Financial Tips for Newlyweds
By Steve Davis, CERTIFIED FINANCIAL PLANNER™
Do you remember that summer a year or two after you graduated from college? You know, the summer when you attended weddings almost every weekend? It started in June and it seemed that almost all of your hard earned cash was going toward wedding presents for your friends who were tying the knot. Well, June is here again and soon the church bells will be ringing as brides and grooms walk the isle.
Here are some financial issues that couples should consider when embarking on a matrimonial journey.
1. Discuss your finances before marriage — Start your marriage off on the right foot by having an honest discussion about financial habits, objectives and history. If one of you is a saver and the other tends to spend every dollar earned, figure out a plan to get on the same financial page. Talk about your short and long term financial goals and review them periodically.
And before your big day, share your statements from your bank accounts, credit cards, student loans, and 401k plans. In the business world — when companies merge — they take the time to carefully explore each other’s financial records. Couples should do the same thing. Also share credit reports and FICO scores. It’s not necessary to make your spouse a joint accountholder on your credit cards, especially if he or she has a poor credit history, which can drag down your own credit rating. If there are any financial concerns or problems, seek out an accountant or CERTIFIED FINANCIAL PLANNER™ for guidance.
2. Create a Spending Plan — Marriage Counselors say that failing to create and stick to a mutually agreed upon budget is one of the leading causes of marital strife. And while nothing seems less romantic than budgeting, remember that the process doesn’t have to be complicated. Start off by listing your monthly take-home pay. Then add up expenses, everything from your rent, car payments, student loans, to groceries, gym membership and utilities.
If you’re making more than you spend each month, you can begin planning how to set aside money for long-term financial goals. If not, time to consider ways to cut spending.
3. Think holistically — Consider each spouse’s investment portfolio as part of a whole. For instance, if both you and your mate contribute to 401(k) plans and IRAs, see how your investment choices match up. You might find that your combined portfolio is more exposed to risk than the two of you can tolerate. Or, you might learn that when you combine your portfolios, your asset allocation is out of whack. Remember, you can rebalance your asset allocation by shifting money from one asset class (stocks, bonds and money market instruments) to another or by adding new money to the underrepresented asset class.
4. Review documents — Along with other legal documents, remember to update your beneficiaries on life insurance policies, IRAs, employer-sponsored retirement plans and pensions. Also, be sure to either create or modify your wills.
5. Meet with a professional — Make a date with a qualified financial professional to discuss your financial goals, such as buying a home or investing for retirement. Then, after making sure that all of your financial bases are covered, relax and enjoy the beginning of your life together.