Categories: BUSINESS & FINANCE

Financial Planning for Newlyweds

For many newlyweds, even those who lived together before tying the knot, combining finances is a challenge. In a perfect world, you and your fianc will have talked about money before the wedding and will simply have to implement your financial plan now that you are married. In reality, many couples don’t face the financial facts of life until after they wed. If you are among them, consider these financial tips for newlyweds.

Talk. Set aside some time when you are both relaxed and won’t be interrupted to talk about financial issues.

Be Ready to Compromise. As you begin to talk about financial issues, you may discover that you and your mate have different perspectives on money. Perhaps one of your is a spender and the other a saver. As a result, compromise is going to be a necessity, so try not to start the conversation without rigid ideas about what must be. Ultimately, the best financial planning solutions may be those where each of you gives a little and gets a little.

Be Honest. Lay your financial cards on the table, especially when it comes to bad news, such as debt or a poor credit score, since these can have a significant effect on the financial decisions you will make as a couple.

Start with the Basics. Start your financial planning discussion with the basics including bank accounts, division of income and bill paying. Decide what bank accounts you’ll have, such as a joint account only or a joint account and personal accounts; how your income will be divided (if you have joint and personal accounts); and how you will handle bill paying. How you handle these basic decisions will tell you a lot about how you make joint financial decisions.

Make a Simple Budget. Budgeting is no fun, but taking a stab at projecting income and expenses is a useful exercise, since it can help you set your financial priorities.

Be Smart about Debt. If you and your spouse have debt, such as student loans or credit card balances, handle with care. Be sure to make all payments on time and in full. If you are able to pay down your debt more quickly than required, pay off the highest-rated debt (usually credit cards) first.

Save for Emergencies. Make putting money in a rainy day fund one of your financial priorities since financial emergencies are inevitable.

Start Planning for Retirement. If your employers offer 401(k) retirement plans, start contributing as soon as you can afford to, since time is your greatest ally in planning for a comfortable retirement. If your employers offer matches for some 401(k) contributions, try to set aside at least enough to earn the matches, since this is like free money.

Don’t Overlook Insurance. If you are on a tight budget, you may have to prioritize when it comes to insurance. Obviously, if you have a car, you must have auto insurance. In addition, health insurance is a necessity, even if you both are in good health, since an accident or unexpected serious illness could be devastating financially. Renter’s or homeowner’s insurance also is important, as is disability insurance, which will replace a portion of your income if you can’t work for an extended period of time due to illness or injury. Unless you have children or one of you is unable to work, life insurance is less important. If you do purchase life insurance, you can get the most coverage for your money with a term policy.