3 Important Financial To-Dos Before You Say “I Do”
Getting married is one of the biggest and most important steps in a person’s life. It’s also one of the most exciting and chaotic. While you may want to spend all of your time planning every last detail of your perfect wedding day, there are other important matters that must be addressed if you want to have a healthy, long-lasting marriage. One of the most important is your finances.
Discussing your finances may be the last thing on your to-do list -- if it’s on there at all! -- as you plan your entrance into wedded bliss. However, failure to develop a sound financial plan before the wedding can place a significant strain on marriage's future. According to one study from Utah State University, marriages are 30% more likely to end in divorce if partners fight over their finances on a weekly basis. To avoid any financial misunderstandings, and ensure you’re on the same page money-wise, here are some important points to discuss, consider, and complete before you walk down the aisle.
1. Discuss the past. Sit down with your partner and discuss your financial histories with each other. This can be a challenge if you are dealing with money problems, but it is necessary to be open about any outstanding debts or financial issues. After all, you can't plan for the future if you haven't made an honest accounting of the past. As a part of this discussion, you and partner should get copies of your respective credit reports. This will give you an unbiased assessment of your current situation, and it will provide you with useful information that will be needed to develop a comprehensive financial plan. For instance, if one of you has a low credit rating, you may need to delay the purchase of a new home until you can establish a better credit score.
2. Dream of the future. Once you’ve discussed your financial pasts, you can move on to your future financial dreams and aspirations. It’s inevitable that you and your spouse will have different ideas about the definition of the perfect married life and your financial future. You may have your sights set on a quiet life in a large house in the suburbs, while your partner may be dreaming of a downtown condo and frequent overseas vacations. Creating a budget will enable you to address these differences and develop a plan to reach your mutual and respective financial goals. Although the budget process may seem monotonous, it’s actually a great way to develop a road map for your future life together.
3. Deal with taxes. The IRS will be very interested in your upcoming marriage – and not so it can send you a nice gift! Because the government treats couples differently from individuals for tax purposes, the decisions that you make as a married couple could have a profoundly negative impact on your after-tax income...if you fail to analyze your unique circumstances beforehand.
You need to decide your tax-filing status once you get married. Although filing jointly may seem the more convenient way to go, it may not be the most advantageous for your pocketbook if both you and your spouse are high-income individuals. This is due to the dreaded “marriage penalty,” which could inadvertently push you into a higher tax bracket. This problem is exacerbated if you fail to adjust your tax withholding after marriage, which could lead to an unexpectedly large tax bill – and possible penalties – when you file.
The financial implications of marriage are endlessly complex and constantly changing, so it is important to address these issues before you start your life together. However, by planning ahead, you can ensure that your finances will act as a strong foundation to support your marriage.
