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Merging Your Money When You Marry

tuxedoGetting married is exciting, but it brings many challenges. One such challenge you and your spouse will have to face is how to merge your finances. Planning carefully and communicating clearly are important, because the financial decisions you make now can have a lasting impact on your future.

Discuss your financial goals

The first step in mapping out your financial future together is to discuss your financial goals. Start by making a list of your short-term goals (e.g., paying off wedding debt, new car, vacation) and long-term goals (e.g., having children, your children’s college education, retirement). Then, determine which goals are most important to you. Once you’ve identified the goals that are a priority, you can focus your energy towards achieving them.

Prepare a budget

Next, you should prepare a budget that lists all of your income and expenses over a certain time period. You can designate one spouse to be in charge of managing the budget, or you can take turns keeping records and paying the bills. If both you and your spouse are going to be involved, make sure you develop a record-keeping system that both of you understand. It’s also a good idea to keep your records in a joint filing system so both of you can easily locate important documents.

Begin preparing your budget by listing your sources of income (e.g., salaries and wages, interest, dividends). Then, list your expenses. It may be helpful to review your transactions over the past several months to understand your regular expenses.

Bank accounts–separate or joint?

At some point, you and your spouse will have to decide whether to combine your bank accounts or keep them separate. Maintaining a joint account does have advantages, such as easier record keeping and lower maintenance fees. Or, you could always decide to maintain separate accounts.

Credit cards

When you and your spouse have joint credit, both of you will become responsible for 100 percent of the credit card debt. In addition, if one of you has poor credit, it will negatively impact the credit rating of the other.

If you or your spouse does not qualify for a card because of poor credit, and you are willing to give your spouse account privileges anyway, you can make your spouse an authorized user of your credit card. An authorized user is not a joint cardholder and is therefore not liable for any amounts charged to the account. Also, the account activity won’t show up on the authorized user’s credit record. But remember, you remain responsible for the account.

Insurance

If you and your spouse have separate health insurance coverage, you’ll want to do a cost/benefit analysis of each plan to see if you should continue to keep your health coverage separate. For example, if your spouse’s health plan has a higher deductible and/or co-payments or fewer benefits than those offered by your plan, he or she may want to join your health plan instead. You’ll also want to compare the rate for one family plan against the cost of two single plans.

It’s a good idea to examine your auto insurance coverage, too. If you and your spouse own separate cars, you may have different auto insurance carriers. Consider combining your auto insurance policies with one company; many insurance companies will give you a discount if you insure more than one car with them. If one of you has a poor driving record, however, make sure that changing companies won’t mean paying a higher premium.

Employer-sponsored retirement plans

If both you and your spouse participate in an employer-sponsored retirement plan, you should be aware of each plan’s features. Review each plan together carefully and determine which plan provides the best benefits.

Review additional articles in our Advice Center to help guide you during this important step in your life.