Being newly engaged, I have learned more than I could have ever imagined about colors, flowers, photographers, and the list goes on… It made me think that this is the beginning of a life-long journey where I will have a partner to help handle day-to-day financial concerns and to plan for the future.
When you’ve just entered a new relationship, how to handle joint finances is probably not at the forefront of your mind. However, once the “M word” (yes, marriage) becomes a serious topic of conversation, it’s a good idea to begin discussing a plan for future money decisions – together. Here are some tips to help ease the transition from a single to a joint household.
1. Talk early and often, so that you know each other’s expectations and to avoid surprises down the road. It is also important to be on the same page not only about wedding expenses but also day to day living expenses. Develop a budget together and make sure you stick to it, but allow some wiggle room for unforeseen expenses.
2. Set goals and hold each other accountable to meet them. It’s important to work as a team so you can both meet your goals. Life will happen of course, but having a partner should make planning easier and more fun.
3. Entering into matrimony itself is exciting for everyone, and also creates wonderful opportunities to enhance your likelihood of financial success. With shared expenses and combined incomes you have the ability to accumulate additional savings; both for emergency / short term needs, and for longer-term retirement goals.
4. Decide how to manage bank accounts. It is OK to have individual accounts, but creating a joint bank account for regular, recurring household expenses is much simpler than splitting all of your bills. It also helps both parties keep track of monthly expenditures.
5. You will also need to determine whether to file joint or separate tax returns once you are married. The majority of the time it will be to your advantage to file a joint return, but you may want to check with a tax professional if either of you has had tax complications (such as unpaid taxes) in the past, to make the most beneficial choice.
Of course, keeping an open, honest dialogue with your future spouse is a good way to lay the foundation of a healthy relationship. It is important to ensure communication carries over to financial matters.
By: Ross G. Allen, CFP ®