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Your First Financial Steps Together: A Newlywed Checklist
Getting married is an exciting journey filled with new beginnings. Beyond the wedding planning and honeymoon bliss, there's another crucial, yet often overlooked, adventure awaiting you: merging your financial lives.
It's a significant step, and knowing where to start can feel overwhelming. But don't worry, you're not alone! This comprehensive financial checklist is designed to guide newlyweds through the key steps and considerations to help build a strong financial foundation as a couple.
Start with Open Communication: The Foundation of Your Financial Partnership
Before you dive into the specifics, the most important step is to have an open and honest conversation about your individual financial values, habits, and expectations. This foundational discussion is crucial for building a strong and transparent financial future together. Talk about your relationship with money, how that’s evolved, and your financial aspirations.
Step 1: Decide If You Want To Combine Finances
There are benefits to combining finances - with some studies pointing to improved relationship happiness - but there are certainly advantages to keeping finances separate (partially or completely). To make the decision that’s right for you and your spouse, here are some things to consider.
Benefits of Combining Finances:
- Transparency: Sharing accounts can facilitate open visibility and communication and reduce the risk of financial surprises or misunderstandings.
- Teamwork & Accountability: Viewing money as “ours” rather than “yours vs. mine” can foster alignment on financial goals, shared accountability and a more equitable distribution of responsibilities.
- Simplified Finances: Managing money from a single pool makes it easier to track and pay bills, budget and monitor spending, and file taxes jointly.
- Potential Savings: Couples may benefit from lower banking fees, better loan terms, and credit-building advantages.
Benefits of Keeping Finances Separate (Partially or Completely):
- Financial Autonomy: Maintaining separate accounts allows each partner to make purchases and decisions independently without needing to consult or justify those decisions.
- Different Spending Habits: Separate accounts can prevent friction and allow couples to spend guilt-free on their interests while still contributing to shared goals.
- Career and Income Disparities: A higher-earning spouse may prefer some financial independence while still contributing fairly to shared costs.
- Debt Protection: If one partner has significant debt, keeping finances separate can prevent the other from feeling burdened by that liability.
Step 2: Decide on the Level of Combination
Again, there is no one-size-fits-all approach, but here are some approaches you can take:
- Fully Combined: All income goes into joint checking and savings accounts, and every expense comes from shared funds
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Hybrid Approaches:
- Keep individual accounts but contribute (proportionally or 50/50) to a joint checking account for shared expenses
- Keep individual accounts but contribute (proportionally or 50/50) to a joint savings account to help reach a financial goal.
- Keep finances separate but occasionally transfer money to cover shared costs
- Fully Separate: Each partner retains full control over their income and spending
Step 3: Create Your Budget and Set Shared Financial Goals
If you want to proceed with combining finances, one of the first practical steps is to get a clear picture of your combined income and expenses.
- Set shared goals and get specific. Are you saving for a down payment on a home, a dream vacation, or early retirement? Having clear goals will keep you motivated.
- Create clear spending categories. Consider using a framework like the 50/30/20 rule to allocate 50% of your net income to Needs, 30% to Wants, and 20% to Savings & Debt Repayment. This simple framework can provide a starting point for your joint budget.
- Pick a budgeting tool you’ll actually use. Maybe that’s Mint or YNAB (You Need a Budget) or maybe it’s a simple shared Google Sheet.
Step 4: Open Joint Bank Accounts
Once you have your budget in mind, it's time to set up your joint banking structure.
Open a joint checking account for daily expenses (like rent, utilities, and groceries) to simplify shared bill payments, and open a joint savings account for your shared financial goals, such as saving for a home or vacations.
Before opening new accounts, however, take inventory of all your existing individual accounts. Pro tip, most banks will offer the option to add an authorized user to your existing checking or savings account, giving both spouses joint access. This can often be done online or via the mobile app, but some banks (e.g. Chase and Bank of America) require a visit to a local branch with both spouses present.
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Step 5: Set Up Direct Deposits and Automatic Payments
Efficiency is key when managing joint finances.
