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7 Things All Newlyweds Need to Do With Their Money, Stat
This past April, I finally finished a project that took a year and a half, way too much money, and more stress than the human brain should be expected to handle. Yes, reader, I married him. The wedding was wonderful, and so is my husband, though it's still weird to call him that. But now we're left with this anxiety-inducing void: After so many months of planning a wedding, we need to put our pent-up energy toward a new project.
All of the options seem intimidatingly grown-up. Do we buy a house? Do we just squirrel away our money for future childcare years down the line? Or do we blow it all and travel around the world for the next six months? Can we even afford any of this?
Like true millennials, my new husband and I spent days Googling around for what to do. And the advice was so wide-ranging, it was hard to figure out any concrete steps. Some websites insisted I needed to freeze my eggs and focus on my career, no matter how much the procedure costs, and others said to hide my money in case of an inevitable divorce. Neither prospect was too cheerful.
So I called a group of experts, from financial advisors to family lawyers, and it turns out we have a lot of work to do just to get our affairs in order. A lot of the steps newlyweds should take involve long, difficult decisions about death, divorce, and debt. (Good times!) But all of these conversations are incredibly important, and can help establish a secure and happy future. Here are seven things I learned.
1) Not married yet? Get a prenup.
Signing a prenuptial agreement, also known as a premarital agreement, is probably the least romantic thing you can do before getting married. You have to lay everything out on the table, from your credit card debt to your financial goals for the future, and you have to figure out what you'd like to happen if the marriage goes south. It's not fun, but experts say it's the most important thing you can do for your marital future, even if neither of you has a ton of money. Prenups aren't just for the Donald Trumps of the world, and experts recommend nearly everyone get one.
When people hear the phrase premarital agreement, that means 'we're planning for divorce.' It can be really intimidating," says Nicole Sodoma, attorney and managing principal at Sodoma Law in Charlotte, North Carolina. "Marriage is a partnership, and you are investing in each other and you are investing in that partnership. It is a taboo subject but it is definitely one that should be had."
Prenups aren't just for the Donald Trumps of the world, and experts recommend nearly everyone get one.
A prenup can include all kinds of things, but most importantly, it lays out the financial assets that both you and your fiancé bring to the marriage. That includes financial accounts, retirement savings, businesses you or your family own, and debts. (Hello, student loans!) Once you lay everything out on the table, then you need to decide how you will handle those finances, both during the marriage and in case of divorce. For example, if you have crazy grad-school debt, will your future spouse help to pay them down? And if she does, will she get reimbursed for those payments if you guys divorce? What happens if your fiancé's rich aunt leaves him a lot of money? Does that belong to him, or to you both as a couple? People generally think of alimony as something that enters the picture when you have kids, but prenups can also settle whether alimony—with or without offspring—would be paid if you and your fiancé were to split up.
If you didn't get a prenup prior to marriage, the standard laws in your state will apply if you file for divorce. But if anything major happens in your lives, or your new spouse surprises you with some secret credit-card debt, you can sign a similar postnuptial agreement, to give you some much-needed peace of mind.
2) Sort out your benefits.
The first thing you need to do is to work out your insurance. Does it make more financial sense for one of you to enroll in the other's health insurance program, or is it cheaper to remain on your own plans? Even though I thought my insurance plans were great, my husband's plan offered the same coverage for far cheaper, so I switched to his. But make sure you do this ASAP, because both of us only had one month after getting married to make these changes. If you have a qualifying "life event," you have a specific window to change your insurance plans. Check with your provider about your deadlines, because they can differ; if you have a plan via the Affordable Care Act, for example, you have 60 days. Also, make sure your insurance providers know you're married; sometimes, like with car insurance, that will lower your premiums.
Even though I thought my insurance plans were great, my husband's plan offered the same coverage for far cheaper.
Then, update your beneficiaries. Check your retirement plan, your insurance plans, and any other accounts, and make sure that your spouse is your beneficiary, assuming that's what you want. That means that if you die, the funds in each account will go to your husband or wife. Usually these plans will also ask for a secondary beneficiary, in case you and your spouse die at the same time. Even your basic checking and savings accounts will have beneficiary information; sometimes you have to go to your local branch and ask for a "transfer on death" form, but it's doable.
3) Get your estate in order
You need to complete a will, a power of attorney form, a healthcare power of attorney form, and a living will. Generally, you can knock all these things out in one go; most lawyers who handle this kind of thing will do them all for you.
