Marriage

Marriage is a merger of lifestyles, emotions, families, financial histories, and situations. While your financial history doesn’t change, you will have a lifetime of new financial experiences together. Successful marriage partners make a financial commitment to share money, resources, and to manage their finances together. They talk about money, set up strategies and plans for saving money, budgeting, and spending. Marriage partners who do these things avoid putting unnecessary strains on their marriage.

Marriage and Financial ChallengesFinancial issues are among the leading causes of divorce and bankruptcy, which can push partners further into debt. While you can’t totally prevent financial challenges, you can minimize the strain financial issues can cause on your marriage by spotting money problems early and immediately attacking them to prevent disaster. If you have not yet done so, talk to your partner about each other’s practices and beliefs about managing money. If one is a saver, and the other is a compulsive shopper, seek balance. The key is to work together to obtain an agreement about how to best manage your finances.

For those of you considering marriage, take time to get to know your potential spouse’s financial history. Swap credit reports. Share expectations about managing money and financial goals.

Ways to Make your Marriage Financially HealthyMarriage is a big adjustment and the challenges of marriage and money are complex because of the interactions of love, personal upbringing, emotion, and practical realities. Here are eleven financial investments you can make in your marriage that will yield greater peace and prosperity whether you are just contemplating marriage, already starry-eyed honeymooners, or struggling to mesh your money management styles after years of marriage.

• Be Open and Supportive of Each Other – Each person should know how much money, debts, and assets the other has. One person will earn more than the other but when you marry, what really matters is the combined household income. Value a stay-at-home spouse as much as the working spouse, and share financial responsibilities if you both work. Agree to discuss all major purchase decisions before making a commitment. Avoid arguments about money. Instead, attack the core of the problem. This may be the lack of financial communication between partners, or the lack of willingness to work together to build a strong and stable financial future together. The trust and respect that led to your marriage will also help you weather financial storms.
• Develop a Financial Plan - Financial planning is a very important ingredient for a financially healthy marriage. Start by obtaining consensus on realistic financial goals for the future and the best way to achieve them. Then, develop a household budget to ensure your income covers your expenses. Make sure savings is a part of your plan – pay yourself first. Be sure to also include your financial goals in your budget. If your financial goals include making investments, seek advice from a qualified financial advisor.
• Discuss Banking and Bill Paying Strategies – Every couple will have a different answer about what works best: separate or joint checking accounts, where earnings are deposited, and who handles the payment of bills. Don’t rush to merge finances and financial transactions. Take time to build trust and get to know each other’s spending habits. Who does what is not as important as the agreement reached about the right financial path to follow. If you start on the same page, you can work together to create the financial future that you both envision.
• Treat Your Household Like a Business – Appoint a “Household Chief Financial Officer” responsible for inspecting and reviewing the family budget and finding ways to cut expenses. Avoid debt by using cash more than credit. Consider having only one or two credit cards for the entire family, and celebrate each time you pay off a debt! For those couples not yet married, it may be worthwhile to think about a prenuptial agreement (“Pre-nup”). One reason some couples enter into a Pre-nup is to protect the assets that one spouse brings into the marriage from the other spouse’s creditors, and you may have other issues to address as well.
• Schedule Regular Financial Conversations –Set aside a regular day, time, and place to talk about money and financial plans before difficulties arise. During these “State of Our Financial Union” meetings, you should review your financial goals to see how much progress you have made. This is also the time to review your existing budget and revise it if necessary. If you are having financial challenges, discuss ways to overcome each challenge.
• Live Within Your Means – Your life together is unique. “Keeping up with the Jones” is not necessary. Bank it instead of flaunting it. Enjoying that which is most important to your own emotional, spiritual, and financial maturity seldom costs much.
• Start Saving Early – It is never too early to start saving, planning for a family, elder care, and retirement so that you may enjoy your life more fully. Start saving as soon as you can even if it is only a small amount. Regular monthly contributions are the key to success particularly if the amount you decide to save is automatically deducted from your paycheck and deposited in a savings account or a retirement savings plan. For more information about saving for retirement, visit our Retirement web page. Try our savings calculators to figure out how much you should save for retirement, college funds, etc.
• Cut Down on Spending – Even if you and your partner are both in good financial condition, it is good to reduce your spending to cover big ticket items like buying a house, car, or going away on a dream honeymoon or a vacation. When times are tight, it is better to limit spending to the cash you have rather than rack up the credit card charges.
• Pay Off Debts – Do your best to rid yourself of debt before marriage, but if this is not possible, be frank and honest about the debts owed. Agree to take on no more debt unless both parties agree to accept it and pay it off together. This avoids “surprises.” Use the debt buster tool to devise a plan to rid yourself of debt faster, so that you can begin to invest in your new life and financial goals together!
• Manage Your Credit Score – Make your household and individual debt payments on time. Avoid late payments and charge-offs, because they can negatively impact your credit score. To learn about what impacts your credit score visit the Experian web site.
• Take a Financial Education Course Together – Improve your understanding of financial strategies and tools by taking our Building Your Wealth online course. In this course, you will learn how to start planning for your first house, children’s college education, retirement, and family emergencies.

