Spring and summer are the seasons for weddings and many newlyweds are excited to begin their lives together. Being married involves making many changes, not the least of which are financially related. Knowing how to avoid financial mistakes will make the beginning phase of any marriage much more pleasant.
Step 1: Though money may be a common reason for disagreement during a marriage, do not avoid the topic. From the beginning, a couple should discuss their respective financial backgrounds, perspectives, and expectations. A relationship requires communication to survive so there should be no money secrets before taking the trip down the aisle.
Step 2: Spending and saving habits are merged during a marriage so it is important to have a budget. The financial plan from the single days no longer works so develop a new budget that includes the debts, income, and regular expenses of each person. List all fixed expenses like car payments, rent, student loan payments, and insurance premiums. Set aside a monthly amount to investments or savings. Write down flexible expenses like the phone bill, utility bill, groceries, and commuting costs. Calculate the combined monthly income and make adjustments to expenses if these exceed the income figure.
Step 3: Decide whether one person will handle the daily finances, the responsibility will be split, or the duties will be traded each month. Even if one person handles these tasks, the other person should have an understanding of the daily finances and be involved in large financial decisions. Involvement includes knowing the due dates for bills and having account details, including passwords. If finances are combined, the savings account and all major purchases should be in the names of both people. This ensures equal access and maintenance of the credit rating.
Step 4: If debt is coming down the aisle with the bride or groom, it becomes the responsibility of both people once they are married, even if finances are not combined. Couples should develop a plan to pay off debt and never officially comingle this expense because it could make it difficult for the non-indebted person to get credit. Existing loan and credit card accounts should be kept in the name of the original account holder.
Step 5: Be prepared for emergencies. Save enough money to cover living expenses for three to six months. Make sure the life, homeowners or renters, car, and health insurance coverage are adequate.
Step 6: If a prenuptial agreement was not drafted, a lawyer can draft a post-nuptial agreement to protect the financial interests of each person. Each person should also have a will that specifies how asses will be divided in the event of his or her death.