Joining your life with someone else can be joyous and stressful. Most newly married couples focus on the "fun" parts of marriage, like companionship, travel, and growing a family. Still, other aspects, like managing your money, can be challenging to navigate.
As you and your spouse merge your lives, your finances will play a key role in planning your shared future. Money is a common marriage stressor, and discussing it may not be the most romantic conversation. However, it just may be one of the best things you can do for your relationship.
While love is essential, managing finances wisely is also crucial for a successful marriage.
The first step to managing finances in a marriage is to communicate openly and honestly with each other about your financial situation. You will need to be transparent about your income, debt (both good and bad), spending habits, financial goals, and money past.
Being honest about your past money issues can be scary. It's hard to admit that you may have a financial history where you made some mistakes. But by sharing your financial past with your partner, you can start the process of tackling issues together as a united team.
Make it a priority to meet regularly and discuss your shared finances. Include discussing the state of your joint assets, progress toward your goals, and any unforeseen expenses (or windfalls, like bonuses) that have come up recently.
When you do this regularly, you and your partner are fully informed, which can help avoid surprises down the road. Unfortunately, if you avoid discussing money, it can lead to misunderstandings and distrust.
Once you know and understand each other's finances, then it is time to set financial goals (and limits) together. Setting financial goals as a couple will help you work together toward a common objective and keep you both motivated and accountable to achieve these goals.
Goals can be either short-term, like saving for a new bedroom set, or long-term, such as buying a house or planning for retirement. Ensure you set clear goals and create a plan to achieve them. Remember, when both or one of you don't prioritize the goals you set, you will not be able to reach them in the pre-set timeframe.
Establish regular check-ins to see where you are on your goals, and make sure one of you is accountable for each step.
Knowing where your money is coming from and where it is going each month is essential, especially if you are new to working with a combined income. Luckily, creating a newlywed budget can help.
A budget is a crucial part of managing finances in a marriage. When you don't have a budget to guide you, it's easy to overspend, and you may quickly find yourself in debt. And if you are in debt, a budget can also help guide you out of it.
To create a budget for newlyweds, make a list of your combined monthly income and expenses, including bills, groceries, entertainment, student loans, rent or house payments, and any other debt payments. A budget will help you track what is coming in (your income) and what is going out (your expenses), identify where you can cut back, and plan for future expenses.
In addition, it is important to establish guidelines on spending (guilt-free spending™) each month.
Don't overlook designating a portion of your combined income toward savings and emergency funds. In case one or both of you are ever laid off or faced with unforeseen medical expenses, it's a good idea to have at least three to six months of living expenses set aside.
Keep in mind that once you determine your budget, it's key to stick to it. With that said, it does not need to be set in stone. You should review your budget regularly and adjust it as needed.
You and your partner need to talk about your spending threshold — what you are comfortable with your spouse spending without sharing it with you.
Clearly, you don't need to have a conversation before one of you enjoys a $20 lunch out. But what if the expense is $250, $500, or $1,000? It's definitely best to discuss what that is for you before you find yourself in an uncomfortable situation.
Determine the "let's talk" spending threshold for you as a couple and agree that neither of you will ever be left out if the other makes a big purchase.
Many of the money decisions you are making now impact not only your current financial situation but also how you can spend and enjoy your money in the future. It's essential that you have a long-term financial plan. This plan should include goals for retirement, homeownership, and starting a family (if you plan to do so).
Newly married couples often have a ton on their mind, and saving for retirement isn't generally at the top of the list. When you are focused on buying a house, paying for your honeymoon, or starting a family, what time is left to think about retirement? Starting to think about retirement sooner rather than later will help. Retirement planning doesn't automatically happen, and it can get more difficult to save up the funds needed for retirement the longer you wait.
In addition, long-term financial planning for newlyweds should also include conversations about insurance and estate planning. It's critical to consider what type of asset protection you and your spouse need.
Life insurance wasn't more than a passing thought when you were single. But once you are married and considering starting a family, you have more to worry about than just yourself. The purpose of life insurance is to ensure the people who depend on you financially will be taken care of if you pass away. Life insurance can help with lost income, pay for funeral expenses, and give your loved ones time to grieve instead of worrying about finances.
Ideally, starting your estate planning early in your marriage is best. However, many people don't consider it a priority until they have children. When you think about why you need an estate plan, it comes down to ensuring the people you love most are protected in case of death.
There may come a time in your relationship when neither you nor your partner have the time or desire to give your finances the focus and commitment they deserve.
There are many reasons this happens, including that your children or parents need more of your attention, your career has become more demanding, you have other hobbies or pursuits that you would rather spend time on, and/or your financial situation has become more complex and challenging to manage.
Instead of feeling guilty and putting your finances on the back burner, find someone to help you and your spouse navigate all of your money decisions. A financial planner can provide you with valuable guidance on how to manage your finances and work toward achieving your financial goals.
Setting a solid foundation is one of the first steps a newly married couple can take on their journey to enduring financial harmony. There is no replacement for good and honest communication about your finances in marriage and working together as a team.
Nothing goes perfectly in life or a marriage. Still, as newlyweds, you can learn from your financial missteps and make wise financial decisions together for a happy and prosperous life.
As you talk with your spouse about your financial situation, you may conclude that your finances have grown too large to manage well and that you don't have the bandwidth you used to have to manage them.
For over 65 years, Spaugh Dameron Tenny has provided comprehensive financial planning for physicians and dentists across the U.S. In addition to providing personalized advice, we walk our clients through their options to help maximize finances and maintain financial security.
If you and your spouse don't have the time or desire to manage your finances and would like centralized advice, connect with one of our experienced financial planners today.
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The team at Spaugh Dameron Tenny works to present timely educational content that benefits doctors and their unique financial situations.
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