10 steps to combining finances after marriage

Congratulations! You’ve joined your lives together. Should you do the same with your finances?

While many couples begin the discussion by talking about joint accounts versus separate accounts, there are many other conversations and decisions about marriage and finances. With money being the number one cause of stress and a leading reason for divorce, it’s important to understand each other’s attitudes towards money and mutually agree on what’s best for both of you.

Here are 10 things you should discuss and decisions you should make in the early days of your marriage for more financial harmony in the years to come.

1. Talk about your finances as a couple

Most couples focus on the tactical aspects of their finances, such as setting up bank accounts and determining how to manage debt, when they get married. It’s much more important, and healthier in the long run for your relationship, if you begin by understanding each other’s attitudes about money. What does money mean to each of you? How do you feel about debt? Does money lead to feelings of security, stress, shame, or comfort?

Start with a discussion about your experiences with money when you were growing up. It’s important to understand where the emotions you feel when you talk about money come from. It’s also important to understand that no emotion or feeling is right or wrong. Most of our feelings towards money were developed by the age of seven, long before we could consciously decide how we want to feel about it.

Next, talk about the role you want money to play in your relationship and the life you want to build together. Does money represent security? Or freedom? Or maybe the ability to raise a family together? What are your individual and shared goals? Set your priorities together and keep in mind that there will always be trade-offs. You can do everything in time, but not everything at the same time.

2. Discuss earnings, contributions, and roles

For many couples, their income level is directly tied to the perceived contribution they make to the relationship. While money is an important part of it, there is more to a successful relationship than careers and income. It’s important to gain clarity around what you both value as a couple and how each of you can contribute to building the life you want together. Keeping score, especially when it comes to money, can be destructive to a relationship.

Money is often seen as a key contributor to the success of a partnership. The “logic” is that the more you make, the more you are contributing, and the more “control” you should have over financial decisions. In some cases, there is actually resentment or a feeling of inadequacy because your partner makes more money than you. The key to overcoming this is not to change your income, but to change your perspective and to redefine what contributions you are both making to the relationship.

Talk about your careers and how you will make financial decisions together as a couple. How important is your career to each of you? Would you rather stay home and raise a child? Who will be responsible for paying the bills each month? All of these conversations matter. The decisions you make today may change over time, but it’s important to reach a mutual understanding of your financial lives together.

The goal is not to quantify some outcome. It’s about understanding how both of you bring value to the relationship that stretches far beyond jobs, careers, income, and money. Valuing each other and clarifying what you value as a couple will lead to a happier, more fulfilling relationship than focusing on the value of money.

3. Create a spending plan together

When you get married, you are taking a big step to bring your financial lives together. The degree to which this step matters depends on how integrated, or not, your finances were before getting married, but it’s important to understand where your money is going as a couple and how to best align it with the goals you set together.

Creating a joint spending plan isn’t about ignoring your individual goals; it’s actually about what matters most to the both of you and bringing your personal goals into the equation.  Research shows that couples that treat their money as “ours” and not “yours and mine” are happier overall. This doesn’t mean you can’t have your own spending money or “play account” or make your own decisions from time to time. The key is to discuss how you will spend, save, and invest your money individually and collectively.

Here’s how to get started:

• Create a household spending plan. A good framework is the 50/30/20 plan: 50% to needs, 30% to wants, and 20% to saving and investing. Bringing two plans together can be challenging, so give yourself time to work through a process that will work for both of you.
• Decide who will be in charge of managing and paying the bills. You can do it together or have one person manage this (or alternate!). There’s no right or wrong answer. Simply discuss it and decide as a couple.
• Schedule time to check in on the spending plan, see how things have changed, and discuss any changes that need to be made. It’s always good to stay informed and aligned when it comes to where your money is going.

4. Combine bank accounts

How will you manage your day-to-day finances and your overall savings strategy? Even if you’re going to keep your separate accounts, it’s often a good idea to establish at least one joint account to make managing your money easier. There is no right answer: some couples have only one joint account and others move everything to joint accounts to keep things easy.

Most brick-and-mortar banks offer similar accounts and services, so often this decision is based on convenience. However, it’s always a good idea to review account types, services, and fees associated with all accounts to ensure the bank relationship meets your needs.

Often, couples open a specific account type based on how they plan to use it. Each might have accounts in their individual names for personal reasons, such as paying their own expenses, and joint accounts for shared goals like vacations or paying the mortgage. That can make it easier to keep track of where you are financially and your progress towards your goals.

Whether or not you combine bank accounts can have legal implications, depending upon your state, especially when it comes to money or other assets you both have prior to marriage. However, generally speaking, money that is either gifted to you or inherited can remain separate from the marriage if you keep it solely in your name. Once you commingle the money, you have to be able to track the specific assets, or they become joint assets.

5. Create a plan for debt

If you didn’t have this conversation before getting married, now is a great time to take a look at the debt each of you has and to create a plan for managing it. Start with listing any debt that you have (student loans, car loan, mortgage), the monthly payment, the interest rate, and when the payments end.

Next, talk about how you want to handle the debt as a couple. The existing debt you bring to the relationship will always remain in your name, but you can decide if you want to pay for it individually or collectively. Make sure you decide who is responsible for making the payments. Will you keep it as an individual responsibility or will you tackle it as a couple? Discussing this now will avoid issues in the future.

