. Newly married couples should consider a comprehensive review of their current individual insurance coverage to determine if any changes are in order, as well as consider new insurance coverage appropriate to their new life stage.
Auto Insurance: The good news is that married drivers may be eligible for lower rates than single drivers. Since most couples come into their marriage with two separate auto policies, you should review your existing policies and contact your respective insurance companies to obtain competitive quotes on a new combined policy.
Home Insurance: Newly married couples may start out as renters, but they often look to own a home or condo as a first step in building a life together. The purchase of homeowners insurance or condo insurance may be required by the lender. While these policies have important differences, they do share the same purpose — to protect your home, your personal property, and your assets against any personal liability.
You should take special care of what is covered under the policy, the types of covered perils, and the limits on the amount of covered losses. Pay particular attention to whether the policy insures for replacement costs or actual cash value.
Health Insurance: Like auto insurance, couples often bring together two separate individual health insurance plans. Newly married couples should review their health insurance plans’ costs and benefits and determine whether placing one spouse under the other spouse’s plan makes sense.
Disability Insurance: Married couples typically combine their financial resources and live accordingly. This means that your mortgage or car loan may be tied to the combined earnings of you and your spouse. The loss of one income, even for a short period of time, may make it difficult to continue making payments designed for two incomes. Disability insurance is designed to replace lost income so that you can continue to meet your living expenses.
Life Insurance: Central to any marriage is a concern about the other’s future well-being. In the event of a spouse’s death, a lifestyle based on two incomes may mean that the debt and cash flow obligations can’t be met by the surviving spouse’s single income. Saddling the surviving spouse with a financial burden can be avoided through the purchase of life insurance in an amount that pays off debts and/or replaces the deceased spouse’s income.
Several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.
Assets & Debt Management Tips
When you get married, you will need to decide how to handle your assets and debt. You can choose to keep your finances separate, merge your finances completely, or find a middle ground.
If you decide to keep your finances separate, each spouse will be responsible for their own assets and debt. This can be a good option if you have very different financial goals or if one spouse has significant premarital assets or debt.
If you decide to merge your finances completely, all of your assets and debt will become joint marital property. This means that you will be equally responsible for all debts, even if they were incurred before the marriage.
If you choose to find a middle ground, you may decide to combine certain assets, such as your checking and savings accounts, while keeping other assets, such as investment accounts, separate.
Planning for the Future
It’s important to discuss your short- and long-term financial goals with your partner. This will help you to make sound financial decisions together.
Some common short-term financial goals for married couples include buying a house, saving for a down payment on a car, or starting a family. Long-term financial goals may include saving for retirement or paying off student loans.
Once you have identified your financial goals, you can start to develop a plan to achieve them. This may involve creating a budget, saving money each month, and investing for the future.
Tips for Financial Success as a Married Couple
Here are a few tips for financial success as a married couple:
- Communicate openly and honestly about your finances. This is essential for building a strong financial foundation together.
- Create a budget and track your spending. This will help you to stay on track with your financial goals.
- Save money each month. Even if it’s just a small amount, saving money consistently will add up over time.
- Invest for the future. Investing is a great way to grow your money over time.
- Get professional financial advice if needed. A financial advisor can help you to develop a financial plan that meets your individual needs.
Getting married is a big financial decision. By having open and honest conversations about your finances and working together to achieve your financial goals, you can set yourself up for a successful financial future.
- The Best Way to Join Money in Marriage: Should couples have married or separate financial accounts? Dr. Matt Morris, LPC, LMFT, and Erik Garcia, CFP®, dive into the pros and cons of each – as well as some of the underlying psychology.
- 7 Financial Issues You Should Discuss Before Getting Married: Marriage is such a beautiful thing! Sealing the deal with your beloved can be magical! You don’t want ANYTHING to get in the way of your burgeoning marriage – so it’s a good idea to talk about your finances BEFORE the wedding, not after.
- Managing Money as a Couple: At some point, you will have to ask yourselves some money questions—questions that pertain not only to your shared finances but also to your individual finances. Waiting too long to ask (or answer) those questions might have some consequences.
- Financial Considerations When Getting Married Checklist