Financial Advice for Newlyweds: 7 Steps Every Couple Should Take

Getting married is one of the most exciting and joyous times in our lives. However, while you’re making plans for your wedding and honeymoon, it’s easy to lose sight of the fact that you’re not only starting a new life together. You’re also altering the course of each other’s financial future.

Before getting married, you and your significant other should give some serious thought to merging your finances. Spending some time and effort reviewing your earnings, savings, debts, and investments now can prevent money issues from becoming a source of heartache.

With those thoughts in mind, here are the seven things we think all newlyweds should do — preferably before tying the knot — to prepare for both the immediate future as well as the many years that lie ahead.

1. Have a prenuptial “money talk”

Before the big day arrives, you should set aside time to discuss your finances with your spouse-to-be. Although the conversation can feel awkward — and maybe a little intrusive — at first, full transparency is essential. That means making sure you and your partner show complete honesty in providing answers to the following questions:

• What’s your current salary?
• How much money do you have “in the bank” (checking, savings, money market, etc.)?
• What kind of workplace benefits do you have? E.g., retirement savings such as a 401(k), health insurance, etc.
• Do you have life insurance? If so, what premiums do you pay, and what is the payout amount on your policy?
• How many credit cards do you use, and how much credit card debt are you carrying?
• Do you have any other debts or financial obligations, such as student loans?

Remember: financial secrets are a shaky foundation on which to build any partnership, including a marriage.

2. Establish common financial goals

Sharing a life doesn’t mean living the exact same lifestyle. But, by talking through the hopes and expectations you have for your household’s finances, you and your spouse-to-be can more easily define areas of overlap as well as a potential conflict.

Start by distinguishing between short-term and long-term goals. Short-term goals may include a dream vacation or upgrading a vehicle. Long-term goals might include starting a family, buying a home, or starting a family business.

Prioritizing your goals provides a framework for both saving and spending. It’s OK if your desires for the future differ from your partner’s in some respects. You’ll be much happier — and more successful — if you define what consensus means for your marriage as early on as possible.

3. Create a budget

Creating a budget and sticking to it can go a long way toward promoting marital harmony. Some budget considerations for newlyweds include:

• How much would you like to save each month?
• How much do you want to allocate for entertainment and other non-essentials?
• How will you create, contribute to, and manage an emergency fund to cover unexpected expenses?
• Will you contribute equally to household expenses, or will your contribution be proportionate to how much each of you earns?
  
  4. Settle on your banking arrangements

When it comes to banking matters, you have at least three options to choose from:

• Each spouse keeps a separate account.
• You combine your finances in a joint account.
• You and your spouse manage both your individual accounts and a joint account.

Each arrangement has its pros and cons, but the third, hybrid option may represent the best of both worlds.

For example, you and your spouse could funnel all of your income to a joint account. From here, you would pay your monthly bills and allocate money to your various purpose-driven savings accounts (rainy day fund, college fund, retirement fund, etc.). You could then divvy up the remaining amount among your individual accounts. You can spend these discretionary funds on those non-essentials — like a new purse, a new pair of sneakers, or a gift for your spouse — that make life a bit more pleasant.

5. Discuss life insurance

When you’re young and newly married, life insurance is perhaps the last thing on your mind. It shouldn’t be. Nothing says that you truly love someone more than making sure they’re adequately taken care of should something happen to you.

When discussing life insurance policies, decide together if you want to buy term or permanent insurance. Term insurance is usually less expensive but only provides coverage for a specified time. It also pays a death benefit only if the covered individual passes away during that specified period (or term).

Permanent life insurance remains in effect as long as you’re alive (or as long as you keep paying your premiums). These policies also provide cash value in the form of savings. Depending on your policy’s terms, you may be able to borrow against that accrued cash value or withdraw a portion of it to cover qualified expenses. However, most insurers impose a waiting period before policyholders can take any loans or disbursements. These waiting periods can be several years long.

Finally, some term insurance policies are convertible to permanent policies, offering you and your spouse additional financial flexibility.

6. Make out your will

If life insurance isn’t the last thing on your mind when starting a new life with your spouse, a will likely is. Yet, if nothing else, a will can provide much-needed peace of mind for your loved ones.

Your will legally establishes your wishes for how your estate will be distributed after your death. Dying intestate — without a will — can wreak havoc for the surviving members of your family, creating conflict and resentments that may never heal.

Consequently, you and your spouse should draw up a will and review its terms every three to five years.

7. Don’t neglect your retirement

The earlier you start planning for your “golden years,” the more comfortable and pleasant they’ll be. A good rule of thumb is to put aside 15 percent of your income for retirement. This figure includes your own contributions to any employer-sponsored retirement plans.

If that 15 percent isn’t achievable, be sure to match your employer’s contribution to your retirement savings at the very least. If 15 percent (or more) is feasible, your and your spouse may want to engage with a financial advisor to explore all of the pre-tax and after-tax retirement savings options available to you. A thoughtful mix of accounts will allow you to realize immediate benefits while maximizing the value of your long-term investments.

The bottom line is that there’s no one right way to manage your finances as newlyweds. But, with communication, honesty, trust, and a little planning, your love and prosperity will only grow.

At Guaranty Bank & Trust, we grow to help our customers grow by offering financial products and services to help them mark every one of life’s major milestones. That includes checking and savings accounts, home loans, individual retirement accounts (IRAs), and estate planning. Becoming a member of the Guaranty family is as simple as visiting any of our Texas locations or making an appointment to meet virtually with one of our friendly, caring, and collaborative bankers.