I Do, Now What? Planning Your Finances as a Newlywed
There are few things in life as exciting (or scary!) as getting married. It’s not an overstatement that saying “I do” is one of the biggest decisions we make in our lives. Tying the knot affects every aspect of your life, from a permanent piece of expensive jewelry on your finger to where you spend your holidays. But by far, the biggest adjustment will be made to your finances.
I’m not a marriage counselor, so I have little to offer on the subject of finding the right spouse or the six steps to a happy marriage (and if you don’t believe me, just ask my wife). But I do know this: If you and your spouse don’t figure out how to deal with the financial aspects of the new life you are building together, your relationship is in big trouble. A recent study by a psychology professor at Utah State found that couples who disagree weekly about money are 30% more likely to end up divorced.
Newlyweds have a unique opportunity to start your financial journey on the right foot. Hopefully, the wedding and honeymoon didn’t create too much conflict between the two of you. However, if you did have some disagreements around the financial aspects of the wedding/honeymoon, that’s not a bad thing, because these early conflicts usually demonstrate the similarities and differences, between how the two of you deal with money.
To get you started right, try these five exercises (this isn’t a recipe, so you can do them in any order you choose):
1) Working separately, each of you right down your short-term goals (less than 5 years) and long-term goals (more than five years). Compare lists and talk about the similarities and differences. It’s okay to have different goals; you are both unique individuals, after all. The important thing is to walk away with a list that includes shared goals, as well as important individual goals that your spouse supports.
2) Show your most recent tax return, your current monthly pay statement, and your projected incentive/bonus pay plan to the other. You each should know exactly how much the other makes, so there is no confusion about income. If one spouse makes a larger sum than the other, talk about this in terms of how it makes you feel. Does it make you feel less powerful or less important? This can be particularly problematic if the wife makes more than the husband. Don’t kid yourself: money and power often go hand-in-hand in a relationship, so it’s critical to talk about it now.
3) Show the last three to six months of credit card statements to the other. Walk your spouse through the transactions, making sure to explain the larger purchases and patterns of repeat spending. You might be surprised what you find out about yourself with this one. The goal here is for each of you to get a handle on the other’s spending personality, since this will affect any plan or budget you develop together.
4) Set up a joint spending account for shared purchases and have your monthly paychecks direct deposited to this account. I’m a big believer in couples pooling their money and working together to fund their shared life. However, if you feel strongly about keeping individual accounts for distinctly individual spending items, go ahead and do it--just be sure both of you figure out how much to transfer from the joint account to fund these individual accounts. Bottom line, I don’t believe you can truly share a financial life together without pooling your money—the mindset of “my money vs. his/her money” is a recipe for disaster.
5) Discuss any charities and philanthropic causes that matter to you. Each of you should know what causes the other cares about. This is a great way to gain insight into what matters to your spouse, so consider this one carefully. Also, if your spouse doesn’t have any causes he/she currently supports, talk about what matters to them and see if you can jointly identify shared causes. Other than shared goals, this is the best way to bond as a couple around financial aspirations.
If you and your spouse can do these exercises in the early days of your marriage, you will have a better chance of developing a shared vision of your financial goals, which will really help you minimize conflict when big decisions have to be made. You will also gain a better understanding of the other’s financial situation and some insight into their money personality, which will help you both when conflict inevitably comes up. Good luck!
Bryan Link is the CEO and co-founder of SimpliFi, Inc., an online consumer financial planning service. SimpliFi has won several awards and was named Fast Company’s Top 10 Most Innovative Companies in 2010. Bryan’s expertise in personal finance has led to him being featured in a variety of print and broadcast media, including ABC News, FOX Business and The Wall Street Journal.