Just married or know someone who is? Listen today for how to manage money together for financial success in marriage. We discuss financial tips for newly married couples. Here is our checklist of key steps to take for financial success and future planning:
1. Save Together: Set up joint accounts for savings with common goals like buying a house or planning trips. Consider saving a percentage of bonuses for the household and personal savings to keep individual spending flexibility.
2. Cash Flow Management: Ensure open communication about who handles specific expenses. Setting up joint accounts and agreeing on who pays what can prevent misunderstandings and financial stress.
3. Divide Financial Roles: Assign responsibilities like bill payment, taxes, and investments. Communication is crucial so both partners are informed. Even if one person manages all finances, try to make sure both people are involved in some way even if it is simply gathering required documents.
4. Set Financial Goals: Clarify and align goals, whether short-term (like buying a car) or long-term (retiring early). Working together on goals strengthens your financial partnership.
5. Legal Updates: After marriage, update beneficiaries and powers of attorney on your life insurance, 401(k)s, and other documents. Having clear, legally binding decisions in place ensures there’s no confusion about who gets what or who makes decisions if something happens.
We believe it is important to review these aspects of finances to avoid future issues and ensure both partners are on the same page financially!
Resources:
- Alliance of Comprehensive Planners: https://www.acplanners.org
- John's firm website: https://www.trinfin.com
-Find us on Facebook: www.facebook.com/friendstalkfinancialplanning
TRANSCRIPT:
Bridget: Hey John, I know somebody who recently got married, and I want to give them advice. They probably won't take it, but who knows. Let's talk about a checklist for what to do with your finances when you get married. Hi, I'm Bridget Sullivan Mermel. I've got a fee-only financial planning practice in Chicago, Illinois.
John: And I'm John Scherer. I've got a fee-only financial planning practice in Middleton, Wisconsin. And before we jump into our financial checklist for after you're married, I want to remind everybody to hit that subscribe button. That helps other people find this content on YouTube. And with that, I look forward to jumping into what to do after a person gets married. And I loved your introduction. I want to give them some advice, but we'll see if she takes it.
Bridget: They might. Okay, so let's go with the first one. Number one, continue saving together. If they haven't been saving together, we recommend saving together for the wedding, etc. But keep saving together. Make sure your savings are set up and common goals are maybe to get a house together once you have kids and/or retirement. Those are two common ones. You also might want to take a trip to Bora Bora and quit your job early or some other goals, but you’ll want to do a little soul searching for those.
John: Yeah. And when we're talking about saving together, opening up a joint account of some sort and each person kicking in some money on a monthly basis.
Bridget: Exactly. Sounds great. Very logistical. And then figure out cash flow. Tell me more about what your thoughts are there.
John: Well, yeah, you know, we've been through this before, a lot of our viewers have been, you start having kids and friend’s kids getting into this (our was your niece got married), and you go, “Hey, maybe this is stuff that I don't need anymore, but it can be really helpful for people that I care about.”
Bridget: Yeah. And just having this conversation about cash flow, like who's going to pay for what, it all sort of sounds good in advance. And a lot of people these days are living together, so maybe they've got some of those things worked out. We find that sometimes people haven't been intentional, haven't thought about, “How is this working?” And so, to sit down and talk about, well, who's paying for what and how are we gonna do this. I love that idea of putting money into a joint account, and that's where we pay our joint expenses from. Other clients do it differently.
One person pays the rent and the other pays the utilities and the food bill or whatever. But you have to have the conversation. The problems that we see come up are when couples haven't had the conversation, and one person feels like they're not getting a fair shake. And if you just have the discussion up front, that helps a lot. It doesn't eliminate all the problems, but it really helps to set a good tone for the rest of the marriage by saying, “We're going to have these conversations periodically and communicate,” because in my view, lack of communication or miscommunication is really a big part of financial stress.
Bridget: Yeah. And one tip I learned from a high functioning set of clients was that they also set up an incentive program for themselves. If you brought in more money with a bonus, then you got a certain amount of that, and then a certain amount went into the joint, and then a certain amount went into savings. So if you got a bonus half of it would come to you, and then, you know, then this 30% would go into the joint, and then 20% would get saved. That doesn't disincentivize you, and it incentivizes your spouse too.
