Planning a wedding is one of the most exciting and stressful times of your life. Your plate is likely full juggling wedding planning plus your normal day to day life. I can attest to this as I married my wonderful husband this summer. However, as a financial planner, I encourage you to start the discussion of joint finances and various other financial aspects before walking down the aisle. Below I will lay out the various financial aspects to consider before married life:
While this may be one of the first things people think about while engaged, I feel it is often not actually discussed as soon as it should be. Before marriage, you should start to discuss and develop a plan regarding how you will view your money. Is it joint money or separate? Will you keep separate bank accounts or join the funds into one? If you decide to join funds, I recommend reviewing the interest rates, fees, and other perks of each bank. You may find one bank is more appealing or even that a totally new bank is in order. Lastly, you should discuss who will be paying the bills. Will you each continue to pay certain bills? Will one person pay all bills?
It will likely take some time to get accustomed to each other’s spending habits. I encourage you to discuss how you plan to budget or spend money. I personally use Excel to budget while my husband is more likely to “eyeball” it. You should discuss if bills will be split 50/50 or proportionately to the higher earner. If you keep your money separate, you’ll want to clarify who is paying what. It may make sense if one pays for utilities and the other pays for groceries, for example.
Regardless, I highly recommend giving each other some “free” spending money each month, where you can spend a certain amount with zero guilt, within reason. I know my husband utilizes his portion on Taco Bell, while I am definitely more of a Starbucks lover. Being upfront and honest about your saving and spending expectations with your partner will definitely save a few headaches later on.
Before starting your new life together, I encourage you to look out to the future. What goals are important to you? How do you envision spending your money throughout your life? I recommend opening the communication lines about your various investment accounts, savings rates, and debt amounts now. You should discuss the expectations of each other regarding savings and possible retirement. Being on the same page will definitely benefit you and your futures!
While this topic definitely does not jive with the wedding bliss feeling, it is important to discuss. If you live in AZ, CA, ID, LA, NV, NM, TX, WA, or WI, you live in a community property state meaning all of your money earned during your marriage is automatically half your spouse’s.
If that is not what you intend, you may wish to speak to an attorney regarding your options including possibly a prenuptial agreement. In addition, once married, you will need to execute power of attorney documents for finances and healthcare. These documents will name agents that act on your behalf if you become incapacitated or incompetent.
Lastly, I recommend discussing whom you’d like to receive your money if you were to pass. You will need to update the beneficiaries on your accounts such as 401(k)s, IRAs, brokerage accounts, etc. You may also need to execute a will. I recommend discussing your estate plan with a qualified estate planning attorney.
Another perk of marriage is that it is considered a qualifying event to switch insurance coverage mid-year. I recommend reviewing each of your coverages before marriage to ensure a smooth transition post nuptial.
You will want to review each of your health insurance coverages and determine if joining onto one policy makes sense. Are either of your deductibles, premiums, or benefits more attractive? Some employer plans require the spouse to remain on their own employer coverage so I recommend looking into this before making a change.
Another coverage to look into would be short and long-term disability, whether it be employer or private. Group life insurance is another employer benefit that may provide spousal benefits, sometimes even for free. I recommend inquiring about your spousal benefits through your HR department.
Lastly once you are married, you will want to ensure you notify the carrier of your renters insurance policy and auto policy. It is possible you will receive lower rates due to this status change.
The year that you are married will be the first year you file as either married filing jointly or married filing separately. If possible, I recommend reaching out to your accountant to review your tax withholding on your paystubs shortly after your wedding. This should help avoid tax surprises come April.
Do either of you have a pattern of getting refunds or owing on your previous tax returns? It is likely that one partner is paying more into taxes than the other. You will want to discuss if that is how you intend continue or if you desire a more 50/50 split. It is possible that filing a new W-4 to update your withholding is necessary. Most couples file under married filing jointly status, however if there is a large disparity in income between spouses, it may be beneficial to file as married filing separately. Talk with your accountant at tax time.
When it comes down to it, communication really is key! I know there is a lot to discuss as wedding planning evolves, however you shouldn’t delay these important conversations. I hope this serves as a great checklist to start discussing your financial future with your soon to be spouse.
Brittany Falkner, CFP®, EA, is a financial planner and tax advisor with Charter Capital Management. Brittany combines her experience of comprehensive financial planning in addition to detailed tax planning to prepare holistic plans for her clients. She is passionate about helping her clients reach their goals and take charge of their financial lives.
Important Disclosure: The opinions expressed by featured authors are their own and may not accurately reflect those of Charter Capital Management. This article is for general information only and is not intended to serve as specific financial, accounting, legal, or tax advice. Individuals should speak with qualified professionals based upon their individual circumstances. The analysis contained in this article may be based upon third-party information and may become outdated or otherwise superseded without notice. Third-party information is deemed to be reliable, but its accuracy and completeness cannot be guaranteed.
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Email Jeffrey Levine, CPA/PFS, chief planning officer at Buckingham Wealth Partners, at: AskTheHammer@BuckinghamGroup.com.