Smart Moves for Life's Big Events:Tying the Knot
As you plan your lives together, come up with a strategy to merge your finances, too.
It's best to start talking about money before you get married to avoid any big surprises afterward. And keep the lines of communication open so that your finances continue to mesh smoothly. In the Thrivent Financial/Kiplinger Survey of Family Finances, nearly a third of couples said that they wish their partner would talk more about money issues.
Set your goals. You may need to find middle ground on certain financial values -- how much risk to take with your investments, how vigorously to save, how freely to use credit. Set aside a portion of each paycheck to fund your highest-priority goals -- perhaps saving for a house, paying down debt or socking away money in a 401(k). And set some ground rules upfront. For example, you may want to consult with each other before making purchases above a certain amount. Start stashing money in an emergency fund with the goal of accumulating at least six months' worth of essential expenses.
Merge accounts (strategically). Combining some of your finances is a plus. For example, when you're buying a home, you often need two incomes to qualify. Some couples prefer to keep separate checking accounts but one joint account for household bills. See whether you can qualify for a better banking package now that you'll have more money in the bank.
Review your investments. Look at taxable brokerage accounts, mutual fund accounts and retirement savings to make sure your combined portfolios are still diversified and coordinated to reach your goals. At Morningstar.com, "Instant X-Ray" will give you a quick breakdown of your asset allocation, the fees you pay and where your investments overlap. To simplify tracking and taxes, consider shifting some of your accounts to the same mutual fund company or brokerage firm.
Decide who will handle the bills. Will one of you be in charge of paying all of the bills each month, or will you divvy up the task? Using a budgeting site, such as Mint.com, can help you focus your spending and organize your accounts. You can automate bill-paying through your bank.
Coordinate benefits. If both of you have health insurance through work, see whether it would be better if you or your spouse switched to the other's coverage. You can also mix and match -- for example, you could sign up with your employer for health insurance but get dental coverage through your spouse's plan. Each of you may also have other employee benefits that you can extend to your spouse, such as life insurance. And don't forget to update beneficiary designations.
Check up on insurance. Do you need one another's income to pay the bills and reach your financial goals? If so, you'll need life insurance. Use the life-insurance-needs calculator to determine how much to buy. Pool your auto-insurance coverage, but don't just add your spouse to a current policy; shopping around may turn up a better deal. Adjust your renters or homeowners insurance to cover all the new stuff you've just acquired. Buying auto and home insurance through the same company could get you a discount.
Don't forget about taxes. If you tie the knot by December 31, the IRS considers you married for the full year. Ask your employers to adjust your withholding [for help with taxes and insurance, see Kiplinger's Recipes for Quick & Easy Financial Fixes. See whether you're still eligible for IRA tax deductions or Roth IRA contributions (you're out of luck if your joint income exceeds $177,000). If you changed your name, let the Social Security Administration know by filing Form SS-5.