Merging Finances In Marriage

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Money Strategies

Develop a budget together that covers your needs and some of your wishes. Set a realistic spending plan that considers your living expenses, shared priorities and an agreed-upon amount for each individual to use as needed.

Set short-term, intermediate-term and long-term financial goals together. Clarify what you want, how much money you need to save, how you plan to accumulate the money and how long you expect it to take.

Establish a protective net before you begin to save for the future. Medical, property, liability and life insurance should be agreed upon early in the marriage. Preplanning allows you and your new spouse to feel safe as you move forward in life.

Save and invest. As soon as you are engaged, begin saving. Pay yourself first. Try to set aside 10 percent to 15 percent of your net pay. Reduce current expenses. When you get a salary increase, contribute more to your employer-sponsored retirement plan and IRA accounts (not to exceed IRS guidelines). Make automatic deductions from your pay into a savings or investment account, or through regular automatic transfers from your pay or checking account into a savings or investment account.

Establish an emergency fund equal to 3 to 6 months of basic living expenses. This financial cushion can soften the blow of an extended illness, an unexpected job loss or other emergency. Make sure these funds are located in a safe and liquid account.

Pay debts in full as quickly as possible. If one or both of you have debt when you come into the marriage, pay the debt balance as quickly as possible. Both of you will be affected by each other’s credit history if you apply for future loans together.

Resist the temptation to overspend on big purchases. Choose a measured approach by planning, saving and then buying what you need when you can afford it.

Commit yourselves to regularly reviewing your finances. What is working? What is not working? Does your budget need an update? What progress have you made toward your financial goals? What new goals do you want to set?

Plan for tax day. Consult a tax accountant about filing your personal tax returns and which is most advantageous — married filing jointly or married filing separately.

Find and reduce financial duplications in employee benefits, insurance policies and financial accounts.

• First, compare each employer’s policies about matching 401(k) contributions. If one individual’s employer matches at a higher rate, you may want to consider maxing out that individual’s 401(k) up to the matching percent first.
  
  
• If you both bank at one financial institution, make sure your various accounts — individual and joint — are connected at the bank or credit union. The connection could help qualify you for lower service fees, higher interest rates on savings or other valuable benefits.
  
  
• Check with your insurer for possible savings. Combining individual auto policies into one could get you a discount. Review your insurance policies to see if they still meet your needs. Review your coverage limits on combined personal property.
  
  
• Check for other duplications including subscriptions, memberships and services, such as Internet, phone and cable.

Decide how you want to hold title to property you own together. Assets, including real estate, investments and other financial accounts, can be owned by a married couple in more than one way. State laws dictate how the ownership of some marital assets is treated. Your own financial circumstances and wishes can also affect your decision.

Because of the legal consequences, consult an attorney for advice about the ownership arrangement for these assets that is right for you and your spouse. Depending on applicable state law, property that the two of you own together may be titled in one of several ways: tenants in common, joint tenants with a right of survivorship or tenants by the entirety.

Tenants in common each own a separate piece of the property rights, although not necessarily an equal share. Each individual has the right to sell, give away during their life, or at death through a will, their own part of the property without affecting the other tenant’s ownership rights to the property.

Joint tenants with a right of survivorship each own the entire property, not just a part of it. If one joint tenant dies, the surviving joint tenant automatically receives the deceased tenant’s interest in the property without being subject to probate. Joint tenants must generally both consent to the sale of real property or to any loans made against it.

Tenants by entirety is a form of ownership recognized by 30 states for legally married couples who own real estate. Neither tenant can transfer property while both are alive without the other’s permission. When one tenant dies, however, the surviving tenant automatically receives the deceased tenant’s ownership rights. Real estate is the most common property owned in tenants by entirety. However, depending upon state law, bank and securities accounts can also be held in this type of registration.