A considerable amount of planning is required to make your wedding day a success. But that day signals just the start of planning issues that affect the two of you. Among them is planning your finances — an important process that can’t be overlooked in getting your marriage off on the right foot.
If you are accustomed to making financial decisions on your own, working as a team on money management issues can mean breaking new ground. As you make the merger, here are some issues to consider.
Deciding what’s ‘yours, mine and ours’
While some newlyweds have no problem duplicating all their money into a family pool, totally combining finances can be drastic — particularly if you and your spouse have unequal incomes and different philosophies about spending and saving. A compromise may be to maintain a household account for joint expenses and to each handle some of your own money separately. Even though the law recognizes that all of a couple’s assets acquired during the marriage are owned jointly, you may decide that it’s important for each of you to make some independent purchasing decisions.
Getting the insurance protection you need
If both of you are covered by health insurance through your employer, you may find that it is more economical to combine your coverage under one of the plans. After carefully comparing benefit plans, you can choose the one that offers the protection you need for the most affordable cost.
You’ll also want to reevaluate the amount of life insurance you now need based on your level of dependence on each other’s income. If you are equal wage earners, the limits of protection you choose will be different than if one partner is the primary breadwinner.
Updating your beneficiaries
If you elect to name your spouse as beneficiary of your employer-sponsored pension plans, IRAs and insurance policies, request and complete the required paperwork for beneficiary designation changes as soon as possible. Making these changes is a detail that many newlyweds overlook, and the oversight can be catastrophic for the surviving spouse if tragedy strikes.
Maintaining your own financial identity
A good way to keep your own credit rating is by maintaining a charge card in your name only. That way you are more likely to be able to get individual credit should you ever be in a situation where you need it.
Getting started with an investment plan
If you and your spouse have employer-sponsored 401(k) plans, consider funding them with as much as you can afford. Since your contributions are made with pre-tax money, they will reduce your taxable income and your money will grow tax-deferred until you withdraw it — usually in retirement.
401(k)s are hard to beat as a long-term investment vehicle, but if you are saving for a shorter-term goal like buying a house, you may want to start an investment plan where a pre-determined amount of money is invested regularly over a period of time. Building your nest egg requires discipline and patience — particularly if you can only commit to a small amount at first. The important thing is to arrange for the withdrawal to happen automatically so you won’t be tempted to opt out in months when finances are tight. An experienced financial advisor can make sure that you set up a sensible investment program that is right for you.
Keeping your spouse informed
Regardless of how you decide to allocate responsibility for family finances, keeping each other informed about your own spending is critical. While taking time regularly to update each other about money matters is important, financial software for home use can be helpful in looking at your big financial picture. Programs like Quicken allow you to track expenses by category on all your own accounts — even if they are not held jointly. That way you can keep track of how much money you have spent and how you are spending it.
Gary N. Garner is a personal financial advisor with American Express Financial Advisors in Jackson.