I recently got married, and now that the wedding planning is out of the way, my husband and I are settling into our new life together. It's exciting in many ways, but it also brings new financial concerns. We've been used to paying for our own things separately, and now we have to plan for a future -- including having a family -- together. It changes things.
Like all newly married couples, we have to come up with new ways to manage our expenses and plan for our future goals. Here are a few of the important conversations we've been having recently -- ones all married couples should have at some point.
1. How are we going to pay the bills?
There are different strategies for paying the bills as a couple, and one isn't necessarily better than the other. It just depends on what the couple prefers. We're leaning toward putting all of our money together in a joint account and assigning a monthly spending allowance that we can each use for items on our want list. If either one of us wants to purchase something more expensive, we have to talk it over with the other.
Some couples prefer to keep their accounts separate. Each partner can pay half if they earn about the same. Or if one person earns disproportionately more than the other, you can break down the bills proportionately. If one partner earns $60,000 per year and the other earns $40,000 per year, for example, the person earning $60,000 per year might pay 60% of the bills, and the other partner would pay 40% of the bills.
Figure out the strategy that works best for you as a couple. You can always adjust it along the way if your circumstances change, or it isn't working out like you thought.
2. How are we going to handle emergency expenses?
An emergency fund is important whatever your age or marital status. Without one, unexpected expenses like a medical emergency, home repair, or job loss could cost you thousands of dollars and could put a strain on your marriage.
Create an emergency fund containing at least three months' worth of living expenses if you haven't already. Six months is even better, if you can manage it. If one or both partners already had an emergency fund on their own, sit down and figure out how much you need together. You might realize you need to save a little bit more, or maybe that you have more than enough stashed away, in which case, you can spend the extra on things you enjoy or put it toward one of your other savings goals.
3. What are our long-term goals, and how are we going to save for them?
My husband and I have chosen to allot a percentage of our monthly earnings after taxes and retirement contributions toward savings. We'll use some of those savings in the near future to add onto and remodel our home, and also for vacations and making other big-ticket purchases for the household. When we have children, we'll also reserve a portion of that savings for their college education.
Sit down as a couple and make a list of your financial goals. If some of these are time-sensitive, make a note of their deadlines as well. Otherwise, rank them in terms of priority. Then, decide how much you can reasonably afford to put toward saving for each goal. If you're keeping your finances largely separate, decide how much each person will put toward savings, where you'll keep that money, and which of you will have access to it.
4. When do we want to retire, and how much do we have saved so far?
Every couple will have different goals for retirement, and this will affect how much you hope to save. Each partner's age will also affect how much you need to save each month to hit your goal. If you're around the same age, you might both choose to retire at the same time. In my case, my husband is eight years older than me, so retiring together means saving as much as I can while I'm young so I can retire early.
Speak with a financial advisor if you're unsure how much you should be saving for retirement or what a feasible retirement age might be given your current savings and ages. Decide how much each person should save for retirement, and try to have some retirement savings in both partners' names. No one likes to think they'll get divorced, but if they do, you won't have to worry about one partner being left without adequate savings. You should also make sure you update your retirement account beneficiaries so that your new spouse gets your retirement savings if you die unexpectedly.
5. What kind of insurance do we need?
Look into getting new health, homeowners or renters, and auto insurance once you get married so you and your new spouse can be on the same policy. Auto, renter, and homeowners insurance policies sometimes give discounts to married couples, and you may be entitled to multiline discounts that save you money as well. Don't forget to cancel your old policies after you've purchased new ones.
You might want to consider adding life insurance as well, especially when you begin to have a family. This will help your spouse and children get by if you die unexpectedly. You can purchase a term life policy that only lasts for a certain number of years, or one that lasts your whole life. Policies are typically cheaper when you're younger, so don't delay.
Dealing with your new joint finances isn't the most exciting part of a marriage, but getting a plan in place right away can ease problems later. If one of you wants to make a large purchase, or an emergency arises, you'll already have a plan to handle it, and this can reduce stress and finger-pointing.