1) Combine Finances Where Possible
In my experience, combining finances where possible is healthy for a marriage because 1) it shows trust to your spouse, 2) it forces you to work together to manage your money, preparing you to work better together when even more challenging circumstances arise, and 3) it illustrates a significant commitment to the relationship.
I have heard many stories over the years of couples whose marriages were distressed because separate finances led to distrust or the feeling that their significant other wasn’t fully committed to the relationship.
Additionally, it creates a bit of an awkward vibe when you have to constantly dance around who gets to pay for what in an effort to keep things equitable.
I know that some people make it work, and I’m sure I’ll get comments from some of you, but for mortals like me, I suggest you lump it all together whenever possible and live like a team instead of business partners.
It is a marriage after all.
2) Communicate Expectations
You don’t have to be in a relationship very long to know that unequal expectations can set you up for some very frustrating and even divisive experiences.
Odds are, you and your new spouse are coming into marriage from uniquely different backgrounds as it relates to money.
One of you may have lived in a home with plenty of money while another didn’t.
One of you may be comfortable with debt, while the other isn’t.
You may have completely different expectations about how much you should give, save, or spend.
If you aren’t on the same page on things like these, and many more, money could become a challenging topic for the two of you to discuss.
Do yourselves a favor a spend some time working out how you will approach the way you use money. Here are some questions to help get you started:
- What assets or debts are you bringing into the marriage?
- Will you combine these assets and debts or keep them separate?
- What are your views on using debt?
- How much do you think you should save?
- Do you plan to give to charity? If so, which charities and how much?
- How much is okay to spend on a single purchase before consulting your spouse?
- Will you keep a budget?
- If you have extra money, how will you use it?
- If you don’t have enough money, how will you address that?
- Who is going to pay the bills? Do the taxes? Monitor the budget?
- How much should we keep in savings for emergencies?
- Are you planning on having kids? If so, will you both continue to work after they arrive?
- How much should we save for retirement?
3) Budget
I’ve been doing this blog thing for three years now, and I’ve taught newlyweds in a small group at church for over fifteen years.
I’ve never met a soul that told me they enjoyed budgeting.
Honestly, budgeting is not fun. In fact, it’s quite the hassle. But I am so glad my wife and I kept a budget in the early years of our marriage.
Having a budget forced us to put our expectations on paper and provided a source of accountability if we veered off course.
It also allowed us to reconcile our plans, goals, and dreams against competing obligations for our money and the limitations of our incomes.
In other words, it forced us to make a plan for how we would spend less than we made.
But it also provided a guide of sorts for us as we learned how to manage finances while holding down a full-time job, saving for our future, paying taxes, and all the other responsibilities life throws your way as you grow older.
So, keep a budget, especially so if the concept of communication leaves you scratching your head a bit. A budget is a great way to drive those conversations.
4) Watch the Expenses!
As you set up your budget, I want you to pay special attention to your expenses.
It is not uncommon at all for us to think first about the fun ways to spend our money when we start our first full time job or when we get married and begin enjoying the efficiencies of two incomes in one household.
It’s not that there’s anything wrong with having your eye on something fun, but all too often, people spend every available dollar on consumption items and debts as opposed to prioritizing important, but boring stuff like saving for retirement or funding an emergency fund.
I’ll cover emergency funds in a second, but one limit I’d challenge you to set up is to not spend more than 30% of your income on housing and transportation combined.
I know this may be challenging, especially if you live in a high cost of living area, but it’s the most practical way to ensure that there’s enough money left from each paycheck to save and invest for the future.
On average, Americans spend 48% of their income on housing and cars, and 61% of Americans worry that they won’t have enough to retire.
I wonder why.
Don’t be average. Be disciplined and limit the amount you spend each month on consumer items, but especially transportation and housing since these two items will consume so much of your income.
5) Set Up an Emergency Fund
One great side effect of a dual-income household is the risk mitigation that comes with multiple sources of revenue.
Yes, if one of you loses a job, it will hurt, but not as badly as it would have if you lost all of your income.
But it’s also true that you probably now have at least two mouths to feed, two cars to fuel, at least two bodies to clothe, etc.
You need to protect all of these obligations by building up an emergency fund of three to six months of expenses in case one or both of you lose your job.
If you have a relatively secure job, then three months may be enough. If you have a job with cyclical income or you see a high level of turnover in your industry, then lean closer to six months or more if necessary.
The whole point of this fund is for you to be able to cover sudden emergency expenses or to replace income if you lose your job.
I work in an arguably secure field, but I was laid off in 2015. It was pretty shocking.
