Getting married is an exciting time full of decisions and choices that will affect you long-term. Determining which color scheme you want to use at your wedding can be difficult enough, but when you throw finances into the mix, things can get difficult. Financial arguments can really affect any relationship if they are not conducted in an effective manner, so it’s a good idea to talk about your finances before you get married. Especially if you are an older adult or one of you is coming into the marriage with more assets than the other person (or greater debt), it is important to determine jointly how you want to merge your money. Not everyone feels that combining assets or debt is the right way to go, and it isn’t the right choice for every couple, but if you do want to combine your finances, here are some important issues to consider.
1. Consider a prenuptial agreement
Issues like prenuptial agreements cause strife with many couples, but the truth is that the divorce rate in America is high. The numbers change depending on who has conducted the research, but roughly 45 to 50 percent of first marriages end in divorce. No one wants to consider the chance that they might get divorced later when they are just getting married, but doing so could protect your financial future. Prenuptial agreements can protect you, or your partner, if one of you is coming into the marriage with considerably more assets. On the other hand, if you or your partner has a lot of debt, you might want to come to an agreement about whether or not that becomes shared debt when you get married. If you don’t have your agreement down on paper, you might end up paying for something that you don’t want to pay for if the relationship ends; much of what you will owe depends on the state you live in.
2. Determine how much money you need
If you are moving in together with your partner for the first time, your monthly bills will change. If you were previously each paying for individual mortgages or rental fees, you will now have bills that are mostly likely shared. This means that hopefully you will be going from two sets of utility bills to one, and this might save you money as a couple. On the other hand, if you are upgrading to a more expensive home, your bills might go up. You will need to figure out how your bills will change, and how you will pay for them. Hopefully by combining two incomes but moving into one house or apartment, you will save money, but this won’t always be the case.
Even if you were living together previously, just getting married might change your financial obligations. If your spouse has debt payments, you might decide to help pay for them once you are married. If either of you has a child from a previous relationship, that could also affect your bills. It’s important to come up with a new budget once you are married.
3. Determine how much you want to share
Getting married doesn’t mean you have to share everything. If you and your spouse both work, you can determine whether or not you want to keep separate bank accounts. Once you are married you should both be contributing to monthly bills (except if one of you stays at home or there is another specific reason that one spouse cannot contribute financially.)
However, your financial decisions should be made as a couple, not based on what you think is the right thing to do once you are married. If one of you makes considerably more than the other, and you are both comfortable with that person spending more (or putting more towards retirement) then that is fine. However, be careful, because money inequality issues, or one spouse being too controlling over the finances can really cause a problem. A better idea is to merge most of your money, but leave some for each of you to spend individually as you see fit.
4. Figure out who is going to pay for what
If you determine that you want to keep your finances entirely or mostly separate, you will need to figure out who is going to pay for what. Just because one person makes more than the other doesn’t mean that the spouse with more income should pay all the bills. If you want to keep your finances separate, you will need to determine which bills are to be paid by which person. This can get very complicated, and if you don’t have the conversation early, bills might get missed or fights might break out. Keeping your finances separate can be fine, as long as you have clear rules established about who is going to pay for each bill, and also, what you will do when unexpected bills arise. Emergencies can be very difficult to handle already, and if your money is completely separate, then you might have a harder time determining where the money for the emergency is going to come from. Having a set plan for all expenses in place will allow you to keep your finances separate and still be able to work together.
Even if you do decide to merge most of your finances, it will still help to determine if you should set individual money aside for wants versus needs, and so on, or whether all items should come from a shared account.
5. Determine your savings goals
People have very different savings goals and habits, and you might find that your spouse’s dreams and goals for the future are different than yours. Not only will you need to determine who will handle and manage your money (or if you both will jointly), but you should also discuss your financial goals together. If one of you wants to pay down debt now and save later, but the other person wants to prioritize retirement savings now, you will need to make a decision together. You also might find that your habits before you were married don’t match; if one of you was a saver, and the other was a spender, it can be difficult to come to an agreement about how to manage your money once you are married and now to save for the future.
Once you are married you also have another person to think about, so while your retirement or emergency savings might be enough for you, they might not be enough for you and your spouse. Try filling out a savings goals sheet with your partner.
Getting married can be difficult when both spouses have incomes and their own goals about the future, but having a conversation together now will save you a lot of potential strife later.