Getting engaged and married is an exciting time in anyone’s life. It can also be a time of intense stress as you try to plan a wedding and adapt to living with your significant other. Adding money to the equation only makes things more complicated.
If you’re about to settle down with your significant other, you can save yourself a lot of heartache and stress by following these money-related tips.
What to Do Before Getting Married
Before you get married, there are a few steps that you should take to ensure you’re in a good financial situation.
1. Discuss Financial Priorities
In any relationship, it’s important to make sure that you and your partner have similar values, beliefs, and priorities. Someone who wants to live a nomadic lifestyle, never living in the same country for more than a year, will have trouble settling down with someone who is content to live in their hometown all their life.
Talking about money can be stressful, but it’s important to talk about your financial priorities with your partner.
- Do you believe in making regular donations to charity or your church?
- What are your day-to-day spending habits?
- Is paying down debt, like student loans, or saving and investment a major priority for you? Or do you prefer to spend money in the moment?
- How much of your income are you willing to spend on luxuries versus necessities?
- If you plan to have children, how much do you want to support them financially?
- What are your retirement plans? Do you want to open an IRA or other retirement accounts now, or wait?
These questions don’t have a “correct” answer. Making sure that you and your partner have similar priorities, or can find a compromise somewhere in the middle, can help avoid financial arguments in the future.
2. Make a List of Financial Goals
Similar to discussing your financial priorities, talk about your goals for the future, especially financial ones. It will be much easier to reach your goals if you can work toward them together, and it can help reduce tension if you make sure you don’t have goals that directly contradict one another’s.
- Do you want to live in a lavish house or a small one?
- Would you rather rent or own your home?
- Do you want to retire early or work full careers?
3. Decide How Much to Spend on a Wedding
One of the biggest sources of tension for newly engaged couples is their upcoming wedding. Weddings can be stressful at the best of times because you have to plan for so many people and manage so many moving parts.
The cost of weddings is also a major source of stress for engaged couples. In 2019, the average wedding cost almost $34,000. Some weddings can be extravagant and cost tens of thousands of dollars more. Other couples opt for much more modest weddings.
Although there’s nothing wrong with throwing an expensive wedding, doing so does come with trade-offs. You could use the money you’d spend on a lavish event for other purposes, such as making a down payment on a house. Before you start planning a wedding, talk about how important the event is to you, and set a maximum budget for it.
Talking about the cost of your wedding ahead of time is a good way to reduce bad feelings brought on by differing expectations of how much a wedding should cost.
Similarly, discuss how much you want to spend on other big-ticket expenses such as your engagement rings, bridal shower, and bachelor party. You can save a lot of money on wedding expenses that aren’t truly necessary and still have wonderful memories while putting that money toward other priorities like a down payment on a home.
4. Consider a Prenuptial Agreement
A prenuptial agreement is a document that defines how to split your assets if your marriage eventually fails.
While signing a prenuptial agreement might seem like you’re preparing for your marriage to fail, they’ve gained popularity in recent years as average marriage ages have risen. The more assets you own coming into a marriage, the more a prenuptial agreement may make sense for you.
Prenuptial agreements aren’t for everyone, but that doesn’t mean that you shouldn’t take a moment to consider whether signing one before your wedding day is a good idea.
5. Open a Joint Bank Account
If you’re about to get married, that means you’re about to combine your finances with your partner. It makes sense to get ahead of the game and open a joint bank account. This will make it much easier to share joint expenses, such as housing and groceries.
Different couples structure their bank accounts differently. Some combine finances, while others keep their money separate. One strategy that combines both approaches is to have a total of four bank accounts:
- A joint checking account (there are several available to offer a cash bonus)
- A joint savings account (consider a high yield account through CIT Bank)
- Separate accounts for each person’s personal spending.
This strategy lets you combine your savings and checking accounts with your partner to easily handle joint expenses. Each month, you can transfer a set amount to each person’s individual checking account.
You can think of the amount transferred like an allowance. This gives each person the freedom to spend some of their money without their partner’s input. Each spouse having their own personal funds makes it easier to go out with friends or make small purchases without having to check with your spouse or risk spending money earmarked for rent or groceries. It also makes it easier to buy gifts without your partner finding out what the gift is ahead of time.
