5 Managing Money Tips for Newlyweds
5 Managing Money Tips for Newlyweds
Getting married is still at the top of the list for being one of the most important decisions that we make. It’s amazing how those two words “I do” or “I will” can change our lives in very significant ways, especially in managing money.
In some states, marriage can change our financial picture whether we intended it to or not. There are a number of issues that newlyweds will need to discuss, but we’ll touch on the five that should be dealt with first. It’s very important that both spouses get on the same page as quickly as possible to avoid potential conflict.
File a Joint Account or Married Separate
The first important issue to discuss is the area of taxes. Usually this will focus on whether to file separate tax returns or to file jointly. Generally, filing jointly will result in lower overall taxes, however, this is not always the case. There are some situations where filing separate returns result in less taxes.
Some other caveats to consider. When filing jointly, both spouses are liable on the return. If, as an example, one of the spouses makes an error in reporting or not reporting income, both are liable for the tax, interest, and penalty.
Another matter to consider is if one of the spouses has some un-resolved tax problems from prior years. It would be advisable to not file a joint return. To be certain that the best filing option is used, it is recommended that you consult with a qualified tax professional.
Set Up Retirement Accounts
The second managing money issue to discuss are your retirement accounts. There are many possible scenarios in this area. Normally, changing beneficiaries is the first to address. Getting married can also impact each spouse’s annual contribution limit.
Even though each spouse may be contributing to a pension plan at work, it may be possible to still contribute to an IRA(s). Again, it would be advisable to consult with a qualified tax professional to see what your options are. It could result in a reduction of your taxes.
Discuss Insurance Needs & Beneficiaries
Another area that needs to be discussed is insurance. Start with life insurance policies and health insurance. These need to be updated to reflect your current status as a married couple. Be sure that you have adequate coverage as well. You may be in a new home or apartment that requires coverage. If you have art or jewelry or perhaps some other asset of value, make sure that your policy has a rider to cover it.
Create a Budget Early On
Here comes that dreaded “b” word that some individuals have a problem with. Create a budget early or even before you’re married. This budget should be a joint household budget and should cover everything from fixed expenses to personal discretionary items.
That means items like rent or mortgage payments, car loan payments, utilities, student loans, credit card balances, etc. What we’re saying here is to bring everything to the table. Don’t hide anything. Set up a time to discuss the budget perhaps weekly to start with, and then on a monthly basis.
Both spouses must be able to freely discuss it and have a voice in any decision. Get on the same page as quickly as possible, and you’ll find that a lot of un-necessary stress can be avoided.
Choose Method of Managing Money
For this fifth item, there is no “one size fits all” solution. This is where you both decide on your method of managing money. Some couples simply pool all money into one account, while others opt for separate checking accounts and perhaps a joint account to pay items like rent, etc.
This can be a very sensitive issue to discuss, especially if one spouse is a saver and the other is a spender. In any event, whatever method that you decide to use that works for you, is the one to use. The key point here is to discuss the merits of each and agree early on in marriage how you will manage your money.
We can’t emphasize enough how important it is for both spouses to be able to freely discuss the topic of managing money without reservation or reprisal. Getting married raises a whole new set of financial and personal issues that will need to be dealt with. The couple that is able to discuss them openly, with each listening attentively to the other, will be better able to resolve the problems that arise.