An occupational hazard of dispensing personal finance advice is that money matters are never far from my mind. At wedding ceremonies I wonder whether the couple has shared their credit reports yet or if they plan to use a joint checking account.
That’s because I know getting married is not just a major emotional step. It’s a financial one, too. Your goals and money management methods may change a lot once you’re hitched. And while divorce may be the last thing on your mind right now, you should learn about marital agreements and whether it makes sense to have one in your plan.
Tackle these financial and administrative tasks now, and you can minimize the money stress that can trouble relationships — and get back to enjoying newly wedded life.
AGREE ON SHORT- AND LONG-TERM FINANCIAL GOALS
Ideally, you’ll already know your spouse’s income, spending habits, debt load and credit score. If not, now’s the time for you both to be upfront about your financial backgrounds and behaviors.
That’s especially important as you discuss the goals you’ll work toward as a couple. If you’re thinking about buying a house together, poor credit or massive debt could affect whether you’ll qualify for a mortgage. If necessary, create a credit repair or debt payoff plan, perhaps with the help of a certified financial planner or credit counselor.
Get in the habit of talking about other priorities, too. Discuss whether you’re each saving enough for retirement or how often you want to take — and how much to spend on — vacations.
DECIDE HOW TO MANAGE BANK ACCOUNTS
There’s no rule that says spouses must combine checking and savings accounts. Discuss your preferences while ensuring the bills get paid on time. If you decide to keep your finances separate, though, it’s often easiest to use one shared checking account to cover joint expenses, says Jennifer Kruger, assistant branch manager at the Fidelity Investor Center in midtown Manhattan.
Make a list of expenses you’ll both contribute to, such as groceries, housing and utilities. You can split the costs in half or contribute proportionally based on your incomes or other financial commitments. Add up the monthly total for each of you, then set up automatic transfers of that amount to the joint account.
Doing paperwork may not be your idea of marital bliss, but there’s a lot of it right after you get married. First, update the beneficiaries on your life insurance policy, if you have one, and retirement accounts.
Federal law says your spouse will receive the balance of your 401(k) if you die unless he or she signs a waiver. You can name anyone as a beneficiary of an individual retirement account, but your spouse may end up getting half if you live in a community property state. (In Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin, divorcing spouses typically must split equally any property obtained during the marriage, no matter who acquired it.)
Each spouse should also fill out a new Form W-4 at work. Getting married often changes your tax rate; updating the form ensures your employer withholds the right amount of federal income tax from your paycheck. Decide which tax filing status to use, too, now that you’re married. Most couples pay less tax by filing jointly, but in some circumstances, filing separately is best.
CONSIDER A POSTNUPTIAL AGREEMENT
Like a prenup, a postnuptial agreement dictates the division of assets in case of divorce or death; the only difference is that it’s created at any point after marriage. Without an agreement, state law will determine who owns what, which may not be in line with your wishes.
Marital agreements are particularly useful if you live in a community property state, you enter the marriage with children from a prior relationship, you’re expecting a large inheritance or there’s a big income disparity between you and your partner, says Kelly J. Capps, a family law attorney and owner of Capps Law Firm in Austin. In these instances, you may have a heightened interest in keeping certain assets separate or clarifying how you and your spouse would split shared property.