Being prepared to start off your financial lives together is one of the most important steps you can take before your wedding. There are five easy steps that can prepare you to successfully begin your financial lives together.
- Transparency is key. Begin by showing your full financial picture to each other. Discuss all your debts, savings, thoughts on investing, and goals. Most couples will want to combine their bank accounts. If you both will be following a joint plan for your finances, then a joint account usually will make the most sense. It is best to work together to create a spending plan to help in creating a “we’re in this together” approach.
- Set goals and start a budget. Work together to figure out what you can realistically afford. Set a goal for your personal savings each month. Discuss how much each of you will set aside for retirement. How much of an emergency fund is needed (3 months income is a common goal). A budget is key to understanding how much should be available for savings each month. Investigate money management software and apps. Many free options are available. Just be prepared to openly discuss your finances and review your budget each month for changes that are needed.
- Plan for your taxes and retirement. Fill out a new W-4 with your employer to update your marital status and withholdings. Maximize your employers matching contributions for their 401K plan. Is an HSA needed for your new joint health insurance plan? If a 401K plan is not available with your employer or you are self-employed, is an IRA needed to set aside tax deferred funds for retirement?
- It is time for life insurance and a will. Young couples never think an unexpected death will happen to them, but we all know stories of young families that have been affected by an unexpected illness or accident. Term life insurance is inexpensive for young couples and can have you covered for up to 30 years. This will allow your surviving family members to be able to maintain their current lifestyle. Life insurance is also often available through your employer’s benefit plan. Be sure to compare cost as often it is a better deal to find your own life insurance options. Dying without a will creates havoc and possible hardships for your surviving family members. Contact an estate or probate attorney to assist you in creating a well thought out will that matches your needs.
- Put your relationship first. You will build a stronger relationship by honestly discussing your plans for your new joint finances. You will build a stronger marriage, future, and family by having a plan that you both have agreed upon to start your marriage. If you are working together as a team, your financial goals will be much easier to achieve.
VP, Community Executive & Regional Manager
United Fidelity Bank