So you’re getting married? Congratulations! Decisions about churches, colors, the bridal party, and which family/friends to invite often become choices that take center stage but there are other, less glamorous considerations that have a much longer lasting impact.
Those considerations involve financial matters. While the most common subject of marital conflict is money, premarital counseling rarely discusses the practicalities of managing household finances. Money matters are even more challenging when people move from individual to joint finances, often with very different financial viewpoints/habits and financial baggage (like student loans and credit card debt).
But this article is here to help, with seven important money matters to consider before you tie the knot:
Shared Credit Scores
You and your marriage partner will undoubtedly apply for joint credit. Whether it’s a home, a car, or school loan, your credit scores will be combined to determine your average credit score. Before getting married, check each others credit scores and if needed, take steps to improve that score as soon as possible. While credit scores can’t be improved rapidly, the earlier you start, the sooner the problem can be addressed.
Joint Or Separate Tax Returns
When the IRS is involved, there is rarely a simple answer but in this case, there is no need to be concerned about this decision. Only in rare cases should a couple file separately but figuring out if you are one of the rarities is simple. Most tax preparation software packages, like Turbo Tax, allow you to calculate your return both ways. With a click of a button you can see the results instantly. If you use a tax professional to prepare your taxes, they can run it both ways too. Choose the option that maximizes your refund or minimizes your amount due.
Combining Bank Accounts
If you listen to many personal finance experts the answer is a definitive yes; but not for financial reasons. According to some, marriage is about combining lives and that means combining all aspects of money. Our financial matters are some of the most personal parts of our lives and to not combine them when we get married keeps a couple from being completely united. Since there are no tax implications directly tied to joint bank accounts, you can make this determination based on non-financial reasons.
Joint Home Mortgage
Some couples don’t purchase homes jointly but consider this: A home is an investment and as the mortgage is paid, a portion of the payment is equity and that equity should be returned when the house is sold. If a couple has joint bank accounts and paying the mortgage with joint money, paying for repairs and other home improvements, or spending time keeping the home in good working order, both parties should profit from the sale. If both parties are not on the mortgage, it also creates a much more complicated divorce proceeding should you and your spouse split up. (Of course you don’t want to think about that but when it comes to money, the unthinkable must be planned for)
Children and Past Marriages
Do you or your spouse have children from another marriage or with somebody else? If you have verbal agreements regarding the care of the child, it’s time to make these agreements legal by hiring an attorney. Ask yourself this question: Should your new spouse have to be involved in future custody battles, child support disputes, or other disputes from your life prior to your new marriage?
Differing Financial Priorities
You don’t buy without a coupon. Your spouse doesn’t buy unless it’s designer. Finely manicured nails are important to you but he doesn’t understand. These are relational brush fires easily avoided by talking about them before you get married. Maybe you decide that as part of your household budget, you each have $200 to $400 per month to spend on whatever you want, no questions asked.
You’re about to start a new life together. The last thing you want to do is talk about death but you must. Without a legal document detailing where your assets will go, if you or your spouse would pass away unexpectedly, your family, which may include children, could find themselves in a lengthy, expensive legal battle. Give back to your family after death by making sure they can easily access your assets. This also includes getting sufficient life insurance coverage.
You and your spouse must talk about money habits and lay out a joint financial plan before rings and vows are exchanged. When the wedding bliss wears off, real life emerges and that is when the adjustments and tensions begin. To have your finances in order will relieve one area of potential stress as you start your new life together.
Get ready for an amazing journey and again, Congratulations!