One of the most important tasks for any newly married couple is getting their financial house in order, and the basic components of this financial merger process are knowledge and communication.
Begin by determining your net worth as a married couple. To do this, make a list of your assets, together with a list of your liabilities. Subtract your liabilities from your assets, and the result is your total net worth.
Examining your net worth helps clarify your overall financial picture. If you have a high net worth, then you will want to continue doing together what the two of you had done separately in the past. If your net worth is low, you can use this information to map out a strategy to secure your financial future.
The next step is to discuss and prioritize your short and long-term financial goals. Together, determine how the two of you will accomplish these goals. This means deciding how much you will need to save, and what types of investments are best suited to achieving your objectives. Finally, you need to ask yourselves if accomplishing one goal will ultimately help you accomplish another.
Creating a monthly financial budget is necessary if the two of you are to stay on track in working toward your goals. List all sources of income and then make a list of all expenses. Calculate and compare your total expenses and your total income. The result should be that you spend less than you make. If the reverse is true, review your expenses and see where you can cut. Keep in mind that a budget is a work-in-progress, so review it periodically and modify it to adapt to your changing financial circumstances.
Another issue you will have to deal with as a couple is whether or not to merge your bank accounts and credit cards. Consolidating your funds into one bank account makes it easier to apply for loans and manage funds. It also cuts down on maintenance fees. However, when two people are writing checks and making automatic withdrawals from the same account, it’s more difficult to keep track of how much money is being spent and how much is available. Having a joint account also means that either spouse is financially vulnerable if the two of you decide to split up, because one spouse can deplete the account without the other one knowing about it.
Merging your credit cards means that you are both responsible for the charges incurred. However, even if you maintain separate credit cards, you still might be liable for your spouse’s debt. In some states both spouses are held accountable for the credit card debt incurred for family expenses. In community property states, a spouse may be held accountable for the other’s credit card debt if the property that underlies the debt is jointly owned.
Merging insurance coverage could be beneficial, especially when it comes to Auto insurance. Many companies offer discounts if you insure more than one vehicle with them. Also, your insurance company might give you an additional discount for covering your home or apartment, as well as cars, with them.
Taking these steps to merge finances successfully can help to keep that aspect of your marriage secure over the long-term.