Financial Tips For Newlyweds
Financial Tips for Newlywed Couples
Now that you are settling in with your new life together, the health of your marriage can be impacted by financial issues. The Institute for Divorce Financial Analysts reports that financial matters contribute to 22% of all separations, making money the third leading cause of divorce.
You want to ensure you are both on the same page in your marriage when it comes to your finances. Following the nine tips below will hopefully help avoid too many arguments over money in your new marriage. Being open with your communication about goals and dreams for your future is one of the most important steps to take.
If you have not had a conversation and laid out financial plans yet, it is best to do it early, not only for your marital success but also for your financial success going forward.
Tip #1 Clear Communication
We all have our own ways of handling money. It's critical that you sit down as a couple and discuss any differences you have as far as spending habits and balancing accounts, as well as being clear about your salaries or sources of income and any assets or debts you each may have.
D. Shane Whitteker is the owner and chief broker at Principle Home Mortgage in State College, PA. In addition to open communication, he recommends both sides in a joint financial situation exercise patience with the other.
“Don’t be unreasonably strict with each other about money.,” Whitteker says. “A reasonable approach to a budget and goals helps to keep the plan on track.”
Tip #2 To Save or Not to Save
Once you understand what money is coming in and what must go out, you need to talk about how you'll spend any extra, for example, putting it into a savings account or making some investments.
You should also be clear about your collective strategy for any expensive purchases like a new car or getting a mortgage to buy a house. Having a clear understanding of the basics of handling your money can help to avoid miscommunications and arguments later on.
Tip #3 Goals and Dreams
Unfortunately, many couples do not get this right ahead of time and often find later on in the marriage that their goals are not in sync. If you have not taken time to have a serious conversation about your goals or dreams for your marriage, it is best you do it now while the marriage is still young.
Some of the key questions you should ask each other to make sure you are on the same page moving ahead or need to make some concessions are:
- Should we plan to buy a house? If so, when and how much do we need for a down payment? When should we talk to a local mortgage broker?
- Are we planning to have children in the near future?
- Do we need to save for a newer or larger car?
- Is there anything we really want to do, like traveling, that we need to save for?
- Should we set up an emergency account and if so, how much?
- How should we start paying down any debt?
Thinking about buying a new home? According to Whitteker, one way to plan for your financial future is to consider the home you’re buying as an investment.
“Consider a home that will be a future rental when buying real estate. This is a very underrated way of building wealth in the future,” Whitteker says. “Property value typically increases over time and if you are renting a home out the tenant will usually cover the expense of the home. Also consider a multi unit for your first home. Small things like this can make a huge difference 15 years down the road.”
Tip #4 Budget Time
“I think the most important aspect of coupled finances is having a budget,” Whitteker says. “It takes some discipline but a budget allows for future planning for things like buying a home or paying of debt.”
Budgets can be difficult but it is harder to meet your goals if you do not have one and stick to it. A budget that you set up together will keep you from having arguments over money issues later.
Here are some issues that you can discuss when planning out your budget:
- Who contributes how much to the household expenses? Depending on what your salaries are, you can choose one salary to be the main contributor and the other's salary to go into savings or nonessential expenses.
- Who is going to handle the banking and keep track of spending and saving? You can even decide to sit down once a week or once a month and do this chore together.
- How will you handle the debts that each brought into the marriage? Maybe one of you has car payments while the other is paying off credit cards or student loans. It is important that you discuss these types of money issues so you can hopefully avoid arguments about it later.
Tip #5 Joint Accounts or Keep Them Separate?
There is no right or wrong on this issue. Some couples opt for joint checking and savings accounts and some decide that they’ll each keep their own. While it is easier to pay the bills and handle household expenditures out of one joint account, some couples feel more secure if they each have their financial independence.
Whitteker believes honesty is vital in a coupled financial situation.
“Be honest with each other about finances,” Whitteker says. “This isn’t as much about getting ahead as it is about building a good foundation of trust which in turn helps you to get ahead financially.”
One way to handle it is to have one joint account for the household expenses you have as a couple while each keeping a separate account for nonessential, personal purchases. When you get your paychecks, you each deposit your agreed amount into the joint account.
Regardless of what your philosophy is toward marital bank accounts, it is important that you discuss this issue and have it settled early in the marriage to avoid any future complications.
Tip #6: Open an Emergency Account
You never know what the future holds. Things happen unexpectedly all the time. Suddenly, one of you is injured or ill and out of work or the company you work for closes and you are out of a job.
Natural disasters can cause financial disasters too if you are not prepared. Some areas are prone to flooding, others have hurricane seasons and still others deal with harsh winters. Sometimes these natural occurrences wreak havoc on a house or vehicle. Having about six months' worth of income in a special account can save you many headaches in case of emergencies.
Tip #7 Planning for Large Expenditures
There are some purchases you may need to make that, although necessary, have options for lowering the costs. For example:
- You can buy a pre-owned vehicle instead of a brand new one. You can opt for fewer options to lower the cost.
- When looking to buy your first house, be sure you’re not getting in over your head with a home that’s in disrepair, or one you can barely afford.
- If your washer and dryer go on the fritz, instead of running to the nearest specialty appliance store, look for bargains and special sales at department stores. Some large departments stores have "scratch and dent" sales too where you can save a good deal of money.
- If you need new household furnishings, decide ahead of time how much you can afford to spend or what you should spend, and stick to it.
Planning to make large expenditures is something that requires mutual agreement and consent before you actually make the purchase.
Tip #8 Plan Ahead for Retirement
When you are ready to retire, you need to have an income. Knowing ahead of time that you are financially secure for your later years will give you peace of mind.
You may decide to make some investments or pay your house off early and put that mortgage payment instead into a special savings account for your retirement years.
Another option to consider when planning retirement finances is a reverse mortgage. This type of mortgage allows some homeowners to receive regular monthly payments, in addition to being able to keep their homes for as long as they live in them.
Tip #9 Consulting Financial Experts
Yes, there are fees for hiring a financial advisor. However, it can be an investment that is well worth the peace of mind you’ll gain. If you’re pondering your long term financial security or considering home mortgage options, a financial advisor or mortgage broker is an expense you may want to consider.
“Meet with a financial planner and possibly a mortgage broker if a home purchase is in your in near future,” Whitteker says. “Getting an outside perspective really helps to understand how to lay out your goals together. Meet with the financial planner even if you don’t meet with the mortgage broker.”
The Bottom Line – Invest in Your Marriage
Investing time and communication in your marriage gives you a better foundation for success than simply winging it as you go. Considering how many marriages end in divorce over money problems, it makes sense to try to ensure you can handle problematic money issues as they arise.
Making sure you have a solid understanding of how you will handle your household expenses on a daily basis avoids many headaches and heartaches as you build your new life together.
To learn more about how mortgages can help your financial future, contact State College mortgage company Principle Home Mortgage.
What is happening with mortgages, and how does the mortgage picture look going into 2023? We discussed the matter with State College mortgage broker D. Shane Whitteker.