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A Guide to Money and Marriage

Money issues are the third leading cause for divorce


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Wedding season is upon us yet again, meaning many couples are preparing to take the plunge and say, “I do.” With so many exciting plans to make before and after tying the knot – choosing a venue, shopping for rings, honeymooning in the Bahamas – one thing that’s often overlooked is financial planning.

While not exactly romantic, effectively managing finances is critical to a long and happy marriage - according to the Institute for Divorce Financial Analysts, money issues are the third leading cause of divorce.

To feel better prepared to tackle everything from joint bank accounts to budgeting and taxes, use this as your five-step guide:

1. Have 'the Money Talk'

When you were dating, most conversations about money were probably limited to deciding who would cover the morning coffee run. But it’s uncommon that partners have identical philosophies on spending and saving. Before you tie the knot, set aside time to have a deeper discussion around how you want to approach finances together – How much do you make and spend? Do you save for retirement? Do you have student loans you’re paying off? Do you help cover costs for a family member?

Being married means personal factors like excessive debt can affect both of you and knowing that ultimately helps you identify strategies to overcome obstacles when planning your goals. Unfortunately, no one gets a "mulligan" in life, so establishing an open line of communication and understanding how your partner’s past financial experiences have influenced their views on money will help lay the groundwork for a lifetime of financial bliss.

2. Map Out Your Goals

Next, have some fun determining what goals you share and want to work toward together. Start big and broad: Do you want to buy a house some day? Have children? Take an African safari? Knowing what big-ticket items are on your “want” list can greatly inform how you get there and the financial decisions you’ll make both in the long, medium and short term.

Create a list and have a plan for all your different goals. Owning a house could mean making lifestyle changes or paying off debt to bring up your credit score. If you’re a saver and the other is spender, figure out how to create habits where the spender is able compromise. Within your plan, it’s important to have one singular budget you can revert to when planning out your goals.

3. Decide If/How to Combine Bank Accounts

Traditionally, newlyweds combined all their money into one joint checking account. But today, couples are customizing their approach to sharing money and financial responsibility.

Since there’s no one-size-fits-all approach, couples can agree to a plan by considering three scenarios: (1) one joint bank account, (2) joint and separate accounts or (3) separate accounts. Combining finances into a joint account is the simplest route and, by default, dictates how you pay for bills. If you’re trying to strike a balance, you can establish a joint account to cover shared expenses while keeping separate accounts for your personal purchases.  How much of your paychecks you decide to put into the joint account will be up to you. For those who prefer an independent approach, you could simply maintain separate checking accounts.

When discussing how to combine accounts, factor in each other’s strengths to figure out what role you will each play. For example, one person may be good at managing short-term expenses, such as keeping track of monthly costs and paying the bills on time, while the other prefers to keep tabs on long-term goals, like saving for retirement. Splitting up roles and responsibilities will ensure you both have a clear stake in your financial journey.

4. Make a Budget Together

Few things sound more daunting than making a budget, but if you’ve already discussed how much you make, how much you tend to spend and your joint goals, then you’re most of the way there.

To start, add up all of your fixed costs (rent, monthly insurance premiums, car payments, etc.), your monthly financial goal contributions (the amount you’re putting towards savings or a debt, an emergency fund, etc.) and your account of irregular costs (quarterly taxes, car registration fees, holiday gifts, etc.). When you add up your irregular costs, divide by 12 to calculate the monthly amount you should budget.

Next, figure out your flex spending by subtracting your fixed costs, your goal contributions and your irregular costs from your combined monthly take-home pay. Finally, when you’ve calculated your flex-spending number, decide where you need to adjust your budget or spending to ensure you’re able to enjoy life today while also saving for your future.

5. Figure Out Taxes and Insurance Needs

When you become a family of (at least) two, your tax status and insurance needs will change. Filing taxes is a joint effort, and you must file taxes as either married filing jointly or married filing separately moving forward. Couples tend to lean towards married filing jointly due to the tax break, however there are a few exceptions that are important to review with a tax advisor. Keep in mind that both parties are responsible when you file a joint return, regardless of who prepared it.

Just like reevaluating your taxes, it’s important to reassess your insurance needs, including health, life and disability. Once you’re married, you get a special enrollment period to change your health insurance, so compare benefits to evaluate if you should consolidate or maintain separate plans.

Marriage also means someone is depending on you for support. Figure out a clear plan for the costs that need to be covered in case of a major life event, like illness or the sudden passing of a spouse. For example, disability insurance can help replace a portion of your income in the event that you become sick or injured and can’t work.

Managing money successfully is essential for a lasting and happy marriage, and it starts with being open and honest with your partner. There is no way to avoid disagreements over money altogether, but aligning on a joint and comprehensive financial plan in advance helps. Lastly, having an unbiased third-party to offer guidance based on experience and expertise can be invaluable in navigating and prioritizing your future financial goals. Marriages are meant to celebrate happy and healthy unions, so don’t let financial stress come between you and your one and only.

This publication is not intended as legal or tax advice.  Financial Representatives do not give legal or tax advice. Taxpayers should seek advice based on their particular circumstances from an independent tax advisor.

Emily Simones is an insurance agent at Northwestern Mutual. Emily can be reached at 303-300-5503 or emily.simones@nm.com

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