What you need to know about marriage and money (2023)

Marriage changes your financial life in profound ways. It's not just about living together or sharing expenses, you don't have to get married for that. Only their legal and tax status will change. And while your credit score remains individual, what your spouse contributes to the financial picture can affect your future options.

Whether you're getting married for the first time or remarrying after a divorce or bereavement, it's wise to sit down with your partner well in advance of marriage to discuss these issues and do some financial calculations.planning. Of course, it's not the most exciting premarital activity. But the decisions you and your future spouse make about how you handle money will have long-term effects on you — not just as individuals but as a couple — whether you decide to combine your finances entirely orkeep certain thingsseparate.

Your decisions not only have financial ramifications, but also emotional and legal ones. A little preparation pays off much later.

Before you say yes

Before you exchange vows, it is important that you and your partner disclose all of your financial circumstances to each other. Since marriage is a legal and financial decision — the government doesn't care how much you're in love — you need to understand the risks you're taking in committing yourself to someone else. Disclose all assets and liabilities (including those from a previous marriage, if applicable, or liabilities you have to members of your immediate or extended family). Both must get theirscredit reportsmiCredit Scoressincethe three credit bureaus. Sit down and go through each other's balance sheets and discuss any concerns.

Once you know what you are dealing with, you can make decisions about how to manage your marital finances. If one partner has significantly more wealth or purchasing power than the other, then oneMarriage settlementcan be ok. These contracts can protect premarital assets and provide for children from previous marriages. You can also justify liability for debts incurred before the marriage and arrange child support in the event of a divorce in advance.

If one or both of you have significant debt, it's time to create a plan to pay it off. One spouse's premarital debts are not automatically converted into the other's when they sign a marriage license, but these debts can still affect you after marriage by affecting your joint finances.

Although the wedding itselfno impact on creditworthiness, the common practices of couples — buying joint auto loans or mortgages, opening credit card accounts together, or adding a spouse as a cardholder to individual accounts — can affect both spouses' future creditworthiness.So if any of you havebad creditCome up with a plan to improve it. You can borrow together and use both assets to qualify when applying for a car loan or mortgage together.

Definition of common financial goals

Even before they found a home together,create a family budgetIt will help you achieve your financial goals. Now it's time to think about your answers to questions like these:

• What are your top priorities in life and how does finance affect those priorities?
• What are your long-term career prospects and goals?
• Do either of you need financial support for additional education or time off from work to work toward your goals?
• Will a spouse be at home full-time or part-time to look after the children?
• Do either of you have children from a previous relationship, and if so, what kind of financial responsibilities will you have for them?
• Does anyone expect you to be asked to help other relatives, such as B. elderly parents, to help?
• At what age do you expect to retire and what kind of retirement do you envision?
• You havedifferent attitudes towards saving and spending? How do you deal with these differences?

Even if you don't know all the answers, it's helpful to have an idea of ​​where your partner is and what each needs to think about or investigate further.

planning your wedding

How much are you spending on the wedding?Who should pay for that?are two of the first big financial questions newlyweds have to answer together. Your choices can have a huge impact on how the marriage begins, which can set the tone for your relationship.

Who pays?

Traditionally, the father of the bride pays for the entire wedding. But sometimes there is no bride, sometimes no father, and sometimes neither of the bride and groom's families have the financial means to contribute to the wedding. If you are paying for the wedding as a couple, especially if it is youyoung couple with little money savedand many missed goals, setting an affordable wedding budget and sticking to it is imperative.

Even if it fits your budget, remember how expensive they can be. According to a 2021 Brides and Investopedia survey, nine out of 10 respondents said they put off at least one major financial priority, like saving for a home, starting a family or saving for retirement, to plan their wedding pay.

Compliance with awedding budgetit can be harder than it seems. Once you start researching wedding costs and talking to vendors, you may find that the magical event you have in mind costs double or even triple what you expected or can afford. Then you must decide to get into debt, lower your expectations, or get creative, or do a little bit of all three. Does the wedding have to be on Saturday? Do you really need 300 guests? If you're smart, can you make your own centerpieces instead of paying for them?

make ring

Decisions about how much to spend on wedding and engagement rings are also important. Ultimately, wearing a band on your ring finger is a symbol of connectedness. A basic bracelet can be had for as little as $10, or you can spend $10,000 or more. $5,500 is close to the national average for engagement rings.And, depending on the piece of jewelry, these rings can be significantly more expensive.

You can resize or redefine a family heirloom ring, opt for traditional gold anddiamondsOr, for a modern alternative, shop at a major jewelry store or contact an independent jeweler who does bespoke work. Couples who choose expensive rings should make sure they have enough.jewelry replacement insuranceif it is lost or stolen.