But it also wasn’t all that painful because we had an emergency fund to ride it out.
6) Don’t Do Debt (And Pay it Off)
One of the most destructive decisions newlywed couples can make is to not take debt seriously.
There are a seemingly infinite number of ways to put yourself in a financial hole using debt, and, for newlyweds, there is typically no shortage of temptations to lure you into it.
Do your best to avoid falling into the debt trap by setting up wise guardrails for yourself.
First, avoid taking on debt for depreciating assets like furniture, appliances, consumer goods, and even cars.
These debts take an extra toll because they couple interest with a loss in value of the asset, exposing you to a situation where you may owe more on the item you borrowed money to buy than it’s worth.
Instead, if you must use debt, use it for items that produce a return on investment, like education or a house.
Of course, whenever possible, I recommend paying cash, even for cars.
And, if you’ve come into your marriage carrying debt, let me encourage you to pay it off. It will be a great challenge for you and your spouse to focus your attention on while also clearing a path for your financial future.
7) Talk About Goals
I am a goal-oriented person.
It seems like I have an easier time facing a challenge if there’s some measurable personal benefit on the other side of it.
However, in a marriage, you may find that your personal goals are a source of conflict for you and your spouse if they are in competition with each other.
Most often, this is seen when one spouse is a saver and the other is a spender.
One of you may be thinking of using your extra cash to pay for a vacation, decorations for the house, or tools for the garage, while the other wants to put everything you can into saving for the future.
The only way to avoid inevitable conflicts like these is to talk about your priorities and compromise so that both parties are at least getting some of what they want.
And, thinking bigger, if you have big-time life goals that will require significant time and money to plan, you should talk about those too.
I’m talking about things like a vacation home, a multi-week tour of Europe, a classic car collection, or starting a business.
If these are things you really want to work toward, let your spouse know so the two of you can try to get there together.
8) Get Life Insurance
Another boring but necessary topic to address is life insurance.
If there is anyone depending on your income to support their way of life, then you need life insurance.
This is quite obvious if you have children, but what about before?
Well, for newlyweds without kiddos, I would say you only need life insurance to the extent that your spouse is counting on you.
One very common way I see this is if you’ve bought a home and depend on two incomes in order to make the monthly mortgage payments.
Could your spouse keep that up without your income? If not, then you need life insurance.
Ninety-nine times out of a hundred, term life is going to be the best value for you. This is true as a newlywed and probably for the rest of your life.
I am not a fan of permanent (whole life) insurance.
One thing to keep in mind is whether or not you will have kids. The younger you are, the cheaper term life will be for you.
You may want to pull out your crystal ball and try to predict how long you’ll need a term policy to lock in a low rate while you’re relatively young.
The other option is to add more coverage once you have kids or drop your original policy and start over.
I have done both, and the insurance company was eager to make the process easy for me each time, so even though you may initially sign up for a long term, it’s not as if it’s carved in stone.
9) Set Up Estate Plan & Name Beneficiaries
Now that you’re married, you should make sure your spouse is the primary beneficiary on all of your investment accounts, retirement accounts, pensions, and pre-existing life insurance policies. (Don’t forget about the free one you have at work.)
Also, you should have a basic will to clearly declare your spouse as the beneficiary of your estate, even if the laws of your state are written so that your spouse is the beneficiary without a will.
Also, if you have kids, you need to nominate custodians for them if something should happen to the two of you at some point.
10) Save & Invest
Last, and most certainly NOT least, you need to be saving and investing if you aren’t already.
If you are younger newlyweds then you may feel like you’re poor.
I can empathize. I felt the same way when I got married.
However, you are incredibly wealthy in terms of time.
You absolutely must harness the power of compounding interest early on in your marriage to harvest its full effect.
This goes back to establishing boundaries in your budget so you have money left to save and invest.
Below you can see the value of one dollar that is saved and invested for anywhere from 1 to 50 years.
Every dollar you save at 25 will be worth $34.76 when you reach age 60 and $95.80 when you reach age 70!
If you wait until you’re 40 to start saving, that same dollar will only be worth $7.60 at age 60 and $20.94 at age 70.
The effects of compounding interest are exponential.
Don’t wait. Make sure you prioritize saving for your future now and make it a permanent part of your financial life.
Wrap Up
For a comprehensive, step-by-step approach to financial wellness in your marriage, please check out The Next Dollar Roadmap, which charts a course from negative net worth all the way to financial independence.
We also have it available in video form on our YouTube channel.
Thanks for your time. God bless and take care!
