Ten Financial Considerations For Newlyweds
Posted on January 08, 2008 by Him and tagged budget, debt, finances, relationship, wedding
Somehow sometime during this long engagement of ours I was signed up to receive the "Groom's News" in my email inbox a few times a week. Along with cheerfully telling my how many days until the upcoming wedding and trying to sell me often unneeded high end trinkets and vacations, it points to articles that may be useful to newlyweds. In today's issue was this gem: Ten Financial Considerations For Newlyweds. Let's discuss, shall we?
1. From the beginning, save 15 - 20% of your income. By combining households, you should reduce your expenses a lot which should allow you to save. You should save to build your cash reserves, in your 401k plans and in a mutual fund.
This is a great tip to start off with. We're currently saving about 10% of our gross income, and after the wedding we're likely to increase that. It will be a balancing act with paying off student loans, though.
2. Rather than simply keeping two checkbooks like before you were married, pool your money into one checkbook and one savings account or money market.
We've spoken about how the joint checking account is working for us. We also have an allowance system to give us a little more freedom in making "guilt-free" purchases.
3. Change all of the beneficiaries on life insurance plans, retirement and other plans at work, and IRAs to your new spouse.
A nice reminder. We don't have life insurance, but we do have retirement accounts and bank accounts we'll have to check.
4. Decide how debts accumulated by each individual prior to the marriage (i.e. student loans) will be handled.
Since we've been living together and have had our finances combined for a while now, we've been living the "everything is ours" way of things - even debt - for a while now.
5. Work together on budgeting and tracking expenditures.
We've made efforts to budget in the past - this year we've implemented a new system that closely resembles the 60% solution. We'll detail that in a later post.
6. Discuss your approaches to handling money -- is one person a spender and one a saver? Create some ground rules on handling any differences.
Haha, it's more like "He's a spender, she's a spender." I mean, uh, we love to save money.
7. If both incomes are needed to pay expenses, be sure to have adequate life insurance.
We're definitely going to have to look at adequate life insurance after we get hitched.
8. Be sure to let each other know where important documents are kept.
More importantly, we need to get a safety deposit box to keep all that stuff. That's been on our to-do list for the past 2 years.
9. Consolidate your credit cards to avoid having double the number of credit cards needed.
Not sure if I agree with this one. We believe that we both should have individual credit. We've even opened some duplicate credit cards in order to take advantage of rewards.
10. Make a list of upcoming purchases together and prioritize them. You should decide jointly how to spend your money now.
Of course, communication is key. Her probably wouldn't like it if I just came home with a 52" plasma screen TV, and I don't quite know how I'd react if she brought home a couple pairs of Manolo Blahniks.
This list actually wasn't that bad. It will serve as a good reminder of things to-do after we're married.
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Tasha | Jan 11, 2008 | Reply to Mrs. Micah
I help my spouse in paying his student loan by providing "direction" through our budget spreadsheet. I've noticed him to be more proactive about paying it off, instead of just living with the fact that he was paying debt monthly (minimum) for maybe 7 or 8 years of our life together!
Since we pool our money together, we really don't see whose income the monthly payment comes from.
Sure wish I read this 10 years ago! Dedicating your income(s) to savings in an early marriage can create a sizable return down the road. I tell young newlyweds all the time that the people they read about "retiring" at 45 started saving when they were 20.
Bags | Jan 8, 2008
I actually thing #9 is more critical now than ever. I actually have to do some research to confirm, but I've heard that FICO scores down the line are no longer going to consider credit accounts where you are an authorized user, which means that it is important for both people in a relationship to be a primary owner on at least some accounts in unfortunate case of divorce, death, etc. Otherwise your credit rating could be hurt and you wouldn't have your spouses rating to help.
Bags | Jan 8, 2008 | Reply to Bags
I worded this a bit poorly. I'm in agreement with your opinion on #9, not the opinion of the article.
Neo | Jan 16, 2008 | Reply to Bags
One thing I've been curious about is whether this only affects people who just have a card in their name, or if it also affects people on a joint account. Seems to me that a joint account would be calculated in both parties' FICO scores, while someone who just has a card in their name will lose out on the credit history.
Nick | Jan 9, 2008
My wife and I have specifically kept our rotating debt (credit cards from home renovation) in my name so her credit rating stays as high as possible. We plan on buying another house and buying a few cars (we don't own one now and are moving to a less metropolitan area) and since most loans are only based on the primary requestor's FICO score, spreading out the debt and lowering her score didn't make financial sense for us.
Hey I just found your site from The Simple Dollar and don't you know I'm getting married in May of this year. Nice to have found you!
I've been married a year and a half now and agree with what you have posted. One addition I would make (similar to #10 on the list) is to discuss when and how many children you will have. Along with that, will both spouses continue to work after children? This will have far more impact on your finances than the 52" plasma or fancy shoes. We bought a house that could be paid for with one salary largely because we knew kids may show up at anytime.
Mrs. Micah | Jan 8, 2008
Micah says that his student loan debts aren't my responsibility, but I told him that I wanted to help pay them off and he's ok with that.
I think communication is really important in all this.
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