Manage your money after the wedding

Marriage brings not only emotional benefits, but alsomany financiers. Financial benefits can include lower housing costs, savings on health insurance, and lower auto insurance premiums.These savings, in turn, can increase financial stability in the short and long term by providing cash for emergencies and ways to save for retirement. In fact, couples find it easier to save for retirement, not only because they're sharing income and expenses, but also because the spouse who earns more can do soContribution to a low-income spouse's traditional or Roth IRA account.

Married couples often set up new joint checking and savings accounts and may wish to add their new spouse as a co-owner of existing accounts. Some use a combination of strategies. It is important to decide which strategymanage money togetherfeels more comfortable with you. Immediately after the wedding is also a good time to update the account.beneficiaries.

Because of the legal and financial ties marriage creates, financial openness and honesty are more important than ever in your relationship. For example, if one of the partners ruins the family budget, the best way to own it is not to hide it, no matter how difficult it may be. If you're honest, as a couple you can discuss the circumstances that led to the situation, the best damage control strategy, and how to avoid a similar problem in the future. For example, a spouse who is prone to overspending may need a monthly allowance that he or she is responsible for covering.

Sharing financial responsibility

In a marriage, it is common for one spouse to take care of the budget and bill payments and the other to take care of all investments, or for one partner to handle all financial tasks. There are dangers in these unbalanced approaches. What happens when one of the spouses becomes too ill or injured to perform their usual duties, or even dies suddenly?

Since we currently do many of our financial tasks online, the other spouse may have no idea what the bills are, what bills need to be paid, or what the passwords are to log into each account. It's best to share at least some of your financial responsibilities or negotiate each month so both spouses have access to all accounts and know how to handle family money.A joint financing approachAlso, it becomes more difficult for one spouse to hide excessive income or expenses from the other. If none of you are particularly smart with money, it might make sense.consult a financial plannerhave a good financial situation from the start.

The legal side of marriage.

State law determines who owns what in a marriage. The law may not seem important when you get married, but it becomes an important factor when one of your spouses dies or when you divorce. It's better to understand how things work now than to be in for a nasty surprise later.

Most states areCommon Law PropertyIf you live in such a state, it means that the property and property belongs to the person whose name is on it and that person can leave their property to whoever they want. You can own assets jointly or individually, but the type of title you hold affects whether the joint property becomes your spouse entirely or whether you can leave your share to someone else after your death.

nocommon property States, the assets and debts acquired during the marriage belong equally to both spouses. However, property owned by a spouse before marriage, or inherited or gifted to a spouse at any time, belongs only to that spouse. Likewise, debts incurred by either spouse prior to marriage are not the responsibility of the other spouse.

If you do not have a prenuptial agreement but wish to, you and your spouse can create and sign a postnuptial agreementpost-marital contract, a legal document that specifies how the estate will be divided when the marriage ends.Similar to a marriage contractyou can simplify and eliminate inheritance and wealth division issuesdivorce proceedings.

Marriage also increases the importance of foundingWillefor each of you - or amend your will to include the fact that you are married - and addpayable on obituariesto all of your accounts so that your money can go to your spouse or other named beneficiary within days of your death. The way the law treats your estate after you die may not be how you would like it to be. That also seems to be an issue too far in the future (wait), but why not take care of it while you organize everything else?

Marriage and Taxes

married couplesmay Ifile joint or separate tax returns. UseSoftware taxRunning both scenarios can make it easier to decide how to file a tax return in order to pay less tax. A joint filing is often the way to go for financial reasons, but each couple's circumstances are unique.

A couple may prefer to submit a separate statementif they do not want to be responsible for the completeness and correctness of the other person's information or if, for example, one spouse wants to maintain the complete separation of the other's business. Sickness deductions for a spouse who earns significantly less income than the partner are another reason why it may be worth filing a separate declaration in some years. On the other hand, certain deductions and exemptions are only available to couples filing joint tax returns.

If one or both spouses havestudent loans, the decision to file a joint or separate tax return may affect the amount of your student loan payments. For borrowers inearnings-related compensation plans, filing a joint tax return means that both spouses' income is used to calculate student loan payments, which may result in a larger payment than filing separately. But the keyword here is "potential" — it depends on the individual's repayment schedule, the income discrepancy between spouses, each spouse's student loan debt, the difference in taxes owed based on filing status, and other factors.

Conclusion

On the surface, marriage seems to be all about love and companionship. On a deeper level, it's much more than an emotional commitment, it's also financial and legal. Because of the way state and federal laws are written, getting married can have significant consequences for your money. It's important to make sure that you and your partner are on the same page about the assets and liabilities you will bring to your marriage and how you will manage money as a couple.

Eliminating those important pre-wedding conversations will help you get your wedding off on the right foot without any nasty surprises in store. It also prepares you for the ongoing discussions about your finances over the years. These conversations will help you stay on track to achieve your goals and reduce or eliminate the anxiety and stress that couples can feel when discussing financial matters with one another.

With your finances in order, you can focus on the next step in your relationship with peace of mind, enjoying this special time and building a life together.