Recently married and having trouble organizing your finances with your spouse? You are in luck! We have put together a top 10 financial to do list for newlyweds to use as a reference.
1. Full Financial Disclosure Most importantly, share with your spouse your current financial condition, spending habits, financial expectations & vice versa. Communication of this important information is crucial to forming a strong partnership with your spouse. If this information is kept secret now, the stage is being set for financial disaster in the future. For instance, not knowing that your spouse has a low credit score could lead to your debt being combined with their debt which in turn lowers your credit score.
2. Budget to Reach Financial Goals Most newlyweds make the major mistake of not constructing a budget to reach key financial goals. Don’t let this become you. Without a budget, it is very difficult to achieve financial freedom that every couple strives to achieve after marriage. Make sure you construct a yearly family budget to account for fixed expenses (i.e. mortgage payments, household & food expenses), discretionary expenses (travel, shopping, & substantial purchases) while also allocating some funds for purchasing a home, raising a child, paying for college, planning a wedding, retirement & in case of a emergency (refer to bullet #3).
3. Maintaining an Emergency Fund Set aside extra cash (~6 months of living expenses) in the event that your family experiences a financial hardship caused by sickness, death, divorce or getting laid off.
4. Planning to Pay Off Debt It is crucial that you and your spouse evaluate each other’s debt levels (credit card, student loan, other loan) and credit scores so that you can put a plan in place to make monthly payments and reduce overall debt. By strictly following a plan, getting a mortgage approved in the future will be easier.
5. Naming Beneficiaries & Updating Wills After marriage, you should evaluate the named beneficiaries of your insurance policy & retirement accounts as well as if you are a beneficiary of someone else’s policy. Also, in the event that you have to divide assets due to death, it’s always important to create or update an existing will. However, please note that the beneficiaries you designate for retirement accounts (IRAs & 401Ks) & life insurance takes precedence over those you name in your will.
6. Review Insurance Coverage Plans Review your and your spouse’s life, health, auto, & homeowners insurance policies since one spouse’s coverage maybe better than the other. For instance, health insurance coverage can vary drastically, so be sure to take advantage of the plan that offers the best coverage for both of you.
7. Explore Accountants, Financial Advisors & Lawyers Whether you have or don’t have an accountant, financial advisor or lawyer, you and your spouse will undoubtedly need to make a decision on one for the future. When choosing a professional advisor, it is ALWAYS important to do your homework & obtain multiple recommendations from friends and family. While your spouse maybe very content with his/her lawyer, you should still seek other references before agreeing to also use the same lawyer.
8. Tax Preparation When thinking about how you & your spouse want to file for taxes, there are number of factors to consider such as your state of residence and each spouse’s income level. Generally speaking, it is more tax advantageous to file as married filing jointly than married filing separately. An instance where it may not make sense to file jointly is if your spouse has significant liens against him or her.
9. Evaluate Checking Account Options The options are generally as follows: 1) maintain a separate checking account from your spouse, 2) open a joint checking account, or 3) setup a hybrid checking account system. A separate checking account is generally recommended when one spouse has any one of the following: liens against him/her, excessive debt levels, or is not financially responsibly. A joint checking account is the most common option because it is convenient and allows for spouses to more easily monitor cash flow together. The hybrid checking account is another option whereby a joint checking account is setup to pay for necessary expenses such as household expenses and two separate checking accounts are maintained by each spouse for spending money purposes.
10. Last Name Change (If Applicable) While it may appear rather trivial, changing your last name on your social security card, driver’s license, passport, & credit/checking accounts is very important since it is a key personal identifier for your financial records.