How to handle your finances when you’re about to get married

Financial dos and don’ts for wedding-bound couples

Ah, summer, a.k.a., Wedding Season. Flowers are in bloom, the sun is warm, and love, as that groovy ’70s song goes, is in the air. But wait! If you listen closely to many young couples’ premarital conversations, you won’t just hear them muttering sweet nothings (or, you know, see them texting heart-eyes emojis). You’ll also hear discussions about the decidedly unromantic and, let’s face it, often buzz-killing topic of personal finance.

According to The Knot’s latest Real Weddings Study, 55% of couples say combining finances is their top goal for their first year of marriage. Why are so many couples eager to merge accounts when they tie the knot? One possible explanation: People are marrying later. The median age for a woman to marry is 28, and for a man it’s 30. Compare that to twenty-five years ago when women married at 24 and men at about 26.

How we handle money says something about who we are and what we want from life.

Those years make a big difference. Couples are entering marriage with more assets—or more liabilities. And with age, you can argue, also comes wisdom. Many young people are well aware that money is a top cause of marital woes, and they want to do whatever they can to avoid the financial strains—and spats—they may have seen their parents go through.

My own parents were married for 65 years and never fought about money. That’s not to say they didn’t argue; all couples do. But they were on the same page when it came to financial values. In our family, as long as everyone was healthy and getting a good education, everything else took a back seat.

How we handle money says something about who we are and what we want from life. No wonder people tend to choose mates with similar credit scores. (“Likes: walks on the beach, sunsets, scores above 750.”) But that doesn’t mean you and your betrothed are going to see eye to eye on all things financial. A new study from Fidelity found that 67% of millennial couples surveyed said they fight about money, while 33% said they have difficulty talking about budgeting and spending.

Don’t despair. You just need to take the time to have honest and open money conversations about where you are—and where you want to be—when it comes to savings and debt. Here’s my four-part agenda for having that financial heart-to-heart with your sweetheart.

1. Marry your savings—the smart way.

According to a recent Bankrate survey, 77% of couples who were married or partnered off said that they shared at least one bank account. I generally suggest people keep individual accounts as well as open a joint account. The big issue with joint accounts—obvious, but significant—is that both people have access toall of the money. The nightmare scenario (which happens more often than you think): The marriage doesn’t work out, and one spouse cleans out the bank account. Or, in a less evil but no less maddening scenario, your free-spirited partner decides you should take up #vanlife—and spends your (joint) life savings on a used VW camper.

One benefit of a joint account? You can use it to save for mutual goals. Having 10% of your paychecks go automatically into a high-interest online savings account is a great way to build up a home down payment. Pooling your funds in a standard bank savings account will probably also qualify you to meet the minimum for free checking.

2. Draw up a plan for tackling debt.

For many couples, that means student debt—which, as recentsurveyshave found, has become a major factor in millennial couples delaying marriage. If you or your partner owe a significant amount, decide whether both of you will contribute to paying it off—and how much you’ll each kick in. Will your payments come out of that joint account, or are you on your own? Consider helping your partner refinance his student loan debt. If you have a relatively high income and credit score, you can cosign for a consolidation loan for your fiancé at a lower interest rate through a company like SoFi or CommonBond. This could save thousands of dollars in interest.

Student loans can’t be transferred to another person, but credit card debt can—and it might make sense to do so. Here’s what I mean: Let’s say your partner owes a ton on a card with a sky-high interest rate. If your credit is better, consider applying for a card with a lower rate and then transfer his debt to that. (Just make sure you aren’t the one stuck paying it off—and curb your partner’s plastic habit.)

In general, it’s smart for both of you to know the rules for paying off debt: Automate, so you don’t miss a payment and damage your credit score. Don’t carry a credit card balance from month to month. And pay off your highest-rate debt first. 

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3. Think ahead—way ahead.

Your golden years might be decades off, but now is the time to come up with a retirement strategy together. Unlike savings accounts, joint versions of IRAs or 401(k)s don’t exist. But you can still come up with a cohesive retirement strategy as a couple. There are two big decisions to make: What share of salary will you each aim to save? And how will you invest the money?

The answer to the first question is straightforward: Aim to save 10% to 15% (if you can). If you have a 401(k) with an employer match, definitely contribute at least to the matched level, if not the annual maximum of $18,500 as of 2018. Annual limits on other retirement accounts are also set in stone—IRAs, for example, are capped at $5,500 per person as of 2018. If one of you has a higher salary, that partner might contribute more to your collective retirement fund, or you might go half and half. Then there’s how you’ll invest your money. Less risky mutual funds usually mean slower, steadier growth, while higher risk stocks offer bigger rewards along with steeper declines during market downturns. If you’ve ever been to an amusement park together, you probably know which of you is the roller coaster type. Gauge your partner’s tolerance for risk, and agree on what you’re comfortable with. Me? I like low-expense, low-maintenance index funds. 

4. Discuss your tax strategy.

Couples can file one of two ways: jointly or separately. Joint filing often results in lessof a tax burden—what’s known as a “marriage bonus.” But it can sometimes lead to paying more tax than you would have filing separately, a phenomenon known as the “marriage penalty.” You can use a marriage penalty calculator to see whether you and your spouse which is right for you. (Here’s one from the Tax Policy Center.) Oh, and plan to spend some extra time figuring out your taxes. Marriage can mean changing names, addresses, or even tax brackets, all of which can complicate the filing process. If you need a refresher on tax basics, check out my handy visual guide.

As I said, just because you’re soulmates doesn’t mean you’re going to be a perfect money match. When disagreements arise—and they will—it helps to use technology as your referee. Turning to a dispassionate source like a financial calculator or budgeting app can often squelch an argument. Say you both want to buy a home. Checking out what you’d actually need to save each month to come up with a down payment lets you make decisions based on numbers, not feelings.

On final note: If you just got engaged, this is a great time to think about cutting back on wedding costs. More than a third of couples turn to credit cards to fund their wedding, according to The Wedding Report. (Not good!) Plus, the average couple goes more than $7,000 over budget, according to The Knot. Starting off a marriage with thousands more in your pocket is perhaps the best wedding present you can give yourselves.

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