Couples’ Guide to Combining Finances

Getting married means you’re sharing experiences with your partner that you won’t share with anyone else. A good relationship means being vulnerable with each other. That carries into your finances.

Hopefully you’ve talked about money at least a bit. But now is the time to really get to know each other financially. Before diving into the nitty-gritty details, start the conversation by sharing your personal experiences with money. Much of your financial background is established as you’re growing up, so start by talking about how money has played a role in your past. Was your family financially secure, or did you have money struggles growing up? What were you taught about money? Were attitudes toward money generally positive or generally negative?

Next, move into how those experiences may have shaped any money values and spending philosophies. For example, does it stress you out if you don’t have a certain amount in savings? Or is the opposite true — do you feel the need to spend money once you have it?

A discussion of values can transition into a discussion of where you each stand financially. You’ll want to make sure to share what you bring to the table. Do you have debt? What kind and how much? Are you saving for the future? Do you have a 401(k)? If so, how much of your paycheck are you saving? Do you have any other investments? What have you saved so far? Understanding where each of you is coming from will help you better plan to get to where you want to be.

It’s important that these conversations occur without judgment, especially if either of you have made decisions that you’re not particularly proud of. Having all the information out in the open is the best way forward toward your future goals together.

You’ll want to discuss your current money habits. How do you track your money? Do you like a detailed spreadsheet, or do you prefer to pop in and check your account balances every once in a while? Also, discuss whether you like managing finances. If one of you has a natural affinity for this work, it may be a good idea to let him/her take the lead.

The goal of your conversations is to gain better insight into how each of you thinks about money. This can help you be more understanding of your partner and facilitate future money conversations. Make sure these conversations are done with understanding and support, preparing the stage to work collaboratively moving forward.

Financial goals include things like paying down debt. They can also be really fun; they include all the amazing things you’ll do in your future together. What are you planning to accomplish? Are you hoping to have children? Do you want to travel regularly? Would you like to buy a home in the suburbs? Do you want to take the kids to Disney every year?

This conversation will help you set shared goals and a plan to reach them as a couple. You may find areas of agreement, such as a shared goal to travel. But there may be other places where you have different views. For instance, it’s not uncommon for one person to want to cover all college costs for children while another is open to loans (to allow for all those Disney trips).

Areas of disagreement are OK. But it’s important to talk about things like this upfront so that you know your partner’s stance and can develop a process for working toward areas of agreement and through differences.

As you set goals, it’s good to group them into short-, mid- and long-term categories.  

Now it’s time to start actually combing through your financial lives. One of the first big decisions is where you keep your day-to-day money. To answer this question, you have to figure out if you want joint or separate accounts or some combination of the two.

If you have credit cards (or plan to), you also have the option of a joint or separate credit card account (or both). A single card is easier to manage, but your partner can see how you spend your money.

Regardless of the option you choose, you’ll also want to establish a process for managing the money on an ongoing basis. Who is going to track the budget? Who will pay the bills each month? Who will manage and track investments and gauge progress toward long-term goals? In assigning these jobs, consider your strengths and interests. If one of you likes to manage finances more or is better at it than the other, he/she may be a good person to take the lead.

Now that you’ve figured out where the money will be and who will be tracking it, it’s time to put the financial pieces in place.

Set a budget together

Get a sense of how you’ll spend on a day-to-day basis as a couple. One or both of you may already follow a monthly budget — which can be a good starting point for building one together. If you’re starting from scratch, you can easily build a budget with these steps:

1. Total your take-home pay. Add up your income and your partner’s income (after taxes and withholding). This is what you’ll be working with.
2. Add up fixed costs. Make a list of essential expenses that don’t vary from month to month – things like mortgage/rent, car payments, cell phone bills, etc. This is a great opportunity to look for redundancies. Now that you’re married, you won’t need two Netflix accounts. Perhaps you can get a family gym membership or save money with a single cell phone plan.
3. Set a budget for irregular costs. You’ll want to make room in your budget for costs that are essential to living but aren’t fixed each month. These could include things like groceries, car repairs or gifts. It’s typical to dedicate about 60 percent of your budget to fixed and irregular expenses combined.
4. Set money aside for financial goal contributions. We’ll get into this more below. But it’s likely that the dreams you have will require savings to achieve. It’s common to set aside about 20 percent of your take-home pay for future goals savings. But this amount can vary greatly depending on your plans.
5. Figure out your discretionary spending. Now it’s time to do some simple math: Subtract your fixed costs, goal contributions and irregular costs from your total take-home pay. This is how much money you have left to spend on impulses, splurges, going out to dinner — the last-minute fun stuff. Knowing that you’re budgeting for your essential expenses and goals should free you to spend this money now. Some couples use this money together, while others give each other a set amount to spend (perhaps 50/50). This amount can vary the most depending on the rest of your budget, but it’s not uncommon to spend about 20 percent of your take-home pay on discretionary expenses.

