Getting engaged and then married is one of the biggest life changes most people go through.
While planning the wedding and inviting all your guests may have seemed like a lot of effort, working out your financial future as a new couple may be even more challenging. You need to consider the various expenses of each spouse as well as how often and how much each is paid during the process of creating a family budget. You have to make realistic estimates of how much you and your spouse are earning and will continue to earn in the future. Luckily, figuring out the finances for newlywed couples does not have to be so tricky. In fact, newly married couples can follow a few simple steps to make sure all of their financial bases are covered after they have tied the knot.
For many people, discussing money is one of the most uncomfortable conversations a person can have. Some people feel uncomfortable because they do not think they make enough money compared to their spouse, while others may worry that they make disproportionately more than their spouse. In either situation, discussing your feelings about money with your fiancé/fiancée or new spouse can be a great icebreaker for the topic and set the stage for future conversations about finances. Ultimately, you want to establish regular communication about both income and expenses with your spouse so that you can be on the same financial page when it comes to money decisions and basic financial planning.
When you were single, you may have budgeted your money a little more freely, maybe depositing a higher percentage of your salary into your vacation fund and a little less into your 401k retirement fund. Now that you are older and married, its time for you to reevaluate your financial goals and think about how you can realistically meet them. It is important that you and your partner are able to agree on the basics of your budget so that you can both work towards the same goals. With two salaries contributing towards your financial aims, you may be able to reach your objectives faster or go for even higher objectives.
Although the exact way you choose to combine (or not combine) you and your spouse’s income will depend significantly on your financial situations, some tips can be useful for everyone. While some couples choose to combine all of their banking and checking accounts, others choose to keep all of them separate. In most cases, having at least one shared bank account (credit or checking) that allows for your and your spouse to withdraw funds is the most common way married couples pay for shared expenses like housing, cars, childcare and more. Most couples that choose this option tend to deposit a predetermined amount or percentage of their income every month into the shared bank account for use by both spouses for agreed upon costs as needed.
Odds are, at least one spouse will have significant credit card or student loan debt that he or she must make recurring monthly payments on for a while. This may be in addition to any regular housing costs such as your rent or mortgage. Big, recurring expenses like this can be budgeted and planned for. Make sure you and your spouse take these expenses into account, as fixed costs that must be paid for first thing come payday. You and your spouse should consider increasing your payments to big, regular bills like this to save tons on accumulating interest fees and to significantly decrease the amount of time you must make payments if possible.
If an emergency fund was not already on the top of your list of financial priorities, then it probably should be. An emergency fund is money that you stash away for the proverbial rainy day when you need more money than you are making. This could be because of the loss of a job, a natural disaster, a health problem or any surprise that could seriously set you and your spouse back economically. Although recommendations vary, most experts suggest saving between three and six months of household living costs for a dependable emergency fund. It may also be a good idea to open up a special savings account at your bank to put apart this money from your general spending funds. You and your spouse should discuss easy ways to save money for this fund, such as opting to make coffee at home instead of purchasing a cup at a local café, as these nominal expenses can add up quickly.
If you have put off getting a retirement savings fund, then this is the time. Now that you are married, you will want to make sure both you and your spouse have access to a good retirement savings program, like a 401k through work or a personal IRA. What is a “good” retirement savings plan? It is a program that either matches your contributions or that allows you to deposit a high annual amount into the account tax-free. Many employees are offered favorable retirement savings plans through jobs, so that may be the first place to start looking for available plans for you and your spouse.
Unlike the unexpected issues you plan for by making an emergency fund, big purchases or events that you know are coming can be specifically budgeted for. Most likely, you and your spouse got a taste of budgeting for a big event while planning your wedding and honeymoon. You can plan for other significant upcoming costs in the same way. Take a look at your calendar and note all the upcoming weddings or engagement events, baby showers or christenings, holidays and whatever else you think you may spend more than usual on in the upcoming year. Note when you will need the funds by and see how that fits into your other financial priorities when. You may want to start putting away a certain amount like five percent every month for these events or just keep in mind that you will put less money towards your other priorities during that period, such as minimizing daily costs through food and utility reductions.
Once you and your spouse discuss all of the topics listed above, you will both need to decide to create a budget. However, any financial decisions that you make can only be counted on if you both choose to commit to the budget. All of the abovementioned topics can be written out so that you both are clear about what you are working towards as a team. It can be difficult to stick to plans when they seem to be too long term. For this reason, it may help you and your spouse stick with your financial aims if you divide them up into short-term goals, say on a monthly or quarterly basis.
Now that you know what you are working with and what you are working towards, its time to combine all the information into one functional budget. Again, it may be useful to start with the big picture and then make smaller commitments. Make sure to take into account all incoming sources of money and all foreseeable expenses for the both of you. If you have children, then you will probably have to incorporate a little more leeway into your budget to account for surprises associated with them. Along the same lines, do not forget to include line items like health insurance or health care, cell phone bills, utilities and your other regular household costs.
Now that you have made a comprehensive budget with your new spouse, you are done with the hard part. At this point, you should try to automate as much of your budget that you can. You may be able to automatically pay many of your bills through an e-banking account, automatically withdraw money from your savings to put into a savings account or towards a retirement fund and much more just by spending some time setting up the payment process initially. Automating as many of your expenses as you can make it even easier for you and your spouse to stick to your budget. You and your spouse may also want to consider scheduling a weekly or monthly meeting to update each other on any new financial issues that may have sprung up.