Marriage is a time for new beginnings and shared dreams. But after the honeymoon is over, real life begins. The practical aspects of life and expenses will need to be resolved.
And because money issues can sometimes lead to marital conflict or divorce, you’ll want to address as many of these issues as possible with your spouse to prevent any surprises in the future.
The time to talk is now (or even before you get married) to ensure as much harmony and unity as possible when it comes to money matters.
You’re a team now!
Marriages are partnerships and because of this many, if not all, of the important decisions should be addressed together. Information is key and the more each of you know ahead of time, the better.
That’s why it’s important to take the time to disclose your financial histories. Be honest and try to develop a clear understanding of attitudes, goals and finances. This is not the time to be shy or coy about incomes, expenses, credit history or any other personal financial circumstances.
But it’s not just your debts and obligations that should be discussed. Any investments or other assets, such as real estate, should be brought up and discussed.
If you find there are problems in credit histories, now is also the time to discuss these issues. Credit history problems could affect your ability to buy a house or a car, and could lead to marital problems down the road.
But once these discussions have taken place, you can move onto the next phase of your financial planning:
Take advantage of professional advice!
There are two important things you must figure out about your financial future. What you know and what you don’t know. Knowing what you don’t know is important because then you can ask the right questions to your advisor.
An advisor is best equipped to examine your financial situation and make recommendations that are suitable for your needs. They can then walk you through a three-step approach for newlyweds that includes:
1. A savings plan
It goes without saying that savings can help newlyweds with short-term and long-term financial needs. Immediate emergencies or “rainy day” funds can also help in surprise situations like a job loss, for example.
Longer-term savings can be built up for a child’s education, or for paying down debts or financing that dream home. Many experts believe you should have enough set aside to cover three-to-six months worth of total expenses, as well as a separate fund for major purchases such as a new car or the down payment for a home.
Keep in mind that how you invest these savings will be affected by market cycles and downturns. If you are interested in preserving some of your money with low risk (for those rainy day funds), consider a simple bank account or low-risk money market fund.
2. Life insurance protection
While the hope is that you will never need life insurance, preparing for the worst-case scenario is always safer. If you or your spouse pass away, life insurance can ensure that future financial obligations will be met and debts can still be paid (such as a mortgage or student loans).
Life insurance is also a way to ensure the surviving spouse will have a financial safety net during a difficult time.
If you are planning to live in a single-income household, life insurance should still be considered for the stay-at-home parent. Their work has tremendous value too and would be very expensive to replace.
Life insurance can help soften that blow, and an advisor can help determine the best insurance for your needs. Keep in mind that every couple’s situation is different and there is no one-size-fits-all approach.
3. An investment strategy
Savings and insurance are a start, but the best way to accumulate wealth for current and future needs is through investments.
Investments are necessary as their potential for growth will help you prepare for large-scale and long-term financial needs such as home ownership, your children’s tuition and your retirement.
An advisor can help newlyweds navigate the crowded and sometimes confusing investment world.
With so many options to choose from and with so many risk/reward profiles, you will have to make choices that may require some assistance. Another bonus of investing is that many investments offer tax savings advantages.
Retirement accounts such as 401(k)s, IRAs and Educations Savings Accounts allow for efficient and cost effective ways to reach many of your goals more easily.
An advisor can also help you by diversifying your portfolio (to smooth out volatile market cycles) as well as regularly review your goals and needs.
Make it a habit!
“Systematic” investing can help make the investing process easier and turn saving into a habit.
Basically, systematic investing helps you lower the average per-share cost of investing because you automatically buy more shares when prices are low and fewer shares when the market nears its peak.
Keep in mind that profit is never guaranteed in any investment, including in dollar-cost averaging scenarios.
As you come together to begin your lives, your partnership should include all aspects of your marriage – especially finances!
Being open with each other, being transparent about your finances and debt, and carefully assessing goals will help you and your partner decide on a path that is right for you.
Setup a meeting with an agent or advisor today so they can lead you through this journey and provide the guidance you need to enjoy your financial future!