Being a newlywed is exciting, but it also comes with challenges. For some couples, the wedding marks the beginning of a new household. While living with a new spouse is normally a joyous occasion, it also means dealing with a financial situation that’s potentially vastly different from what you experienced previously. As a result, it’s best to have a strategy that can help you financially survive your first year of marriage. If you’re not sure where to start, here’s what you need to do.
Have an Honest Conversation About Money
If you didn’t have a serious talk about money before you wed, it’s critical to have a straightforward conversation about it as soon as possible. There are several things you both need to learn about each other’s financial situations. Plus, you need to dive into other critical areas, like spending or savings styles and financial goals.
The goal of these conversations should never be to judge or shame each other for past mistakes or different perspectives. Instead, aim to gain a solid understanding of where you’re both coming from and why you view money the way you do. These conversations put you on the path toward transparency. Plus, they’ll make a significant difference when it’s time to handle the remaining steps.
Take a Close Look at All Debts
For many newlyweds, talking about the debts they brought into the relationship is difficult. However, it’s a necessity to understand the financial obligations you both carry. By knowing what the balances and interest rates are, it’s easier to determine how you can tackle them efficiently.
In some cases, you may also need to evaluate whether a spouse should be added to one of the credit accounts. For example, adding a spouse as an authorized user on a credit card account could make sense in some situations. Still, you need to get a better picture of all of the debts you each carry before making those types of choices.
Create a Household Budget
For newlywed couples who didn’t previously live together or who are combining their finances after the wedding, creating a new household budget is essential. Knowing how much you’re receiving as income and the amount that’s being spent on ongoing expenses or debt repayment allows you to plan to cover your costs more effectively.
Plus, it helps you both see how much money remains after household obligations are handled, which makes planning for other financial goals easier. You can determine how much can go toward retirement, accelerated debt repayment, an emergency fund, and other objectives.
Precisely how you manage the expenses may vary. Some couples prefer to have all income go into a joint account and use the funds as needed for bills and other costs. There are also newlyweds who have their pay deposited into separate individual accounts – each paying specific bills or a percentage of the costs, either directly or by transferring the needed amount into a new joint account. Any of these approaches are viable as long as both spouses agree, so consider the path that makes sense to you.
Make Household Finances a Joint Effort
Many couples figure that having one spouse handle the financial aspects of running the household is best, as it centralizes those activities. However, this can prove problematic. If only one spouse is monitoring the budget and paying bills, the other may not have much visibility into how the picture is changing. As a result, they may make financial moves based on inaccurate information, and that can lead to accidental hardships.
A lack of visibility also means one spouse’s perspective is removed from the equation. If the partner that is handling the money makes a decision without discussing it with their spouse, that can lead to disagreements when the situation is discovered, which isn’t ideal.
Instead, make sure both you and your spouse remain fully involved in the household’s finances, regardless of who’s paying the bills. Having a monthly sit-down talk about the state of your financial lives keeps everyone informed. Plus, it ensures that both partners can air their concerns quickly if something is making them uncomfortable and creates opportunities to proactively discuss potential changes to the budget, a move that can prevent disagreements down the line.
Update Your Beneficiaries
One update to your financial picture that’s easy to overlook is the beneficiaries on life insurance and retirement accounts, as well as in-wills. In most cases, married couples would like their spouse to receive all or some of the funds (usually based on whether there are also children to account for) should they pass away.
If that’s the case, then it’s critical to update the beneficiaries listed on various accounts and in your wills. Otherwise, the living spouse may encounter unexpected obstacles should one of you unexpectedly pass away.
Adjust Your Tax Withholdings
When you get married, your tax picture changes. As a result, you may need to adjust your tax withholdings to ensure you’re setting the correct amount aside from each paycheck. Whether you need to set more or less aside may depend on how your tax situation shifts, but handling it quickly can help you avoid some unexpected hardships.
For example, if the change to your tax situation means you’d owe more, failing to update your tax withholdings to account for that could lead to a surprise bill when it’s time to file. If the shift in your tax situation means you’re setting aside too much, you’re unintentionally limiting your income in a way that could slow down your progress toward specific goals.
If you’re not sure what tax withholding adjustments make sense, speak with a tax professional. They can look over your situation and determine what’s necessary to align your withholdings with your anticipated obligation.
Do you have any other tips that can help couples financially survive their first year of marriage? Share your thoughts in the comments below.
Read More:
- 6 Long-Term Investing Tips for Newlyweds
- 4 Personal Finance Apps All Newlyweds Should Be Using
- 3 of the Best Personal Finance Books Every Newlywed Should Read
