Tying the Knot? 9 Financial Considerations for YouJuly 25, 2016
In all the hustle and bustle of planning your dream wedding, don’t neglect to discuss how your finances will change once you’re married.
Before and after you tie the knot, you must establish budget guidelines upfront with your fiancée, and decide how you will best manage a financially responsible future. In order to not run into issues with unmanageable wedding costs, financial baggage on either side of the marriage, or divorce settlement issues from previous marriages, you and your spouse need to have a candid conversation about how you will blend your assets.
9 things to consider
- Wedding costs- According to a study by The Knot last year, the average U.S. wedding cost around $30,000 in 2015. This number is around $5,000 more expensive than five years ago, so it has become more and more important for you to decide how much you and your fiancée would like to spend on rings, how elaborate you’d like your wedding to be, how many personalized themes/elements you’d like to incorporate in the ceremony and reception, and when it would make the most sense to hold the ceremony (different prices depending on the demand in different seasons—Fall weddings are gaining popularity as of late).
- Joint or separate bank accounts?- After tying the knot, your financial advisor can assist in helping you decide what’s needed to combine accounts (checking, savings, money market). You can also add your new spouse to your IRA. You might prefer to maintain separate accounts for some things, but a good rule of thumb is to maintain one joint account to cover shared expenses (mortgage, car, childcare, etc.)
- Who will pay the bills? - Decide who will manage your checkbook and who will be responsible for paying bills. It helps to join together and create an annual budget, a plan for possible lay-offs, and a plan for your eventual retirements.
- Debts- How much debt are you bringing to the marriage?... What about your spouse?
- Savings- How much of your savings are you using to defray the cost of your wedding? How much is your spouse contributing? How much will you have leftover, if any?
- Credit Ratings- If you’re coming into the marriage with a less than average credit rating, make sure your spouse is aware. Consider how you might offset your (or your spouse’s) debts and liabilities moving forward.
- Employee benefits- You might consider getting rid of duplicate health care or life insurance coverage, as well as updating your insurance policies and retirement plans to reflect your new beneficiary.
- Divorce Settlements- If this is not your first marriage, you need to consider any debts you have with your ex-spouse as well as any child support obligations, alimony payments or insurance premiums that you are bound to under the terms of a divorce settlement agreement.
- Deeds, wills, and powers of attorney- Branching off divorce settlements, are there changes you need to make regarding beneficiaries on your deeds, wills, and power of attorney documents?
Our blog, “Choosing Your Tax Filing Status: Married Filing Jointly vs. Separately” is a worthwhile read. What you need to know above all else is that married filing separate almost always results in more taxes because the brackets are not in line with the single brackets and couples will be forced to divide all of their deductions as a result.
Our other blog, “Did you get Married this Year? Tax Tips for Newlyweds,” can help enlighten you and your spouse about the process of changing your name(s), updating your withholdings and coordinating your fringe benefits.
Don’t let one of the happiest days of your life be clouded by financial considerations, but make sure that your wedding is not excessively lavish if your budget cannot handle it, and be sure to have a candid conversation with your loved one about how your finances will change once you tie the knot.