4 Ways To Put Your Marriage on the Right Financial Track

Neary Ting, Eagle Invest Advisor, First Republic Investment Management
April 30, 2018

The key to any solid relationship is good communication — especially when it comes to big issues like money. However, money doesn’t have to be a forbidding, looming topic, particularly for newlyweds who have decided to merge their lives, thereby saying “yes” to joining financial forces. If you’re newly married, getting on the same page about your saving, spending and overall financial goals early can help ensure that you’ll work together to accomplish them — and maybe sidestep unnecessary strife.

Here are four ways that newly married couples can put themselves on the path to financial success:

1. Make time for money talk.

Much like having a regular date night, consider setting aside time with your partner to discuss your finances. While it may seem like an underwhelming date activity (wine and takeout can up the fun factor), it may be the most important thing you do for your marriage.

Research shows that 68 percent of couples who say they’re in sync on their finances deem their communication on the topic as “perfect” or “very good.” Conversely, 60 percent of divorced individuals say disagreements over money played a role in their split. The takeaway? Communication is critical.

If you haven’t delved into the topic with your partner before, don’t worry. Start by simply taking an inventory of what you each bring to the financial table, including:

  • Savings, brokerage and retirement accounts. Discuss how much you each have saved and designate plans for each account. Start prioritizing goals for these assets, especially for retirement accounts, which, unlike other accounts, will need to remain in individual titling as you also want to consider reviewing beneficiary designations.
  • Debt and financial obligations. Don’t be shy about your debt. Eight in 10 Americans have some form of debt. Discuss your student loans, credit card debt, auto loans and any other financial obligations you each have or want to pre-plan for (including paying for child support and the care of aging parents).
  • Employee benefits. If you have an employee benefit plan, outline what you receive and how much it costs. Make note of health insurance, life insurance, disability insurance and retirement contributions. Compare each of your plans side by side and explore the cost savings to both of you being on the same plan.
  • Personal and joint spending. In addition to having joint expenses such as your housing, food and travel costs, it’s also important to discuss your individual spending. It’s up to each couple to determine how much they want to know in terms of listing out expenses. At a minimum, it can be beneficial to map out general needs and wants and set expectations. While some couples are comfortable tracking expenses on a single Quicken or Mint account, others might choose to designate a general budget category for “personal spending” without wanting to track every expense. The important thing is to get on the same page in terms of cash flow.

2. Set joint financial goals.

Every couple manages their money differently depending on their circumstances and preferences. Regardless of whether you combine your assets or keep them separate, outline your shared financial goals to ensure you’re both driving toward the same target. Your goals could include:

  • Short-term plans. Determine how you’ll work together to save and pay for upcoming trips, new cars, home purchases, additional education or career changes. Talk about how you might pay down any debt. Put together a budget that will help you achieve these short-term goals.
  • Long-term goals. Discuss your vision for retirement savings and begin to plan for how to achieve them. According to a NerdWallet study, one in three Americans in a relationship report that neither they nor their partner are saving for retirement.
  • Family planning. If children are part of your future plans, consider setting aside savings designated for related expenses, including childcare, time off from work and education. With the latter, creating a 529 plan account that grows tax-free can set your college savings efforts on the right trajectory.

3. Divide and conquer.

In many relationships, it’s not unusual for one partner to be more inclined to manage the finances than the other. However, it’s important that both participate at some level so that one person isn’t left in the dark about joint financial matters. Start by dividing up financial tasks. For instance, one spouse may be in charge of paying bills, while another manages retirement savings and investments.

Even with designated responsibilities, you’ll want to tackle some big-picture items together. These could include:

  • Handling taxes. Whether you’re working with an accountant or taking a DIY approach, you and your spouse should familiarize yourself with the tax filing process. Depending on how complicated your finances are, consider consulting an advisor for ways to plan and save.
  • Creating an estate plan. As you and your partner accumulate assets, you’ll want to create an estate plan that specifies what will happen to them if one partner becomes incapacitated or passes away. In addition to living wills, trusts and life insurance, comprehensive plans also include establishing healthcare directives and designating guardians for your children.
  • Meeting with a financial advisor. An advisor can help with everything from your monthly budget to your overall investment strategy. Go together to ensure that the plan created takes both of your perspectives and priorities into account.

4. Stay on track.

While some aspects of your joint financial plan might be set-it-and-forget-it tasks, it’s prudent to revisit your plan regularly. Consider monthly or quarterly check-ins with each other, or schedule an annual meeting with your financial advisor or tax advisor if you have one. Life happens and it’s important to either reaffirm or adjust your plan to keep pace with changing priorities.

Talking about money doesn’t have to be a source of relationship stress. Instead, make it a regular part of your communication and then celebrate the progress that you and your partner make toward your financial goals.

 

The strategies mentioned in this article will often have tax and legal consequences; therefore, it is important to bear in mind that First Republic does not provide tax or legal advice. This information is provided to you as is, does not constitute legal or tax advice, is governed by our Terms and Conditions of Use, does not necessarily reflect the views of First Republic Bank, and we are not acting as your attorney or tax advisor. We make no claims, promises or guarantees about the accuracy, completeness, or adequacy of the information contained here. Clients’ tax and legal affairs are their own responsibility. Clients should consult their own attorneys or other tax advisors in order to understand the tax and legal consequences of any strategies mentioned in this article.