Getting married is one of the biggest decisions of your life. It’s easy to understand how delving into your finances after marriage would fall toward the back burner. That’s especially true when there are so many more exciting things going on, like planning your wedding and where to go on a honeymoon.
Yet, if there’s one thing you can do to set your marriage up for long-term success, it’s create a plan for how you’ll manage your money as a married couple. By removing potential money conflicts, you can smoothly sail over one of the biggest hurdles for most married couples. It can seem like a lot, but you don’t have to do it all overnight; in fact, it’s best to tackle each aspect of finances in marriage piece by piece and give yourself more time for reflection. Here’s what to consider.
How can marriage change your finances?
Most engaged couples are aware that marriage can affect their tax situations or that they may become eligible for a child tax credit as they expand their family, but that’s not the only thing to consider. Your money exists in a complex ecosystem, and everything is about to change — and for the better, as long as you plan accordingly.
Marriage and insurance policies
You want to make sure your life together is fully protected against things you can’t yet foresee. It’s a true sign of love to prepare in advance and ensure your spouse will be taken care of, no matter what. That means you may need to consider additional types and/or amounts of insurance, depending on your situation:
- Life insurance
- Auto insurance
- Health insurance
- Disability insurance
- Long-term care insurance
- Renters or homeowners insurance
A good insurance agent or financial advisor can help you identify areas you need to protect and then help you get the coverage you need. The amount of insurance you may need to consider can be overwhelming, but there’s good news, too: insurers generally charge lower rates for married couples because they are seen as carrying less overall risk than single people.
For example, married couples save an average of $160 per year on car insurance premiums. In addition, many spouses are able to take advantage of things like employer-sponsored healthcare plans rather than having to purchase their own policy if their current employment situation doesn’t offer one.
Marriage and taxes
Getting married can come with tax benefits or penalties depending on many different factors, such as filing statuses and student loans. If a high-income earner marries someone with a lower income, for example, you might receive a “marriage bonus” as the higher-income spouse drops down to a lower income tax bracket when filing a joint return.
In contrast, couples earning similar incomes can sometimes end up paying a higher combined tax rate. This “marriage penalty” isn’t as prevalent as in prior tax years due to changes in the law, including an increase in the standard deduction. However, it’s still relevant for couples with matched incomes in the 37% tax bracket, earning a combined income of $693,750 and over in 2023.
So, how does marriage affect taxes in your situation? The only way to be certain — and to account for numerous other factors, like potential tax liability from pre-marriage home sales, deductible expenses, etc. — is to speak with a Certified Public Accountant (CPA). The money you save in taxes could be well worth their fee and more.
Marriage and retirement planning
You’re planning to be together in sickness and in health, from your younger years into old age. By planning for retirement, you can ensure your older years are as stress-free as possible, giving you both more time to enjoy each other fully.
Not only does getting married spur more people into saving for retirement, but it also broadens your available retirement savings option. Married couples can save more towards retirement, can inherit those accounts from each other more easily, and may even be eligible for Social Security survivor benefits.
When combined, these factors show that retirement planning is easier in many ways for married people. In one recent study, as many as 39% of married adults already had over $100,000 in retirement savings; in contrast, 60% of single adults in the same study had nothing at all saved for their golden years.
Marriage and debt
Having access to two incomes opens more doors when it comes to accessing credit, especially if one spouse has a lower or inconsistent income.
You’ll also need to navigate paying off any debts you had before you were married, especially things like student loans, tax debt, and credit card debt. Some people find they still need to do their taxes as married-filing-separately, for example, in order to qualify for certain income-driven payment plans and student loan forgiveness.
It’s also important to know whether you live in a community-property state, where any debts your spouse incurs while you’re married also apply to you, or a common-law state, where debts are generally only legally attached to you with your explicit consent — even if married.
Marriage and homeownership
Married couples made up three out of every four homebuyers in 2022 according to data from the National Association of Realtors. It’s often easier to pool your resources together and buy a better home as a married couple as opposed to on your own. You may be able to buy a more expensive home in a nicer neighborhood and within a better school district, for example.
In addition, spouses have more legal homeownership protections available than unmarried couples. This is especially true if you have any debts such as mortgages or reverse mortgages remaining on your home when you pass away. In some cases, your spouse may be able to continue living in your home, even if they are not listed as borrowers on the loan.
How to combine finances after marriage
We’ve given you some factors to consider for your money and marriage situation. It’s good to keep these in mind as you go about the process of combining your finances:
Have an honest discussion about finances
You’ll need to have vulnerable conversations with your spouse about your feelings on children, intimacy, awkward health conditions, and a million other topics — especially finances. It’s good to set aside some time when you’re both relaxed to plan out what your money management style will be like. Keep in mind you can experiment with different arrangements over time until you find something that works for you both.
One of the first major considerations is whether you’ll open joint accounts, keep your finances separate, or opt for something in between. The majority of married couples use joint bank accounts for everything, and this has been shown to preserve happiness among newlywed couples. However, joint bank accounts aren’t right for every couple; some are perfectly happy maintaining totally separate finances in marriage. Other couples prefer to keep separate finances with a shared bank account for common expenses, such as housing and utilities.
Set joint financial goals
You don’t need to start out with the exact same ambitions in life. It’s normal for these to change over time anyway. However, it’s a good idea to at least be on the same page when it comes to financial goals, such as saving for a house, early retirement, debt payoff, travel, or rewarding hobbies.
If you’re both working toward the same objectives, it’ll be that much easier to put money in a savings account. When you achieve your shared financial goals together, those achievements will carry more meaning, and you’ll develop an even closer bond.
One exercise you can do as a couple is to individually create a list of financial goals for the short-term (under five years) and long-term (over five years), and then rank them in order. Then, show your lists to each other and discuss points of common interest.
Create a household budget
The word “budget” can be a loaded term, conjuring up a well of emotions. However, budgeting is the single best way to achieve your financial goals; it offers a road map and a concrete financial plan for your everyday cash flow that will help ensure your future selves get the rewards you both deserve.
If you’ve struggled with budgeting in the past, we have good news: there are numerous budgeting options available today that work for anyone. Popular mobile apps and online software such as YNAB (You Need A Budget) are often semi-automated, and there are even budgeting apps specifically for married couples, such as Honeydue and Qube.
Make money conversations routine
It’s easy to let things slide by as you settle into your married life, often until they become a problem. You and your spouse can guard against this by having regular money check-ins.
Many couples find this easier if they make it a fun thing. Put it on your calendar and rebrand it as a “money date night,” and grab a glass of wine (or your preferred beverage) to relax as you discuss your thoughts on how your budget is doing, whether you still share the same short-term and long-term financial goals, etc. This can help you both stay connected to your money — and, ultimately, your marriage.
If these steps seem overwhelming, don’t worry: you don’t need to do this all at once, and it may even be better to spread it out over time anyway. Putting together a strong financial support team with a fee-only financial advisor, an accountant, an insurance broker, and an estate-planning lawyer can help you ensure you and your spouse won’t have to worry as much about money and can enjoy the benefits of married life instead.