And you can figure out whatever percentages you want or however you want to do it, but I think that makes a lot of sense. And I think it's very important for each individual to make sure they've got some money for themselves that they don't have to be accountable to their spouse for. So if they like haircuts, if they like golf clubs, if they like golf courses, whatever floats their boat, whatever they really like spending money on, they can just do that. They've got some money, and it's just discretionary for them to really enjoy and not have to be accountable to the spouse.
John: Yeah, we call that the secret account. What was that from Saturday Night Live? Their secret public journal or whatever it is. This is the secret account that everybody knows but you have to be responsible for. You have to be accountable if you want to do whatever trips your trigger. That's excellent.
Bridget: Yeah. So just make sure that's included. That's my biggest tip on that. And then figure out who's doing what. That's number three.
John: Yeah.
Bridget: So usually there’re a few functions. There's bill paying, so that's a monthly thing. And then there're investments and other financial planning things, like getting the will done, getting the insurance, dealing with your taxes. Now you're gonna have to file joint tax returns. So there's a bunch of functions that you need to do. And now you can split it up if you want to, but a lot of times still one person does it all and then the other person takes care of the car or other things. What are your thoughts?
John: Yeah, I think that's exactly our experience with things. And I just wanted to point out that oftentimes in marriages, and relationships in general, one person is more naturally inclined to take control of the financials side of things.
Bridget: Right.
John: And sometimes that person is very detail oriented and it's great for them to run the cash flow. Oftentimes we'll see sort of cash flow as one thing, bill paying, the detail oriented versus the bigger picture type. Things can be set up as two separate functions. But we encourage people to not let one person do everything when it comes to the financial side of things, meaning have at least one financial function that you handle even if you're not the financial person or that your spouse handles if you're the financial person.
Because some of the big problems come in not knowing what's going on. That's another place of miscommunication. If you're not interested, you don't need to handle the investments, but you have to be informed and aware. So for the non-financial spouse, maybe their job is to gather all the documents for the tax return. I don't want to understand all that, but I know what goes in, and I see these things, and I'm at least somewhat informed. I think that's an important function or philosophy.
Bridget: And even if one person does it all, reporting to the other person I think is important. So you have to tell the other person what's happening and keep them appraised. The best functioning couples that I see who’ve got big goals that they want to accomplish just set up a meeting, maybe over coffee or something once every two weeks or once a month and just talk about whatever it is. Again, not everybody really wants to do that, but it's a good tip. If you want to reach big goals, that's a great way to do it. Another thing that I have to say about this is that my parents switched when they retired.
John: Interesting.
Bridget: This was a good idea, because they were both inclined to do both; they were fine with both functions, investments and bill paying. And so, when they retired, they switched. I thought that was good. I haven't seen a lot of people do that, but that was a good tip.
John: Yeah, that's awesome.
Bridget: Goal setting. Don't forget that. Now we've been talking about that, but again, you want to talk about what you are trying to accomplish. And you have more financial power, and you can think a lot bigger than you can when you're single, when you have two people. So that's kind of fun. And it's one of the fun parts of being married, but it takes some communication and intentionality.
John: Yeah. And it's easy to gloss over that. Oh yeah, save for your goals. Well, wait, let's make sure that you both know what your goals are and that your goals jive. I mean it's simple, but that's the communication thing. I kind of forget about that because I've been doing it so long, but when you're both pulling in the same direction, four oars gets you there faster than two sort of a thing. That's pretty cool stuff.
Bridget: There’s a lot of power to it, and it can be a lot of fun. So it could be, okay, in addition to our 10%, we're saving for the next person's car. That's a smaller goal, but it could be a bigger goal, like we want to go someplace special, or we want to retire early, or we just want to retire, whatever it is. If you set goals for yourself, I think that can be a very meaningful part of your life together.
