Getting married is a time of excitement and joy. You are joining together as newlyweds to build a new life, combining your hopes and dreams into a shared future. You are also merging your finances, making it is essential that you consider how to adhere to smart financial planning practices as you embark upon your new lives together.
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The following four considerations can help you start off on the right financial footing. Make sure to devote some time to thinking of how you can work in tandem to save money, set financial goals, pay off any existing debts, and whether or not you should file a joint tax return.
How Can Newlyweds Save Money?
As you begin to design the contours of your joint finances, building a budget is always an advisable step. This will allow you to take an accurate accounting of your shared income, and where you might be able to reduce costs and save money.
Many financial advisors suggest following a 50-30-20 strategy, whereby you are using 50% of your income for necessities, allowing 30% to be devoted towards wants, and saving 20% of your income for the future. Whether you decide to follow the 50-30-20 rule or another one, these guidelines will help you to live within your means.
While it is not easy, saving money is remarkably straightforward. It requires you to grow the difference between what you are making and what you are spending. You can do this via a number of avenues, such as by taking on a side hustle to increase your income or figuring out creative ways to decrease your non-essential expenditures.
You may have done this in the past as an individual. Now is the time to change your mindset to do it as a family.
What Are Your Financial Goals?
Getting married does not change your financial ambitions, but you are no longer free to make untethered choices about the future without considering how they impact your partner.
Make sure that you discuss these together, being open and honest about the joint path you are planning on pursuing. Are you planning on growing roots in the community where you are currently living, or hoping to travel the world for a few years before settling down?
Regardless of your chosen horizons, creating a plan is a vital step towards concrete actions that will allow you to get where you want to go. It will allow you to budget accordingly (see above), while helping you limit the monies you are devoting to items which are not part of your long-term plans.
Make sure to decide on a threshold for purchases that require a joint review, which can prevent major disagreements going forward. For instance, depending on your circumstances, you and your spouse can agree that any expense over $500 should be discussed beforehand. This has the added benefit of forcing you to justify any prospective purchase, both to yourself as well as for your spouse. It is possible that this process may also help you realize that you do not really need it, saving both money and regret.
Set aside time to regularly review your finances together, using these sessions to think about your future plans and how to reach them.
How Will You Pay Off Your Debts?
The debt cycle can be a vicious one, both for individuals and for families. Even if you come into the marriage without debt, your spouse may have some. This will impact your plans, so make sure you are openly approaching these obligations together.
Though legally you do not automatically assume your spouse’s debts, building a joint future means addressing past liabilities. Credit card debt can cause particularly painful wounds. Many credit card companies compound these monies daily, which can make them grow at a particularly fast clip. Student loans–especially public ones–are a different entity all together, but even here it is important to make sure that these payments are line items in your monthly budget.
Breaking free of debt will allow you to pursue your financial ambitions unhindered, a necessary step before you can begin to accumulate savings or qualify for a future mortgage.
Should You File a Joint Tax Return?
Couples who get married by December 31 have the option of filing a joint tax return for that tax year. For many, this often makes the best financial sense, as filing together tends to offer greater tax breaks and deductions (as well as saving both the time and hassle of filing two separate tax returns).
However, everyone has their own unique tax situations, and your scenario might be one in which both you and your spouse have large individual deductions. It is always a good idea to consult with a tax professional, who can help make sure that you are pursuing the strategy that maximizes your tax savings.
Conclusion: Combining Financial Forces
Marriage is a contract between two individuals who have agreed to join forces and walk down the path of life together. This includes finances, making it of the utmost importance to regularly discuss monetary decisions and how both of you can help support each other and your newfound family unit.
Every couple and relationship has its own unique set of dynamics. Successful ones are based on a common denominator of trust, openness, and planning.
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