Eat, Drink, and Be Married: Planning Considerations for Marriage

We’re in the throes of “wedding season,” and the wait to walk down the aisle is dwindling for hundreds of couples. In addition to planning for the special day, there are several other considerations to remember. If you, or someone you know, is readying for marriage, we’ve compiled a list of considerations to consider before saying “we do.”

Assess and Discuss Your Financial Situation

Discussions about money can be challenging, but it’s necessary. The best approach for such a discussion is to have an open mind and to work as a team. The more thoughtfully you work together on financial matters, the more financial harmony you’ll maintain.

Consider discussing your respective financial situations and expectations. Take inventory of what you own and what you owe. Revealing your financial situation is an essential first step for a couple. If either party has a financial problem, it is best to identify it as soon as possible and solve it together.

In addition, be sure to disclose all of your financial commitments. Discuss whether you have to repay student loans, medical debt, or have credit issues. Ensure each person understands where you stand financially and your expectations. For example, let your spouse know if you expect them to discuss purchases over $100 with you first.

Have Frequent and Routine Money Meetings

It’s easy to feel like you’re on the same page, but sitting down together to discuss your money and budget will ensure you and your spouse are on the same page. You can discuss your budget for the month, whether you have any upcoming bills to pay, how you are progressing with your financial goals, and anything else related to money.

These meetings are great because they strengthen communication and trust in your marriage. You will always know where you stand financially and, likely, emotionally. Setting aside time to talk also helps reduce stress about money because you’ll be far more aware of where you stand.

Bring up sensitive subjects with care, impartiality, and love. For example, if you feel your partner is overspending, consider bringing up the matter by pointing out how you’re jointly over budget this month and how you’d like to look at ways to get back on budget. You and your partner are a team, so go into discussions with the team mindset and look for solutions to improve the team. When considering your investments and overall lifestyle, it’s much easier if you’re both on the same page.

Discuss Your Financial Goals, Set New Goals, and Write Them All Down

Discussing your financial goals is the first step in mapping your financial future together. Start by making a list of your short-term and long-term goals. Short-term goals can take three to five years (e.g., saving for a down payment on a home or a new car). Long-term goals take more than five years to achieve (e.g., saving for a child’s college education or retirement).

Then, determine which goals are most important to you. Once you’ve identified the priority goals, you can focus on achieving them. Make sure to write down all of your goals and review them periodically. You’ll have a much better chance at success if you do. Work together to figure out what you can realistically afford.

Discuss Bank Accounts

Decide whether you and your partner will have separate or joint bank accounts. Advantages to consolidating your checking funds into one account include easier record-keeping, reduced maintenance fees, less paperwork when you apply for a loan and simplified money management.

If you keep separate accounts, consider opening a joint checking account for household expenses. When sharing a checking account, keep track of how much money is in the account since you will be spending money drawn from the same account.

Prenuptial Agreements

A prenuptial agreement is a contract executed by prospective spouses that may define the parties’ rights, duties, and
obligations during marriage and in the event of separation, annulment, divorce, or death. A prenuptial agreement may not be necessary if you and your fiancé are young and have a comparable net worth. But, if either of you has substantial assets or children (from previous relationships) or owns a business, you may want to discuss with an attorney the possibility of having a prenuptial agreement.

Get Organized

If you don’t already have one, seriously consider building an emergency cash reserve. Ideally, you should have in savings an amount that is comfortable for you to fall back on in case of an emergency, such as a job loss. A familiar formula for calculating a safe emergency fund amount is multiplying your monthly expenses (mortgage, groceries, utilities, recurring medical costs, etc.) by six. This money should be kept liquid and somewhere easy to access.

Saving and Investing

When figuring out your budget, savings should be considered one of your monthly expenses. Think of your savings as a fixed monthly payment. A good rule of thumb is for you and your spouse to save 4 to 9 percent of your combined gross earnings while you are in your 20s and double that savings percentage as you reach your 30s and 40s.

Consider automating your savings by setting up regular transfers from your bank account to your investment accounts.
Sometimes, a dual-income couple can live off one spouse’s salary and save the other. After establishing an emergency cash reserve, you can invest your money to target your financial goals. Your overall objective is to maximize returns without taking on more risk than you want. You’ll need to choose investments consistent with your financial goals and timeline. A financial professional can help you construct an investment portfolio considering these factors.

Tax Issues Related to Marriage

Once you’re married, you should review your tax withholding and income tax filing status. When your marital status changes, you should fill out a new Form W-4, Employee’s Withholding Allowance Certificate, with your correct marital status and number of W-2 withholding allowances. These determine the amount withheld from your wages for federal and state income taxes. Also, take advantage of tax-favored accounts like health savings accounts (HSAs) and 401(k)s. Contribute as much or at least enough to earn any company-matching contributions.

Risk Management

Before your wedding, determine how marriage impacts your insurance needs. The lack of proper insurance protection can lead a married couple into financial ruin.

If you or your partner have a disability or life insurance policy, determine whether your existing coverage is the right type and provides adequate coverage. If neither of you has a disability or life insurance policy, consider whether or not your marital status changes your need for insurance.

As for renters/homeowners insurance, ensure your property and possessions are adequately covered. If your employer does not offer a particular type of insurance or the amount provided needs to be improved, consider purchasing an individual or private policy.

Also, employers have fixed periods for new spouses to sign up for various benefits. For example, you may only have 30-60 days after your wedding to add your spouse to your health insurance at work. Otherwise, you may need to wait until the next open enrollment period.

Estate Planning

Create a Will

Your will establishes your wishes concerning the distribution of your estate and provides direction on how they should be carried out after your death. Even if you already have a will, you must update it when you get married.

Dying intestate—or without a will— can create financial havoc on surviving family members. Estate laws vary from state to state, but in the absence of a will, surviving spouses without children typically retain only between one-third and one-half of the deceased’s estate. You and your spouse should contact your attorney for more information and create wills as soon as possible. Be sure to review them every three to five years to make sure they address your changing circumstances.

Create or Update Your Estate Documents

As part of this process, consider drafting or updating other estate planning documents to ensure that you have (at the least) your essential documents in order (Powers of Attorney, Health Care POA, Living Will, and Revocable Trusts). Reviewing these documents ensures that your current wishes are documented.

Review Beneficiary Designations

The beneficiaries on your retirement accounts and life insurance are as crucial to your estate plan as a will can be.
The beneficiary designations take precedence over instructions left in a will, so be sure your beneficiaries are current.

Conclusion

Marriage is full of incredible moments and also moments of hardship. While marriage and money can be complicated, it’s best to head into it with open eyes and hearts and as a team. Start off on the right path by talking about money management and creating a solid plan for budgeting, spending, and investing.

The sooner, the better. If you form good money management habits as a newly married couple, you can work as a team through whatever financial challenges you face. With communication, trust, and some planning, you
and your partner can avoid many conflicts about money. For extra guidance and help achieving the life you choose, contact Sequoia Financial Group. Our financial advisor will help you map out a plan and future that works for both of you.