Merging Finances In Marriage

---

Develop a written budget — be sure to cover your needs and some of your wants.

• Gather pay statements and other income statements, check registers, bank statements, credit card statements, bills and receipts.



• Use the Budget Work Sheet to record the amounts you plan to spend for the month. Depending on your financial goals, financial planning professionals recommend saving or investing at least 10 percent to 15 percent of monthly net income.



• Total your monthly net income and subtract your monthly expenses to determine your net cash flow.



• Monitor your spending. Keep written records of your purchases and payments. Record the amounts you actually spent for the month.



• Review your plan. Compare what you spent to the amounts you planned to spend. How well did you do for the month? Did you have extra money (net cash flow), or did you borrow money by using a credit card? Look for areas that require special attention, and reduce or eliminate expenses as needed. Review your spending plan at least once each month.



• Adjust your plan. Modify expenses to reach your financial goals.

Agree upon your money management strategies.

• Decide on the use of joint or separate bank accounts.
  
  
  • A joint account can be used for family expenses: mortgage or rent, utilities, groceries and common bills.
  
  
  
  • Each person can have an individual discretionary account for personal spending.
  
  
  
• Work out a plan for payment of existing debt — do not commingle your debt — keep existing credit card and loan accounts in the original holder’s name.



• Allocate income for payment of monthly bills; mortgage or rent, utilities and insurance.



• Establish an emergency fund — save enough money to cover 3 to 6 months of basic living expenses — in case of an extended illness, an unexpected job loss or other “unbudgeted” expense.



• Build-in provisions for automatic saving and investing.



• Consider using an online bill pay tool — offered free by some financial institutions.



• Track your cash flow — know how much you are spending each month.



• Annually calculate your net worth, then revise your financial plan as necessary to meet your goals.

Update financial accounts and records.

• When merging finances the most important thing to remember is honesty — disclose all financial related matters to your partner.



• Find and reduce duplications in employee benefits, insurance policies and financial accounts.
  
  
  • 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 fully funding that individual’s 401(k) up to the matching percent first.
  
  
  
  • Check with your insurer for possible savings. Combining 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.
  
  
  
  • If both of you bank at the same 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 fees, higher interest rates on savings or other valuable benefits.
  
  
  
  • Check for other duplications including subscriptions, memberships and services, such as Internet, phone and cable/satellite.



• Change beneficiary on insurance policies and company pension plans.



• Order a copy of your credit reports.
  
  
  • Your spouse’s credit score will affect your ability to get joint credit.
  
  
  
  • Talk about how to improve your credit scores.
  
  
  
• Evaluate existing saving, investing and tax arrangements.
  
  
  • Establish an investment money market account for holding emergency funds.
  
  
  
  • Determine level of contribution to tax-advantaged retirement accounts such as: private employer 401(k), military Thrift Savings Plan (TSP) or Traditional/Roth Individual Retirement Account (IRA).
  
  
  
  • Update retirement account beneficiaries.
  
  
  
  • Calculate appropriate withholding amount on federal and state income taxes.
  
  
  
  • Notify the U.S. Social Security Administration of your marriage to ensure eligibility for your spouse’s benefits.
  
  
  

Establish a plan for regular saving and investing.

• As soon as you decide to get married, begin saving. Pay yourself first. As a goal, save 10 percent to 15 percent of your net income.



• 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 investing account, or through regular automatic transfers from your checking account into a savings or investment account.

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. Depending on applicable state law, property that the two of you own together may be titled in one of several ways, for example:



• Tenants in common each own a separate piece of the property rights, although not necessarily an equal share. Each individual generally 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. There is no right of survivorship that transfers the decedent’s interest to the other co-owner.



• 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 co-ownership that applies only to 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. (Not all states recognize this form of ownership.)



• Because of legal consequences, consult an attorney for advice about the ownership arrangement for your assets that is right for you and your spouse.

Discuss financial matters periodically.

• Agree upon a formal time, perhaps weekly or monthly, to go over financial matters.



• Review cash flow and discuss budget adjustments.



• Evaluate progress you have made in achieving your short-term, intermediate-term and long-term financial goals.



• Establish new goals based on recent life events.



• Review your credit report at least once each year — consider a review during federal income tax filing time when all your financial documents are available.



• Work as a team.