Tackle these issues first
You may find it difficult at least early on to agree on everything having to do with personal finances. But It’s possible to minimize – if not eliminate – the stress over finances is to tackle the important issues early on. Here are four administrative and financial tasks you should resolve fairly quickly so that you can get back to enjoying your marriage.
1. Decide how you will handle bank accounts
You may want to combine your checking and savings accounts but no rule says you have to. What’s important is to talk about your preferences to make sure your bills get paid when they’re due. If you decide to keep your finances separate, you will need to set up a new account to cover your common expenses. Sit down, list the expenses you’ll both need to contribute to, such as housing, utilities, and groceries. Then, figure out how to split these costs. You might split them equally or on a proportional basis depending on your incomes. Once you determine this, your final step should be to set up automatic transfers of these amounts to the new joint account.
2. Agree on your financial terms both short- and long-term
If you already haven’t done it, then now is the time for you and your spouse to compare your income, debt load, spending habits and credit scores. It’s particularly important to discuss the joint goals you should be working on. For example, if one of your goals is to buy a home together then massive debt or poor credit could stop you. If this is the case, you may need to make a credit repair or plan to pay off your debts – maybe with the help of a consumer financial counselor or a certified financial planner. In addition, you should develop the habit of talking about your other priorities as well. Issues you might want to discuss include whether you’re putting enough away for retirement or how much you want to spend on vacations.
3. Update your beneficiaries
Your idea of wedded bliss might not be to sit down and do a bunch of paperwork but if you just got married, expect there will be a lot. And one of the first things you need to do is update your life insurance policy’s beneficiaries (if you have one), as well as your retirement accounts. If you die, federal law dictates that your spouse will get whatever is in your 401(k) unless the surviving partner has signed a waiver.
If you have an individual retirement account, you can name anyone as your beneficiary. But suppose you live in a state with community property laws (California, Arizona, Louisiana, Idaho, New Mexico, Nevada, Washington, Texas, and Wisconsin), and get a divorce. In this case any property you purchased during the marriage must be split equally regardless of who acquired it.
Each of you will also need to fill out a new W-4 at work. This is because getting married will probably change your tax rate. You both will need to fill out a new W-4 form so that your employer will begin withholding the right amount of income tax. You also need to decide which filing tax status will be best. Now, you’re married, you’ll probably want to file jointly as this may mean paying less taxes. However, circumstances may determine that filing separately could be best.
4. Discuss a postnuptial agreement
It’s possible you may want to have a prenuptial agreement though this can turn into a real sticking point. A better idea is to create a postnuptial agreement which will determine how assets are divided in the case of death or divorce. The difference between it and a prenup is that a postnuptial agreement can be created any time during the marriage. The reason to do this is because if you don’t have such an agreement, then your state’s laws will determine who owns what, and this may not be what you had wanted.
A postnuptial agreement is especially useful if you live in one of the community property states listed above. It can be also an especially good idea if one of you have children from a previous marriage or relationship. It can also be a good idea if one of you are anticipating a big inheritance or if there is a large disparity in your incomes. If this is the case, one of you may have an interest in keeping certain of your assets separate, or identifying how – in the event of divorce – you and your spouse would split shared property.
Sitting down and talking about finances shortly after your marriage may not be one of your most pleasant tasks. However, addressing these four issues early on can save a lot of arguments and disagreements later on. Plus, you may find it’s easy to agree on most of these.