6. Build an Emergency Fund and Pay Off Debt
Try to set aside some money each month to build up some savings. Try to have between three and six months’ worth of expenses in an emergency fund in cash. That money will help you cover unexpected expenses and weather bad situations such as unemployment. Having the money set aside can help you avoid a lot of financial stress in the future.
If you have debt — especially high-interest debt like credit card debt or expensive car loans — work on paying down your balances. If you can go into your marriage free of high-interest debt, you’ll be setting yourselves up for financial success.
7. Create and Track a Joint Budget
Budgeting is important to make sure you know how much money you make and where all of your money goes. If you don’t have a budget, it’s easy to overspend without noticing it, leaving you with nothing left over at the end of the month.
Getting married is a great opportunity for newlyweds to create a budget together for the first time or to reexamine their existing budgets. When you get married, you’ll be combining your incomes and your expenses. Some expenses will increase, like food costs, while others will stay relatively the same or decrease, such as your housing costs.
Take a few months to build and practice living on a joint budget, then track your spending and refine your budget to match your spending needs. If you have a good budget when you get married, you’ll be prepared to manage your money and make sure you can save for the future.
What to Do After Getting Married
Once you’re newlyweds, there are additional steps you should take to make sure you’re financially prepared for the future.
1. Update Beneficiary Information for Individual Accounts
When you open a bank account or investment account, the bank or brokerage might ask you to name a beneficiary for your account. If you pass away, the money in the account passes to your beneficiary. After the wedding, you should add your spouse as the beneficiary on any accounts you opened before you were married.
If you don’t name a beneficiary and something happens to you, the account may pass to your estate and get locked up in probate. Naming your spouse as the beneficiary of the account makes sure that your money will pass directly to your spouse without them having to deal with the legal system or other bureaucratic annoyances.
2. Consider Changing Health Insurance Plans
When you get married, you have the option of updating the health insurance plan you purchase from the insurance marketplace or your employer.
Married couples can often use family insurance plans so that they are both covered under the same insurance policy. Depending on the policies that you both use, you might be able to save money by signing up for a family plan instead of staying on two individual plans.
3. Get Disability and Life Insurance
If you don’t already have disability or life insurance, getting married is a good time to think about signing up for these plans. This is doubly true if you make the majority of the income for your household.
Disability insurance through a company like Breeze helps to replace your income if you become disabled and unable to work. Although some government programs like Social Security Disability can help if you get disabled, private disability insurance can provide a much larger benefit and make it easier to cover your expenses.
Getting both short-term and long-term disability coverage is usually a good idea.
Life insurance gives a lump sum of money to your family if you die. Because you and your spouse will have joint expenses, your spouse might not be able to make ends meet if you die unexpectedly and your household loses your portion of its income.
Given that the death of a loved one is already an incredibly difficult time, the last thing that you want to leave your partner with is money trouble on top of the mourning process. Life insurance can help make sure that your family has enough money to get by while grieving and adapting to their new life.
4. Have Regular Discussions About Your Finances
Although it’s important to make sure that you and your spouse are aligned on financial priorities and goals before you get married, money should be an ongoing topic in your relationship. You should take time at regular intervals, such as monthly, quarterly, or annually to sit down and look at your money together.
Use this time to think about where you are financially as a family. Are you on track to meet your goals? Do you need to update your budget? Do you have financial concerns that you want to talk to your partner about?
It’s easy to fall into a habit of avoiding discussions about money, but they’re important even if they can be stressful. Having a regular schedule to sit down with your spouse to talk about money can make it much easier to stay on the same page and on track financially.
5. Divide and Conquer
Related to working together to stay on track financially as a family, it’s important to divide up the financial tasks between the two of you. Although it works for some couples, if one person is managing all of the house’s money, it can be easy to become resentful of one another over how money is managed or spent.
Find a division of tasks that works for you as a couple. Maybe one of you can manage the monthly bills while the other keeps track of the budget. However you divide the work, making sure you both do some of the financial chores for the household can keep you both invested in your financial lives and help avoid resentment.
Getting married is an exciting but potentially stressful time. Money issues only compound that stress. The most important thing is to make sure that you and your partner have similar financial priorities and that you can find a way to compromise on any financial differences you have.
If you take the time to think about how you’ll manage your household finances before you get married, you can save yourselves a lot of financial arguments and stress down the road.