Financial Advice for Newlyweds
As newlyweds, financial management may be the most crucial change that you and your spouse need to address. Instead of managing your money separately, you’ll probably find it useful to plan and coordinate your finances. This coordination is especially important if both of you are wage earners and already have accounts at financial institutions.
Look at your financial picture. Either before the wedding or immediately after the honeymoon you should take a close look at your complete financial picture. Review the amount of money that you earn and how the money is being used. Have a frank discussion about future goals and their financial implications. Some goals that you might want to discuss are relocating to a different city, buying a home, starting a family, making a career change, taking college courses, or getting an advanced degree.
Make a firm commitment to spending goals. Reaching these goals may require some changes in how you spend money. It may sound easy to adjust your lifestyle so that you’re spending less, but most people develop spending habits that will require discipline to change. A commitment to goals and a sound financial plan makes obtaining those goals easier for couples.
Establish a budget. Once you’ve considered your short- and long-term goals, you should make plans to achieve them. This can best be done by determining a realistic budget that allows you to meet your usual expenses and to have a cushion for the unexpected ones. To be an effective tool, a budget must be reviewed regularly to see whether it’s realistic and to determine if the expenses are over the targeted amounts and need to be cut back.
Include savings and investments for the future. Include in your budget a regular amount committed to savings or investments for the longer term. It’s never too early to start putting money away for retirement. Look especially at company-sponsored retirement plans, such as a 401(k). If those aren’t offered by your company, find out if you qualify for IRAs. With the effect of compounding, even modest amounts invested now can grow substantially over the next few decades.
Consider separate accounts. Review the need for separate checking and savings accounts for each of you. If your marriage resulted in a name change, accounts should be listed in the new name. If you want to establish a joint checking account, you should check out services and fees at financial institutions, especially credit unions, so you can get the best value.
Review credit cards. Credit card accounts also should be reviewed, and, again, if a name change was made, that should be listed. Often you and your spouse may want to maintain your individual credit cards. Sometimes you may want a joint account in which both of you are listed as the account holders and both are responsible for the debt. Regularly track your spending on credit cards against your budget.
Determine financial responsibilities. You also need to make a decision about each person’s responsibilities for handling personal finances, including balancing the checkbook, depositing checks, paying bills, and making investment decisions for their savings. It’s usually a good idea to divide the responsibilities, rather than one person handling them all.
Consider personal finance software. Consider purchasing personal finance software to keep track of your financial dealings, including credit union accounts, credit lines, and investments.
Change important documents. If there has been a name change, important documents, such as a Social Security card and a driver’s license, should be changed to carry the correct name, not only for identification reasons but to keep the information up-to-date for possible future benefits.
Review insurance policies and beneficiaries. Check out health, life, and auto insurance policies, both those at work and any carried individually. Marital status would need to be changed, and in the case of life insurance, the beneficiary might need to be changed also. With health insurance, review your coverage and make decisions about whether to continue to carry individual medical insurance or to include your spouse as a dependent under one plan.
Also review investments, such as certificates of deposit and mutual fund accounts, to determine if you want to change the beneficiary.
Make it last. It has been said that the main cause for divorce in America today is financial stress. When debt levels get to the point where the full earning potential of both wage earners is needed, it’s probably time to step back and assess the situation. If circumstances change because of illness, loss of job, or a career change, you could be in serious financial trouble if you have no financial cushion.