Now that the wedding bells have rung and you and your spouse have settled into newlywed life, it’s time to talk money. The task of combining your funds into one account can seem intimidating, especially since money is often one of the biggest challenges couples face in marriage. But there’s no time like the present to set goals and assess where you stand financially – so you can look forward to a happier, more secure future.
Here is some practical financial advice and money saving ideas to consider as your navigate through your first years of marriage.
Establish a joint account. It can be hard for new couples to merge finances immediately after the wedding, but it’s still a good idea to establish a joint bank account. Expenses that usually need to be covered by a joint bank account include houses, cars, child care, utilities, etc. Settle on what bills will be paid out of this account ahead of time. It’s equally as important for a couple to outline a monthly budget for the joint account, as a solid plan will keep you and your partner on the same page.
Tackle debt. Determine you and your partners’ outstanding debt up front and put it all out on the table for consideration. This includes credit card payments, personal loans, student loans, etc. Consider paying these types of debts out of your shared account. Even if one spouse accumulated more debt before the marriage, alignment on your financial goals, such as getting out of debt, should help prevent any potential conflict here.
Plan for the future. Think about what you want from your retired life and talk about it with your partner. It’s a good idea to start saving for the future now, even if it’s only a small amount. If you wait until your forties or fifties, you’re going to have to save a lot more of your income. Make sure you’re both setting aside money for retirement, enough to take full advantage of any employer match on your respective savings plans.
Speaking of the future, do you and your spouse plan on starting a family? If the answer is yes, you’ll both need to get on the same page with respect to your finances. There’s plenty of financial obstacles to consider when planning for a baby such as childcare costs, supplies and diapers, nursery furniture, and most importantly, post-secondary education costs.
Once the baby arrives, parents can consider setting up an education savings plan for their child. In Canada, Registered Education Savings Plans, or RESPs, can serve as a helpful way to invest in a child’s future education and are offered through organizations like Children’s Education Funds Inc. (CEFI). Once a child is born, parents can set up an RESP and contribute to the RESP, with the money growing tax-free for as long as it stays inside the plan. The sooner you start to invest in your child’s future education, (think 18 years) the more you can save.
Build your household emergency fund. You’ll want to have at least a small buffer for emergencies at all times, but it can be difficult to stockpile several months of replacement income when you’re first starting out as newlyweds. Any amount helps, but continue to pay off those high interest rate credit cards as a first priority.
When it comes to building a financially secure future as newlyweds, the main factor is to be proactive about saving money. By working together and being honest, you can avoid many of the financial pitfalls that new couples often face.