Financial Management and ChildrenScholars from UCLA and Yale University conducted a recent study that showed economic and financial stress in the family affects a child’s emotional and behavioral problems, including impulsive and anti-social behavior. When you agree to handle your financial matters carefully and wisely in front of your children, you achieve better results. And, they will likely copy your behavior and attitude toward money management. Plan ahead and positively include your children in discussions that teach them good money management sense. Better yet, teach your children about managing money by setting up a savings account in their name at an early age. Once they become teenagers, consider opening a checking account in their name and teach them how to balance a checkbook.

Estate PlanningWhile many of us would like to live forever, the reality is that no one does. Having a plan in place before you pass away is one of the best gifts you could leave behind for your loved ones. Estate planning is a process that involves your assets (your property) and the various forms of ownership and title that those assets may take. Estate planning also addresses your future needs in case you ever become unable to care for yourself. If you fail to plan ahead, a judge will simply appoint someone to handle your assets and personal care. And, your assets will be distributed to your heirs according to a set of default rules known as intestate succession instead of following your wishes.

It is important that you seek advice before you develop your estate plan. Wills and trusts are legal documents, so the best source of information is a qualified attorney. Other professionals may also be helpful to you such as certified public accountants, life insurance salespersons, bank trust officers, financial planners, personnel managers, and pension consultants. Here are a few tips for you to consider while developing your estate plan.

Wills
At a minimum, everyone should consider having a will. After you die, the provisions of your will determine who will inherit your property, who will become the guardian of your children, and who will wrap up your financial affairs. A will is a traditional legal document which:

• Names individuals (or charitable organizations) who will receive your assets after your death, either by outright gift or in a trust.
• Nominates an executor who will be appointed and supervised by the probate court to: manage your estate; pay your debts, expenses and taxes; and distribute your estate according to the instructions in your will.
• Nominates guardians for your minor children.

Most assets in your name alone at your death will be subject to your will. Some exceptions include securities accounts and bank accounts that have designated beneficiaries, life insurance policies, IRAs and other tax-deferred retirement plans, and some annuities.

Revocable Living Trusts
Depending on the value of your assets, you may want to consider a revocable living trust. In some cases, it will partially substitute for a will. With a revocable living trust (also known as a revocable inter vivos trust or grantor trust), your assets are put into the trust while you are living, administered for your benefit during your lifetime, and transferred to your beneficiaries when you die—all without the need for court involvement.

Most people name themselves as the trustee in charge of managing their living trust’s assets. By naming yourself as trustee, you can remain in control of the assets during your lifetime. In addition, you can revoke or change any terms of the trust at any time as long as you are still competent. (The terms of the trust become irrevocable when you die.)

In your trust agreement, you will also name a successor trustee (a person or institution) who will take over as the trustee and manage the trust’s assets if you should ever become unable to do so. Your successor trustee would also take over the management and distribution of your assets when you die.

A living trust does not, however, remove all need for a will. Generally, you would still need a will—known as a pour over will—to cover any assets that have not been transferred to the trust. You also nominate guardians for your minor children in your will.

Powers of Attorney
If you are unable to make legal decisions because you are incapacitated, someone will need to make these decisions for you. You need to decide who this person will be in advance. You name them as your agent or attorney-in-fact, but many people call this giving someone power of attorney.

There are two main types of powers of attorney. A durable power of attorney for finances gives a person, or people, authority to manage your finances and other legal affairs for you. The power of attorney can be effective now, or become effective only upon your incapacity. It can be long-term or short-term and allows the party who has power of attorney to use your money to take care of you, sign your tax returns, handle your investments, and other important matters.

A health care power of attorney (often called advance health care directive) allows the person you designate to make healthcare decisions for you if you are unable to make those decisions for yourself. For example, you can name someone as your health care power of attorney to decide on health care options when you cannot, and ask doctors to turn off your life support systems if you have indicated in your document that is what you would want under those circumstances.

You should consider consulting with an estate planning attorney to determine your estate planning needs and the best plan for your specific situation.

Start Planning Now Strong marriages plan for their financial success and the success of their children. If you have children, don’t forget to nominate a guardian to supervise and care for your children (and to manage their assets) until they are 18-years-old, in the event you become unable to do so.

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