Don’t overlook reviewing your credit scores. As you build a life together, you may take on car loans or even a mortgage, and healthy credit can go a long way to improve your ability to qualify for better loans with lower interest rates and monthly payments. Make sure you have a plan to improve and/or maintain your credit score over time.

Finally, don’t forget the need to discuss how you each feel about debt, because debt can be a very divisive and emotional topic. Understanding how you both feel about debt can help you make more informed decisions together down the road.

6. Review investment and retirement plans

Most of the above is about where you both are financially today, but it’s also important to talk about your future and the life you want together. Call it retirement or financial independence, it doesn’t really matter. The point is that you need an integrated plan to make the life you want to build together a reality.

Prior to marriage, most couples have individual investment strategies — how much they’re saving, the account types they use, how they like to invest. Once married, it’s critical to ensure that all investment accounts are working towards the same goals.

Start by getting organized. Make a list of the accounts you each have, their balances, how much you are saving, and what you own (how you are invested). The goal is to understand what each of you have so you can start to create a more integrated plan.

Next, move on to discussing and aligning on your goals, when you want to achieve them (often call your time horizon), and your comfort level with risk and/or the potential of losing money.

It’s critically important to not just define why you’re investing in the first place, but align on the best approach. Are you investing for retirement? An education for an existing or planned future child? Or maybe you aren’t quite sure what you want in the next 10 years so you need an account that puts your money to work while giving you the flexibility to use it sooner rather than later.

Together, take a look at what types of accounts you have, how much you’re investing in workplace or personal retirement accounts, and why you’re investing. Make sure your overarching investment strategy is aligned. Many couples make the mistake of not looking at their investments collectively and end up with an investment approach that isn’t cohesive, has too much risk, or isn’t aligned or optimized to help them reach their goals. Make sure all accounts are included and that you have a clear understanding of the overall strategy to ensure you have the right level of diversification, low fees, and the right plan for your taxes.

7. Update estate planning documents and beneficiaries

Getting married means the way things are handled legally changes overnight. Everything from how you title (or own) your assets (home, bank accounts, investments) to your estate planning and your beneficiary elections on various accounts needs to be updated. Here are the three steps to take.

• Update all of your major estate planning documents including your wills, financial powers of attorney, and your powers of attorney for health care.
• Make sure you review and update your beneficiary elections on your retirement accounts and life insurance policies.
• Don’t overlook the importance of sharing log-in information and passwords for online accounts. Most of us keep our personal and financial information online, and that information should be easily accessible to your partner in the event of an emergency.

8. Update insurance and protection

Protecting the people and things you care about most is always an important part of financial planning, and the stakes are raised when you get married. As you build a life together, raise children, buy your dream home, and everything in between, it’s important to have peace of mind knowing that everything is safe and secure should the unexpected occur. Here are two things to consider:

1. Health insurance: Marriage is a qualifying event, which means you can make changes to your employer-sponsored health plans and insurance through the state healthcare exchanges outside of the open enrollment period. You will have to compare any group coverage you both have and decide which plans make sense for you as a couple.
2. Insurance for what you own (property and casualty insurance): Review all of your insurance coverage for your apartment or home, your cars, and anything else such as jewelry, artwork or other valuables. You want to ensure the amount of the coverage is appropriate. You’ll need to notify your insurance company that you want to add your spouse as a “named insured,” which means they can be legally covered under the policy. Also, be aware that jewelry and other items may not be covered under a standard insurance policy, and you may need to buy a separate rider to cover those items. 

9. Plan for taxes

Getting married changes your tax situation. Most married couples file joint returns, and you should understand what marriage means for your combined income, deductions, and taxes. Although your tax return is only filed once a year, your strategy for taxes should be reviewed periodically, and marriage is a great catalyst to kick off this healthy habit.

Make sure you revisit the taxes your employer withholds from your paycheck to avoid any unpleasant surprises come April 15. That amount will often change once you’re married, so talk to your HR department. If you’ve already had the investment discussion noted above, you may want to change your contributions to your retirement account(s) as well.

Don’t forget to look ahead for at least the next year or two. What plans do you have as a couple? Having a baby? Buying a home? All of these decisions will affect how you plan for your taxes.

10. Regularly check in on financial goals — schedule “Money Dates”

Life is ever-changing and your relationship will need to evolve with it – marriage, family, career changes, college, retirement, or the passing of a loved one. This includes the often overlooked relationship we all have with money. Many of the financial decisions you make aren’t “one and done,” but will evolve as your lives do.

Scheduling regular check-ins, called “money dates,” is an excellent way to review how you both feel about where you are, the progress you’re making as a couple, and even where you may disagree. Open, honest conversations about money can help reduce and eliminate any stress or worry that either of you has about money. And it can also be a great time to celebrate your wins and your progress as well. The goal is to ensure you remain aligned so money remains a tool for the life you want to build together.

Final word

Money is the #1 stressor for married couples and a leading cause of divorce, primarily because many couples don’t create a joint financial plan for their lives today or their futures. They often ignore discussing the things about money that are a little scary to them, such as the stress, the fear, the worry, the lack of confidence.

Aligning on goals, regular communication and having a plan in place on what makes sense for the both of you will help to alleviate much of that stress. It’s important not to just focus on the tactical changes. Discussing your beliefs, attitudes, and worries when it comes to money can be the most liberating part of the financial planning process and ensure you understand why your partner feels the way they do and how  to align on a combined vision for the life you want to build and experience together.