Marriage is an exciting milestone that will lead to changes in your life, including your finances. Your joint money habits affect you in myriad ways, such as which house you can afford, whether joint loan approval is possible, and even your retirement age.
Without a plan, money can sometimes be a source of conflict in a marriage. Finances have a deep impact on many other lifestyle choices—from your Netflix bill to vacation savings. After marriage, combining finances might include joint bank accounts, filing taxes together, and buying that first house.
According to a 2013 Survey of Consumer Finances data, White, non-Hispanic couples between the ages of 18 and 64 have a median wealth of $193,400 including vehicles. Single White women have a median wealth of $49,180. Black couples have a median wealth of $46,900, and Black single women have a median wealth of $5,000. Hispanic couples have a median wealth of $39,100, while single Hispanic women have a median wealth of $2,680. These differences result from issues including wage disparities, tax disadvantages, and historical institutional racism that restricted opportunities to build wealth.
Newlyweds who start with joint money management can often avoid common pitfalls, achieve common financial goals, and build wealth. To most effectively merge your financial lives, take these steps:
1. Discuss Money Motivations
Open communication helps couples compromise and avoid disputes over time. Be transparent about habits with your spouse, and explore the root of your money-management philosophies. Understanding your money motivations can shape future interactions—without the risks of anger or judging your partner’s overspending behavior.
Some good questions to get the ball rolling:
- How was money handled in your household, growing up?
- Are you a spender or a saver? How much do you save each month?
- How did you manage or budget money up until now? An app, spreadsheet, or other?
- What’s your credit score, and how important is it to you?
- Do you pay off your credit card balance every month, or only the minimum amount?
- What’s your investing philosophy?
2. Lay Out Financial Goals
Finding new, shared purposes can make money management more fun, so write down your short-term and long-term financial goals. These could include things such as:
- Home purchase or renovation
- Children and childcare
- Advanced education (college, graduate school, or training)
- New business
- Retirement and emergency savings
- Large purchase or vacation
For each, you can dig deeper, too. In your dream world, how much would you budget for an annual vacation? Where would you go? What are your retirement plans—what age, where? What do you envision?
Outlining and prioritizing joint financial goals provides a framework for spending and saving, and developing a roadmap to consensus. Your opinions about the future may differ, so you can start discussing now how to make both partners happy.
Establishing an emergency fund is one of the first and most critical joint goals you can establish for financial security. Start with even $5 or $10 a month, if you can.
3. List Assets and Liabilities
Both partners probably already have some assets they’re bringing into the marriage and potentially some debt. Assets might include cars, houses, savings accounts, and investment accounts, while obligations could consist of student loans, mortgages, or credit card bills.
Both spouses should know upfront precisely what each party brings to the table, as debts and assets affect spending habits and joint loan qualifications. Spouses should share their individual debt amounts, discuss repayment plans, and whether they’re tackling the debt alone or together.
Your acquired assets reveal your priorities and illuminate future financial goals. For example, If your spouse already has substantial investments, you may be further ahead in joint efforts for retirement savings. Investing is probably an essential part of your partner's money habits, and growing the nest egg may be his or her priority.
4. Combine Finances After Marriage
Should you combine your financial lives as a couple? In some situations, you may not have a choice, while in others, you do. Decide together what makes sense for you as a couple. For example, you could have some shared accounts but still maintain separate accounts, as well.
- Bank accounts: Combining your finances can be convenient, allowing you to contribute to and pay shared bills from one pool of money, rather than determining how to split expenses. But it can also lead to more discussions and potentially more conflict over how money is spent.
- Credit cards: A few credit cards allow joint accounts—where both spouses have the authority to use the card and the responsibility for repayment. Others allow you to add your spouse as an authorized user. You retain control over the account and are responsible for paying the bill, but your spouse will receive a card with their name on it, or will be authorized to use your card.
- Taxes: Determine whether you’ll file as “married filing jointly,” which could affect income-driven student loan repayment. If you file as “married filing separately,” you could be ineligible for certain income tax deductions. Your income tax rate may also change as a result of your marital status—you could face a higher or lower rate depending on your combined total income. Speak with a tax specialist to determine the right course forward.
- Credit history: Coming into the marriage, you each have separate credit reports and scores, which remain separate. If your spouse has unfavorable information on his or her credit report, it won't affect your score. However, any new joint obligations will show up on both reports, including mortgages, car loans, and joint bills such as utility bills. That means if your partner pays a joint account late, your credit will suffer, too.
In some community-property states, debts and assets acquired by one partner during the marriage may automatically belong to the other partner as well.
5. Set the Monthly Budget
Use established financial goals to determine which type of monthly budget you'll use, and agree on spending limits. You’ll revise your budget throughout the marriage, so it needn’t be perfect the first time, but ensure you can track expenses and measure budget success.
Then, decide who handles various day-to-day actions of financial life management and bill payment. One person might pay a mortgage or rent, while the other invests money or writes a check or sets up a direct deposit for other bills. Perhaps you both pay for groceries.
All the money can come out of one big pot, but it's still worth discussing responsibilities you'll each take on, and whether there’s a spending limit (say, under $50). Even if one spouse pays bills and manages monthly finances, the other should be kept informed and involved in money decisions.
If maintaining separate accounts, determine how to split the bills. Some couples divide expenses in half, for example. Others use a percentage of income—if you earn 60% of your combined income and your spouse earns 40%, you cover 60% of the bills.
6. Evaluate Insurance
Buying insurance is a vital part of adulting, especially once you're married. For example, health insurance may be more affordable on a spouse's workplace plan, and you could potentially save by bundling your car insurance onto one plan.
If you're making financial commitments that rely on two incomes, such as buying a house or having children, a life insurance policy can contribute your share to the budget if something happens to you.
An estate plan is a good idea and should include a will specifying inheritance of assets and guardianship of children. A trust gives you more control over inheritance management and can reduce or eliminate estate taxes if you have a more significant estate.