Financial Tips for Newlyweds: Part 1

Many engagements occur during the holiday season.When a couple decides to gets married, they usually comingle at least some of their personal finances. Some of the biggest challenges a couple will face include joint goal-setting, establishing accounts at financial institutions, deciding how to pay bills and manage money, and filing income taxes as a married couple. Below are five recommendations to consider:

• Set Joint Financial Goals- Make a list of short- and longer- term needs and wants. For example, one spouse may need a new car within a year and, together, a couple wants to buy a house within three years. Determine the cost of each goal and the amount that needs to be saved each month to achieve it on time. As an initial financial goal, plan to save at least 3 months living expenses for emergencies such as car repairs.
   
• Develop a Spending Plan- Prepare a spending plan (a.k.a., budget) that includes savings for financial goals. Review and revise it as needed. A simple spending plan includes monthly net income, fixed expenses, flexible expenses, and occasional expenses that are paid less frequently than monthly (e.g., quarterly insurance premiums).

• Develop a Cash Management Plan- Decide if and how you want to merge financial accounts (e.g., savings and checking). Some couples prefer one joint account while others prefer two separate accounts or a combination of separate and joint accounts. Factors to consider include convenience, a desire by each spouse for some personal “spending money,” and the minimum balances required by financial institutions to avoid fees.
   
• Develop a Payment Plan-Decide how to divide household expenses. If the incomes of two working spouses are fairly equal, bills can be split 50/50. If there is a substantial difference in earnings, bills can be pro-rated. For example, the spouse who earns 70% of household income would pay 70% of the couple’s expenses. The other spouse who earns 30% of total income would pay the remaining 30% of the bills.
   
• Come Clean About Credit- Review each other’s credit reports prior to marriage. If a spouse-to-be has a poor credit history, don’t apply for a joint loan (e.g., mortgage) or credit cards. Keep your credit histories separate until negative information drops off the poor credit report, usually in 7 years (10 years for bankruptcy). If one spouse co-signs a loan for the other, he or she becomes legally responsible. Similarly, if financial accounts are merged, assets of the spouse with a good credit history can be seized by creditors.