Practical steps to combining finances after marriage
If you do decide to merge your finances, there are a few practical steps to take before you combine your assets.
Decide how you will fund your joint account
First, it’s crucial to go over how money will flow in and out of the joint account so there are no surprises. Couples have options to choose from here, too, such as opting for automatic funding and deductions to pay your bills, or perhaps just using the account to pay for specific purchases.
“You can decide whether you want default funding, meaning both of your paychecks get deposited in the account and then the money gets siphoned out to separate accounts, or maybe there’s a set amount of dollars that’s expected to go into the joint account to manage operating expenses each month,” Baustian explains.
Create a joint budget and track expenses
Next, come up with a joint budget for your account. If you’ll both be transacting from the account, both parties should be aware of how much money you will allot to different spending categories, from entertainment and groceries to short- and long-term savings goals.
It may also be important to decide on an amount you both feel comfortable having in the account in case of emergencies, with both parties agreeing not to let the account fall below that number. Better yet, consider setting up a separate joint emergency fund in a high-interest savings account.
Ensure your estate plans are updated
If you’d like your new spouse to be the beneficiary for any assets if you were to die, update this information now, in addition to putting estate planning documents in place. “At a minimum, no matter your income, everyone needs a will, healthcare directive and financial power of attorney in place,” Baustian says.
Having these documents in place can help your spouse and family in the event that something happens to you or you become unable to make financial decisions or manage your account.
Baustian also notes that trusts can be helpful in many circumstances to help avoid the probate process—what can sometimes be a long, costly, and public situation. “As your wealth grows, or if children enter the relationship, then trust planning does make a lot of sense,” Baustian says. “Having your assets in the name of a trust helps your family or people who are settling your estate in navigating the orderly distribution of your assets without having to incur the court costs or attorney fees associated with the probate process.”
Decide whether a prenuptial or postnuptial agreement is necessary
Baustian encourages couples not to shy away from prenuptial or postnuptial agreements, especially if one or both are bringing substantial assets to the relationship. “I think prenups get a bad reputation,” Baustian says. “I see these as tools that can help you navigate your financial partnership.”
If you come into a marriage with existing property or a portfolio of stocks you’ve received as part of an inheritance, for example, you’ll want to clarify how you treat those assets.
“The prenup can be a great place to gather that information, share it in good faith with each other and create an agreement of how you’ll treat those separate assets should things not go as planned,” Baustian says.
Should you combine finances and bank accounts before or after marriage?
If you do plan to combine your finances and create a joint account, you may be wondering about ideal timing to make the merge. Should you combine your finances before walking down the aisle? Or is it OK to wait until you’ve sent out the thank-you notes and settled into your new life together?
Just like your financial goals and plans, the timing of merging finances is unique to every couple and dependent on several different factors.
Merging finances early on can help build trust and transparency in the relationship, as well as making it easier to work together toward your financial goals. This can be the case if you live together before you tie the knot.
But if you know it will take a while to come up against a major shared purchase together, such as buying a house, there may not be a huge rush in creating that joint account.
“The timing may be unique for each couple, but in general, when you start to have more combined expenses than separate expenses, that’s when it’s likely makes the most sense to combine your finances,” Baustian says.
Ensuring financial harmony after marriage
Creating a solid financial partnership starts with being open and honest in your conversations—but those conversations aren’t a one-time occurrence. You should review and adjust your financial strategies on a regular basis to make sure you’re accounting for any changes to your income, financial goals or life circumstances.
“It’s not a set-it-and-forget-it situation,” Baustian says. “Things change, life changes, and opportunities present themselves.”
Baustian encourages people to seek professional advice if needed—since doing so can help you get on the same page about one of the most important factors in your marriage. By keeping communication open from the start and working through some tough conversations, you’ll be able to create a more solid foundation to grow your financial partnership for the future.
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