- Update your direct deposit information so your paychecks (or a portion of them) go directly into your new joint account.
- Decide how you'll contribute: Will it be proportional based on income, or a straightforward 50/50 split?
- Set up automatic bill payments for all your shared expenses from the joint account. This ensures timely payments and helps avoid late fees.
Step 6: Establish a Joint Credit Card
Understanding joint credit - both the advantages like combined borrowing power and the shared liability and impact on both individuals’ credit scores - is an important step in building a shared financial history.
While not all banks offer true joint credit cards, many will allow users to add an authorized user to an existing account for joint access. This can often be done online or via the mobile app, but some banks (e.g. Bank of America) require a visit to a local branch.
If one partner has better credit, consider using their credit card to maximize rewards. To compare top credit card offers, explore offers here.
Step 7: Evaluate Merging Debt (If Needed)
Debt is a common part of many people's financial lives. As a couple, you'll need to decide how to approach existing individual debts, be it student loans or personal credit card debt.
Decide on a unified strategy (e.g., debt snowball or avalanche method) and clearly define who is responsible for payments.
Look into options like consolidating or refinancing loans to secure lower interest rates if it makes financial sense for both spouses. To shop personal loan rates, explore offers here.
Step 8: Evaluate Your Investing Strategy as a Couple
Building long-term wealth together is an exciting prospect. Discuss your risk tolerance and investment goals as a couple to align your strategies. Are you comfortable with aggressive growth or do you prefer a more conservative approach?
Consider automating transfers to investment accounts to consistently build long-term wealth.
To explore investing platforms, from online trading to financial advisor platforms, see offers here.
Step 9: Update Your Tax Strategy
Your marital status has implications for your taxes, so you’ll need to adjust your tax withholding on your W-4 Employment Form to reflect your new marital status. If you are married and both work, read our step by step guide on how to update your W-4.
Next, decide whether to file taxes jointly or separately. In many cases, filing jointly offers better tax benefits (like higher deduction thresholds and potential tax credits), but here are some real life scenarios that help inform the best filing status.
If and when you are ready to file taxes jointly for the first time, consider reading our guide to help get you started.
Step 10: Update Your Insurance Strategy
Reviewing your insurance policies as a couple can lead to significant savings and better coverage.
- Healthcare Insurance: Compare employer-sponsored health plans and check if one spouse's employer charges extra for spousal coverage.
- Auto Insurance: Consider combining auto policies for multi-car discounts.
- Renters/Homeowners Insurance: Consider bundling auto and home insurance for potential discounts.
- Life Insurance: Consider getting life insurance to allow your loved one(s) to be financially secure. Remember, life insurance is generally more affordable when you are young and healthy.
To shop insurance offers and identify potential savings, click here.
Step 11: Update Your Beneficiary Information
This is a critical, yet often overlooked, step to protect your loved one.
Why this is important: If your beneficiary information is not updated to reflect your spouse, your money or assets may go to a parent, a sibling, an ex-spouse, or your estate (depending on who was originally listed). This could create unnecessary legal hurdles and distress for your spouse.
Places to update beneficiary info: Personal financial accounts (banking, investments, retirement), employer benefits (HSA, FSA), and insurance policies.
Beyond beneficiaries, discuss broader estate planning. Consider our 12 step estate planning checklist to dive deeper into wills, trusts and powers of attorney. These legal documents ensure your wishes regarding finances and healthcare are clearly documented and legally binding, protecting both of you in unforeseen circumstances.
Ongoing Financial Check-ins: Nurturing Your Financial Partnership
Your financial journey as a couple is ongoing. Schedule regular financial meetings (e.g., monthly or quarterly) to review your budget, track progress towards goals, discuss any financial concerns, and make adjustments as needed. Consistency in these conversations strengthens your financial partnership and ensures you stay aligned.
Final Thoughts
Taking these financial steps together as newlyweds will not only set you up for greater financial stability but also strengthen your bond through shared responsibility and open communication. It's a journey, not a sprint, so celebrate your progress and support each other every step of the way!
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