John: And I'll just say too, that for me personally, goals are challenging. What do you want to do and what do you want to be when you grow up? That's always been hard for me to figure out. And that's some of our work. If you have a financial planner who can help you talk through what your goals are, help you to clarify those, life coaches can do similar things, that can be really helpful.
But sometimes it's not just a matter of let's sit down and have the conversation. That can work for a lot of people, but I just want to throw out there that it's not always easy for everybody. And sometimes getting some help, getting some guidance on that from a coach, financial planner or other person like that to help you communicate some of those things that are going on can be really useful.
Bridget: Yeah, that makes a lot of sense. Okay, now we're going to get into some more legalities, so this is the do this so you're not unhappy in the future section.
John: Yeah.
Bridget: Number one is update powers of attorneys and beneficiaries, so you want to look at your 401(k)s, your pension statements, any kind of life insurance you've got out there, all the crazy little this and that things, and make sure that you've made your spouse the beneficiary. Take off your ex-husband, take off your ex-wife…
John: Take off your parents.
Bridget: Exactly. It’s time to make your spouse the new beneficiary. And tell them, because they'll be happy.
John: And that's one of those things that sounds simple. And it is functionally simple, but it's not always easy to do. We had a client who had been divorced, and I said, “Let's review your beneficiary.” And he goes, “No, we just did all that stuff.” But I said, “Well, let's take a look.” And his largest life insurance policy still listed his ex-wife as the beneficiary, which sometimes happens in divorce settlements. I said, “Oh, so I see your ex-wife is listed here; I assume that's from your divorce settlement.” He goes, “No, I had no idea.” That would have been a gigantic mistake. Some of those little things can make a big difference. Oh yeah, that's right. Now I probably want my money to go to my spouse.
Bridget: Yeah. And then the other one is getting your will done. Now, we've got this last on our list for a reason. I think that it's more vital if you're single to have a will than if you're married but tell me what your thoughts are.
John: Yeah. For me, it's the beneficiaries and then the powers of attorney. The powers of attorney is, hey, if I have a stroke, I'm in an accident, something happens to me, who can make decisions for me, especially from a health care standpoint. And if that's not laid out directly, then you get the courts involved. And I remember Terri Schiavo, who was a woman from Florida, famous 20 years ago now, because she didn't have these things in place. I can't remember exactly what happened, but she was in a coma for years and years.
And the husband said, “She wouldn't want to stay like this, so we should remove life support.” And parents said, “No, we should keep her on.” And it was in courts for years. Some legal matters might make you think, “Oh that's kind of silly,” except for in situations like this. Hey, wait a minute, I want my spouse to be able to make those decisions. And when it's in writing and it's legal, then you have to think about that. So those things that aren't fun, but you gotta be prepared for it.
Bridget: Yeah. And if you don't do it, you're basically saying, “Whatever my state laws are, I'm okay with.”
John: Right. Unless my spouse doesn't agree with what the state law is or my parents don't agree, then there's going to be a fight, whereas if it's in a power of attorney, it's not that they couldn't sue, but it's really, really, really clear as opposed to well, we kind of think that this is what the law might have to say if you don't do your job sort of thing.
Bridget: Yeah. So I think when you're either single or married, having a will is a good idea. If you've got kids involved, definitely have a will.
John: Yeah. I agree.
Bridget: But if you're lazy about it when you just get married, make sure the beneficiaries are correct.
John: Yeah. Beneficiaries and powers of attorney are the two big ones that we see.
Bridget: All right. This is a great place to wrap it up. I'm Bridget Sullivan Mermel. I've got a fee-only financial planning practice in Chicago, Illinois.
John: And I'm John Scherer. I've got a fee-only financial planning practice in Middleton, Wisconsin. Both Bridget and I are taking on new clients, so we'd love to hear from you. But if you'd like an advisor in your local area who thinks similar to how we think, we're both members of the Alliance of Comprehensive Planners. And you can check out a planner in your area at acplanners.org.
Bridget: And please subscribe.
At Sullivan Mermel, Inc., we are fee-only financial planners located in Chicago, Illinois serving clients in Chicago and throughout the nation. We meet both in-person in our Chicago office and virtually through video conferencing and secure file transfer.
Comments