Getting married and moving in with your partner is a significant turning point in both your lives. But in the process of packing up and combining all your worldly goods, things can get a little bit hectic. You may have found your dream home, but this is just the beginning – in the midst of all this excitement, you shouldn’t forget to keep a critical eye on your personal finances.
Things can get a little weird, so with that in mind, here are a few money protips to help you navigate life as a newlywed.
Clear the Air and Tell Eachother Your Debts
First things first: communication isn’t just crucial for your feelings! Openly communicating about finances is a massive step towards keeping tension out of your marriage.
Make no mistake: money is (perhaps unsurprisingly) one of the biggest causes of stress in relationships. So be honest and forthcoming with each other about your finances prior to moving in, so you can work on a plan to move forward together. That means laying all your cards out on the table. Make sure to discuss:
- Your spending habits and priorities
- What you each carry in terms of debt
- Your credit standing
- Current investments and income
- Your goals are for the future
The more you communicate, the better you’ll be able to negotiate your financial landscape as a team.
Knowing What’s Mine and What’s Yours: What’s Separate in the Eyes of the Law
The distinction between separate and shared marital assets differs from state to state. In general, assets acquired before marriage, as well as gifts, inheritance and personal injury awards are considered separate.
Most other assets, specifically those acquired during a marriage, are seen as shared. This includes retirement accounts (like IRAs or 401(k)s), businesses, properties, income and investments. However, remember that some of these assets will be assessed differently depending on whether you live in one of these common law or community property states:
- New Mexico
This can totally affect how you handle those assets, so read the links and be prepared!
Do You Share Debts Too?
Those community property/common law states I talked about earlier, on the other hand, treat both spouses as equal contributors to the family unit, regardless of individual income level, which means they divide all assets 50/50. This includes everything earned or purchased during the marriage years, no matter if the deed, title or account registration is only in one person’s name. This also means that here, debt or liabilities acquired by one spouse are shared equally by both.
Yep, that means in the event that you want to override your state’s property laws, you’ll need to hire a lawyer to draft a prenuptial agreement. This will stand in court even if you move between states that apply different property laws.
‘Till Death (and Taxes) Do Us Part
Tax laws can be complicated, so make sure to do some research to determine whether you should file jointly or separately as a married couple. It will highly depend on factors such as children, rate of income and even nationality.
Filing jointly means your tax liability will likely change, pushing you into a lower or higher bracket. However, even with a higher tax rate, there are benefits. Married-filing-jointly couples receive exemptions, deductions and credits not available under other statuses. Adjusting your W-4 to the married rate or claiming the additional allowance also reduces the taxes withheld from your paycheck. Plus, spouses are also allowed unlimited tax free gifts to each other, which can affect how you handle larger assets.
Add it All Up – Together
One of the most proactive steps you’ll need to take is to – for real – sit down and make a mutual budget. This will keep both of you accountable to the shared responsibilities you’ll now have, so you don’t fall into debt.
Even if you decide to put one of you in charge of the finances, it’s still important to create a plan together. List all of your expenses, most of all including:
- Rent or mortgage payments
- Food and entertainment
- Car expenses
- Loan and credit card payments
- Savings and retirement contributions
Discuss individual needs or preferences and make sure you come to a compromise in areas where you disagree. You’ll also need to decide whether you’ll split everything equally, or have each person contribute a percentage to the household based on their earnings.
Save for a Rainy Day
Finally, build an emergency fund! This is critical in keeping your marriage stable when life gets rocky, and is severely lacking on most people’s ledger. It is guaranteed to come in handy when the car breaks down, the basement floods or a family emergency occurs. It will also protect you during job losses, serious accidents and extended illnesses.
There’s no way to predict what or when these events will crop up, but one thing is for sure: something always does. Make this a priority so an unexpected life event doesn’t end up driving your marriage into the ground.
Moving into a new home together as newlyweds can get a bit daunting as you’ll have to do things a bit differently. Make sure you take the previous tips into consideration when planning out your finances for your new life together – it’ll make many of your future issues a lot easier to deal with so that you can focus on each other and your marriage.