Merging Money Matters in Marriage

No matter how much or little you have, matters of money illicit stress in people’s life and for many couple’s, fights over finances can break up the union.  In an effort to avoid unnecessary battles, there are some planning steps you can take in advance of tying the knot.

Talk about finances

Keep finances out in the open, meaning have regular, honest, open discussions about money.  This can help you become comfortable talking about what can be a difficult subject and can help you both be on the same financial page on these matters so there are minimal surprises.

List Assets and debts

Understand what financial assets and debts each of you brings to the table.  Preferably make a spreadsheet for each of you, listing all assets together and then  the debts.  For each asset and debt name the item (ie: IRA, savings account, home), list the value if it is an asset and the amount owed if it is a debt and list any particulars such as whether something is a joint asset or debt between the two of you, being careful not to double count this.  An idea is to list joint ownership as 50% dollar amount on each of your spreadsheets.

List income and expenses

List income for each of you whether it be earned income such as from a job, rental income, investment income etc.  Then make a thorough list of expenses and include both a monthly and an annual dollar amount.  Remember to include expenses that are paid once or more during the year and not just the monthly expenses.  Expenses should include as many items as you can possibly think of such as pocket change or misc. spending money, food bought at grocery store, food expenses eating out, expenses for pets, household items, car insurance, health insurance, magazine subscriptions etc.  You can find many different budget forms online to help you but it’s best to find a very detailed one so you do not forget where you spend every penny.

Understand financial goals

Talk openly with each other about long term and short term goals you have that require money to obtain, have an effect on money or are impacted by money and make a list.  Goals might include, changing jobs to a lower paying position in order to follow your passion, buying a home, covering costs for children or step children, eliminate debt, retire at 50, or take a month long vacation each summer.  List an approximate dollar value if you can next to each goal.

Recognize spending and savings habits

Observe each other’s tendencies in these areas and without blaming the other, come up with an agreement that keeps you living within your means each month and that includes having extra money to save each month so you can reach the goals on your list above.  Use the budget sheet you created to tell you whether your household income covers your expenses leaving you some money to put away in savings each month or whether you need to curb or lower some expenses so you can stay within that budget.  Learn how to help each other and accept the others help with spending less and saving more or saving less and spending more.

Insurance Review

Compare all forms of insurance coverage and figure out what works best financially and for your specific situation.  For example look at each person’s health insurance plan and decide if it is best to go on the same plan or better to keep individual policies.  Insurance companies often offer discounts when you combine multiple types of insurance coverage such as auto, homeowner’s and an umbrella policy.

Establish joint bank account

Opening a joint or trust checking, savings and/or investment account is a good way for married couples to manage joint household expenses and savings in tandem.  It is important to give thorough thought to whether to co-mingle separate accounts and property.  In California, once separate property is co-mingled with a spouse it becomes community property. In the event of divorce community property in California is typically divided 50-50.  You’ll need to take specific steps and complete certain documents in order to keep your separate property (property you possess before marriage) separate after marriage.

Making a prenuptial agreement and doing estate planning

Every marriage is going to end either in divorce or death of a spouse.  These agreements are a great way to plan ahead and make well thought out decisions on how to handle real estate, children from previous relationships, a business, or other assets and debts when the marriage ends.  You will need to consult an attorney to draft these documents and provide guidance on your options on how best to manage property brought into the marriage as well as property that is acquired during the marriage.

Update and amend estate plans and beneficiaries

Often couples forget to do this and not doing so can cause devastating problems down the road.  Make sure any estate plans that exist are up to date.  These may include a trust, will, health care directive, guardianship of stepchildren, power of attorney for finances and health.  Also, you will want to review the beneficiaries you have designated on such things as insurance policies, investment accounts, bank accounts, retirement accounts, annuities etc.  In California, your spouse must sign agreement if they are not designated as your primary beneficiary on such documents.  Make necessary changes for your beneficiary designations.  Beneficiary designations provide instructions as to whom you want these assets of yours to go to upon your death.
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Karen helps attorneys; mediators, individuals and couples, navigate through the financial morass of divorce and widowhood. Her expertise lies in understanding the special tax and financial issues that can plague divorce and she helps clients get their financial fair share and equitable settlements. She provides financial analysis, projections and solutions so clients can avoid long-term regret over decisions made early on in divorce and widowhood.  Karen offers a range of financial, investment and insurance services that address clients’ complete financial picture and long-term needs before, during and after marriage.  She is currently writing a book entitled, “To Have and To Hold Onto Your Financial Fair Share: Financial Decision Making When Marriage Ends in Divorce or Death.”