Congratulations! Whether you’ve just said your “I do’s” or are recently engaged and preparing for the big day, hopefully you’ve also prepared – or are in the process of preparing – your finances with your significant other.
Tying the knot may have significant implications on your financial state and wellbeing, which is why it’s important to consider the following tips to ensure there are no surprises or disconnects once you’re hitched1:
Before heading to the altar, couples should have a keen understanding of each other’s financial situation. Although there are likely more exciting things to plan and discuss leading up to the big day, creating an open dialogue around money should not be overlooked. Both you and your partner should be open and honest about your financial wellbeing, including income, expenses, and any outstanding debt. Holding regular discussions about family finances is a healthy and prudent practice to help evolve your financial wellbeing and put you on the path of achieving your dreams together.
Evaluate Your Assets and Debts
Before developing a sound financial plan, it’s important to know what you already own, the value of your assets, and how much outstanding debt you may owe. This understanding will provide an overview of your financial situation and lay the groundwork for your comprehensive plan. Understanding your credit worthiness is a fundamental practice, as it is likely to influence your ability to borrow and fund larger purchases, such as buying a car or home.
Create a Budget
Rather than taking a reactive approach to managing money, budgeting is a proactive tactic that will keep your plans and goals on track. Having a strong handle on your monthly income and expenses will give you the information you need to make thoughtful decisions about how you spend your money. For more insight into how to build a solid financial plan, please review our recent blog post, Creating a Financial Plan for a Changing World.
No couple ever wants to discuss the possibility that things may not pan out the way they imagine. However, the unfortunate reality is that approximately half of marriages end in divorce or separation. For individuals coming into a marriage with significant assets or earning substantially more than their partner, a prenuptial agreement may be a consideration. These agreements, signed before marriage, can protect an individual’s assets in the event the marriage doesn’t last. These contracts can also reflect obligations around preexisting debt prior to marriage and predetermine spousal support in the event of divorce or separation.
Set Shared Goals
One of the most important elements of a solid financial plan is understanding why you’re saving and/or investing. By setting both short- and long-term goals, you will have the ability to measure your progress and overall financial state. You and your partner should discuss not only your individual goals, but your goals as a couple. Goals may include furthering your education, taking a new career path, buying a home, having children, caring for aging parents, planning for retirement, and more. All of these goals have a financial impact; knowing them in advance will help you prepare financially so you can achieve them.
Funding Your Wedding
Weddings can be expensive. If you are paying for your own wedding, setting a budget and distinguishing your wants from your needs can help you make smart decisions and lighten the financial burden of the big day. The less you spend on your wedding, the more you have to start a life together.
Joint Bank Accounts
Exchanging vows comes with financial benefits. Married couples often open joint accounts to pool their assets in a single location, which could eliminate one set of fees. Couples may also decide to add their partner to an existing account. Joint accounts make it easier to monitor your cash flow each month and keep a closer eye on income and expenses.
Life Insurance Planning
Marriage comes with responsibilities, especially to one another. If your employer provides life insurance at work, make sure to review your beneficiaries and consider adding your spouse. If you come into the marriage owning a home, consider adding life insurance to protect your mortgage so your spouse won’t be forced to sell should something happen to you. If one of you come into the marriage with children, assuring their financial futures with life insurance is critical. Even if you’re just starting out and just thinking about a family, you now have each other to love and protect – it makes sense to also protect each other’s financial futures with an insurance policy that can grow as your assets and obligations grow.
Married couples have the option to file taxes jointly or separately. Each couple’s circumstances are different; there are benefits to each approach depending on your financial circumstances. Newlyweds are encouraged to engage a tax professional to explore your options to determine which best fits your joint needs.
Investing is an absolute for individuals and couples seeking to accumulate wealth. By starting early, and investing consistently over the long run, investing can have a profound impact on your accumulation of assets and significantly improve your financial wellbeing. For additional information about investing, please review our recent blog post 9 Investing Tips for Beginners.
Develop an Estate Plan
Discussions about aging, cognitive decline, and death may feel uncomfortable for many, but deciding on important issues like who will make financial and heath decisions for you if you are unable to can provide an added layer of risk protection and help avoid confusion at a difficult time. It’s important to identify your beneficiaries in the event of death and consider legal assistance to coordinate the distribution of your estate. Creating a will detailing your final wishes is highly recommended and enables you to be the final decision maker. A will helps your spouse and family avoid an often burdensome, sometimes confrontational, or costly legal situation.
Foresters members can access free will services through the LawAssure benefit, an online document preparation service2.
If you’re interested in learning more about any of the strategies outlined in this article, please consult your independent financial planning, tax, or insurance professional.
1 Foresters, their employees and life insurance representatives, do not provide, on Foresters behalf, financial, estate, tax or legal advice. Individuals should consult their financial, estate, tax or legal advisor regarding their situation.
2 LawAssure is provided by Epoq, Inc. Epoq is an independent service provider and is not affiliated with Foresters. LawAssure is not a legal service or legal advice and is not a substitute for legal advice or services of a licensed attorney. Foresters Financial, their employees and life insurance representatives, do not provide, on Foresters behalf, legal, estate or tax advice. In the US, some features not available in Louisiana. In Canada, LawAssure is not available in Quebec, the Yukon, the Northwest Territories and Nunavut.
421023 CAN/US (10/22)