Figure out your taxes

Now that you’re married, you’re eligible to take advantage of additional tax breaks, credits and deductions if you file jointly. There are a few situations, though, when it makes sense to file separately — like if one of you itemizes a lot of income-based deductions or owes a lot to the IRS. You’ll also want to look at your big financial picture to determine whether you’d like to make changes to your withholding (especially if your marriage bumped you into a different tax bracket). If you need help determining the right moves for your situation, a tax advisor or financial advisor can help.

Make a plan to save

Look at the goals you’ve set together, and do some rough math to figure out how much money you’ll need to reach them. Then calculate how much you should be saving each month toward that goal. This is what you’ll want to budget monthly for goal savings.

Next, you’ll want to discuss how you’ll manage those savings. Different savings vehicles yield different benefits, so what you’re saving for and when you plan to access your savings will dictate where you want to put your money.  

• If you’re saving for short-term goals like building an emergency fund, saving for vacation or buying a new car, a savings account through a traditional bank may be a good fit so that you can easily access money.
• If you’re saving for mid-term goals like a down payment for a home, you may want to look at options that can allow your money to grow, such as CDs or even investments.
• If you’re saving for long-term goals like retirement, there are a number of options, including those with tax advantages, such as a 401(k).

This is an area where a financial advisor can help. He or she can get to know you and even help to facilitate your financial conversations as a couple. Then your advisor can recommend the best financial options to help you reach your goals.

Now that you’re married, you’ll want to look at your insurance. You’ll likely have some opportunities and new types of insurance you may want to consider.

1. Health insurance. When you officially get married, you’ll have a special enrollment period during which you can change your insurance. In some cases, it may make sense to stay on single insurance through each of your own jobs. But take a look at the premiums, deductibles, coinsurance and copayments of each of your insurance plans, and then determine whether it makes more sense to use a family plan through one of your employers vs. each carrying your own policy. Often, there’s some savings in doing so. In addition, one plan can make things easier vs. trying to keep track of two.
2. Auto and homeowner insurance. Simply being married may lower your rates for homeowner and auto insurance. But this can also be a good place to consolidate if you have separate policies. You may be able to get a single policy that covers everything you need and saves you money.
3. Disability insurance. Disability insurance is a good idea when you’re single because it helps to protect your income in the event that you become sick or injured and are unable to work. Now, in addition to yourself, you have another person depending on your income. Look into group coverage that you get through work. You may also want to consider additional coverage if your work covers only 50–60 percent of your income (which is common).
4. Life insurance. If you haven’t considered life insurance before now, getting married is a key time to look at getting coverage. Life insurance helps to protect your income in the event that you pass away. Getting married means someone else is depending on that income. In addition to the death benefit, some life insurance accumulates cash value, which becomes a source of funding that can help you with other goals throughout your life. A financial advisor can show you more about how this type of life insurance, known as permanent insurance, can help strengthen your financial plan.

Combining your financial lives involves updating a lot of important documents. This checklist can help you make sure you’re covering the basics to make sure you and your spouse are listed on the right documents and that any name changes are official.

Life changes, and plans do, too. You may have a different number of kids than you originally planned, or one of you may make a major career change that impacts your big picture. A good financial plan is flexible and can adapt to the changes life throws at you.

Keep talking about finances openly, and create a process for regularly checking in on and adjusting your plan. Perhaps you’ll track and briefly review spending each month and have an annual meeting with a financial advisor, or maybe you’d like to check in on all the moving pieces quarterly. The best plan is one you’ll actually follow.

As you set and maintain your plans together, don’t be afraid to ask for help. These are big conversations, and there are many variables to a couple’s financial picture. It’s OK if you don’t have all the answers or don’t know what to do. Financial advisors are experts in these areas and can give you the support you need to create the life you want together.

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