Love, Marriage and Money
Financial harmony supports a happy marriage, but it’s not necessarily a path of roses to get there. Most new couples have some adjustments to make.
It starts with a conversation. Every couple is unique, and discussing finances isn’t always the most comfortable conversation, particularly if spouses have different financial circumstances. Survey results from the matchmaking service eHarmony found that the main breadwinner in a household reports the greatest amount of overall happiness in their relationship, and that 27% of respondents said they have argued with their partner about money.1 Other polls discovered that more than a quarter of young people in committed relationships keep their finances separate, and that 10% wait until marriage to reveal their income to their partner. 2
Determine your short-term and long-term financial goals and talk about them with your partner. Identifying a plan and creating a budget will lay the groundwork for decisions like buying a home, changing careers or having children. Financial plans are meant to evolve as your life circumstances change. Open communication facilitates that.
Gaining an understanding of your annual income and expenses helps you save and contribute to retirement plans. This exercise may seem simple but can be eye-opening for a new couple. Becoming aware of all assets available to you – like investment accounts, trusts and insurance – improves your ability to make wise financial choices and feel comfortable with those choices.
Give thought to how much you value having full financial transparency with your spouse regarding assets, income and how you spend your money. Identifying who will take care of paying bills, managing health insurance and filing joint tax returns can prevent misunderstandings.
Consider life insurance and disability insurance for each of you. Many young couples don’t have insurance besides what their employers might offer as a benefit. What if you change jobs or your employer discontinues that benefit? Generally speaking, it makes financial sense to lock in these policies when you are young and healthy. Securing a life insurance policy on both spouses, or at least the higher income earner, would protect against a potential loss of income. If children come into the picture, factor in the financial costs of child care and other expenses should something happen to the primary caregiver or a working spouse. Disability insurance would help you avoid erosion of savings if you are hurt, can no longer work and require costly care.
Newlyweds who consider saving and investing a top priority ought to ponder how best to do so as a couple. Your investment philosophies and risk tolerances may differ. Some prefer to invest separately or incorporate their individual investment preferences through an IRA or 401k, not their joint assets; other couples want a streamlined asset allocation. You might have different perspectives on liquidity, socially responsible investing or debt. It’s normal for spouses to have different opinions, but it’s important to communicate, monitor and update your financial plan on a regular basis to make sure you’re meeting your individual and joint goals.
You might want to retitle your checking, savings and investment accounts to include both of your names as joint owners. It may instead be prudent for you to establish a joint living trust. Certain assets – like premarital assets not commingled with your spouse’s assets, and irrevocable trusts – are protected in a divorce in many cases. If you require ironclad asset protection, consider a prenuptial or postnuptial agreement. Young couples and their parents often differ on this topic. Many parents want to protect their children and the family legacy from divorce, but it might not be the most romantic topic to broach ahead of a wedding. Engaging wealth and fiduciary advisors to facilitate these conversations can help inform the decisions.
Updating legal documents – such as your wills, powers of attorney, healthcare proxies and advanced medical directives – plays a vital role for you in the case of incapacity or death. In the absence of these documents, the state will decide where certain assets will go and who will act on your behalf – and it’s not always your spouse. It’s important even for young, healthy couples to have these documents in place. It’s also important to update retirement plan and life insurance beneficiary designations, as those assets pass according to the current designation, not according to your will.
Financial planning might not be the easiest or most exciting thing to check off the wedding planning list, but it’s one of the smartest.
Ashley Ferriello is a Vice President and Wealth & Fiduciary Advisor at Evercore Wealth Management. She can be contacted at ferriello@evercore.com.
2 “The ‘bizarre’ money secret many Americans keep — even from their spouse,” CNBC, March 12, 2018. “Why Some Millennials Are Opting To Keep Their Finances Separate,” Forbes, Feb. 12, 2018.
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