Congratulations on your nuptials! As you and you future mate begin to build your life together, conversations about money are bound (and should) come up. Money discussions aren’t always easy for newlyweds, but as with any partnership it should be handled with grace and to approach this subject with an open mind. Think team!
The more thoughtfully you work together on money matters, the more harmony you’ll maintain in your life together. And, since fights over money is the top reason for divorce, you want to get this right from the start. The number one rule is to be honest, it’s all about building a strong foundation for your marriage.
Talk about your Financial Goals, Memories and Habits
Talk about your goals, dreams, and visions for the future. Discuss your current money habits—whether you live paycheck to paycheck, are you a saver, how you decide whether or not to buy something, what your attitude would be toward a windfall.
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Take a Look at the Numbers
Go over all your financial documents, and tally up all your assets, savings, checking, retirement accounts, real estate, collectibles etc. Include your debts, school loans, credit card debt, mortgages, etc. Then determine your net worth by subtracting your debts from your assets. At this point, you should also go over your credit reports. And, if you don’t know it already, reveal your income to each other.
Set Realistic Financial Goals
Starting out you should set three categories of goals: emergency funds (3 to 6 months of essential bills), 1 to 5 year goals, such as for a down payment or a trip, and then long-term goals such as your child’s education or retirement. Don’t put all your long-term money in retirement accounts, since you won’t be able to withdraw it without a penalty. Most importantly for life goals, be honest and realistic when discussing what you want from your life together and can afford.
Create a Budget
Add your essential costs—housing, transportation, utilities, groceries, and discretionary spending—gym, shopping, entertainment, etc. If you aren’t sure how much you spend on various categories, track your spending for at least a month, or use a service like Mint. Financial planners recommend saving 20% of your take-home pay, 10% toward emergencies if you’re still building savings, and 10% toward retirement.
If you’re living on more than 80% of your income, ratchet your spending down. Save 3% of your income, then cut rarely used expenses, dine out less or downgrade your cell phone package. Maybe that brings your savings to 7% a month. Then, put your next raise toward savings, arriving at 10%. If you have debt, you should try to live on 70% of your take-home pay and use the other 30% for savings and debt–but make sure you stop accruing more debt.
Set a Minimum Threshold Cost for Discussing Big Expenses
An easy way to head off fights about money is to agree to discuss any purchases above a set amount. For instance if your spouse spends $20, that’s no big deal. But if it’s a $1,000, there may be fireworks. Couples should agree that anything above a certain amount, should be discussed.
Talk About How You’ll Deal with Friends or Family in Need of Money
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Set a policy to discuss these kinds of situations together as a couple. This of course, depends on what you have in surplus income, that you could help someone with (or rather income you can afford to lose), the severity of the situation, and the frequency. Is this someone who is always in trouble financially, or do they have a sudden illness? What’s really important is that you evaluate it as a couple.
Update or Re-evaluate All Your Insurance Policies
If you both receive health insurance through your employers, see whether it makes sense for you to be on the same plan, and if so, which plan gives you the coverage best for your situation and for the cost. For disability, re-evaluate based on how you’ll each be impacted financially and work-wise if something happens to your spouse. Decide whether you’ll need life insurance. Many couples forgo it if both spouses work, but there are exceptions. Look at your auto insurance to put your spouse on your vehicle, and meet with a broker to review your homeowner’s insurance.