- Awilllists where you want your assets to go after you die, names guardians for your kids, and names an executor who will carry your wishes out.
- Apower of attorneyform designates someone to act in your interest if you become incapacitated, and a healthcare power of attorney form lets them make important medical decisions on your behalf.
- Aliving willspells out the end-of-life care you want, like whether you want to be resuscitated if your heart stops.
Make sure you and your spouse know what the other wants, and remember who you designated for each account. "Many times, couples haven't had that discussion, and one of them becomes incapacitated," says estate planning attorney David DuFault, a colleague of Sodoma's. "The husband arranges the insurance policies and then he dies, and the wife has no idea who to contact. Communicate and stay on top of that."
4) Combine finances—at least a little.
This is the part where I especially found conflicting information online. But most experts I talked to recommended putting some, but not all, of your money in joint accounts. Figure out what you both consider joint expenses, like rent, utilities, food, and cat toys, and pay for those with your joint account.
Pay into that joint account in proportion to how much money you make—so if you make twice as much as your husband, contribute twice as much to the joint account. Then, use your own money to buy stuff you want, whether that's a weekly manicure or a surprise birthday gift for your spouse.
And a quick aside about death, because that seems to be a theme here: there are two kinds of joint accounts, one with the right of survivorship, meaning the money will pass to the co-owner of the account if you die, and one with the right of convenience, which means it might not do that. Different banks and states have different rules on this, so just know which type you have.
5) Talk about your money goals and make sure you're both working toward them efficiently.
Do you want to go back to grad school? Does your wife want to quit her high-paying job for a nonprofit gig she'd love? Could one of you envision being a stay-at-home parent? Being part of a married couple is all about supporting one another's goals, but before you do that, you need to establish what's financially realistic.
Make a specific appointment, maybe after a few episodes ofOrange Is the New Black, to talk about the assumptions you may have internalized from dear old Mom and Dad. "Start talking about how your parents handle money," says Pam Friedman, certified financial planner and author ofI Now Pronounce You Financially Fit. "Was mom responsible for the spending and dad responsible for investments? Did they pay for your college? What would you do if you won the lottery?" Like it or not, our childhoods taught all of us different lessons about money, and we all become our mothers at some point anyway, so it's important to compare notes before making big decisions.
Talk about the assumptions you may have internalized from dear old Mom and Dad.
Then pick one person to keep tabs on the bills, says Beth Kobliner, author ofGet a Financial Life: Finance in your 20s and 30s. "Select one person to be responsible for balancing the books, whether you write checks or use a debit card, just to make sure you're keeping track of what's going in and what's coming out," she says. "If you both try it can be really tricky, because you each assume the other is on top of it."
Cindy Wilson, director of the field consulting group at financial firm TIAA, also recommends setting up specific savings accounts to move toward your goals. If you have kids, you could consider contributing to a 529 savings account aimed toward their college education. And if you want to buy a house within the next few years, consider a less-risky account instead of the stock market.
6) Keep your stuff safe in case of divorce.
Ready for another downer? Keeping a separate account will also help you out a ton in case of divorce. "One thing that every person in a couple should have is their own bank account and their own credit card," Friedman recommends. That will help you establish credit independent from your spouse. Ideally, that bank account should have at least three to six months of emergency savings.
Wilson also recommends making a record of all the assets you came into the marriage with. Print out statements that detail your account statuses right before you tied the knot, and file them away. And if you're concerned about specifics, talk to a lawyer or financial advisor about whether you should keep those assets separate or commingle them with your spouse's money.
7) Make sure you're clear on your tax situation
A nerdy milestone in your married life will be the first time you file taxes together. According to Kobliner, it will make financial sense for most couples to file jointly, but the "marriage penalty" sometimes kicks in if each spouse makes a vastly different amount of money. The spouse who makes much less money may miss out on key tax deductions if he files jointly. (If this applies to you, choose "" when you file your taxes. )
And above all, make sure you don't leave the discussions about money behind after year one of your marriage. DuFault recommends reviewing your legal and financial agreements every three to five years, or whenever any major life events happens, like the birth of a child or the death of a relative. "Be committed to be open and transparent," Friedman adds.
Video: FilterCopy | Things Newly Married Couples Do | Ft. Shriya Pilgaonkar and Veer Rajwant Singh
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