The Financial Checklist for Newlyweds
You’ve just spent the best day of your life celebrating your new marriage with all your family and friends. You can’t wait to start the rest of your life with your new spouse. Now that the cake is gone and the confetti has settled, it’s time to take a look at your new life together and get on the same page when it comes to your finances. Hopefully you’ve already had in-depth conversations about money before you got married, but now it’s time to do some clean up and start putting some tasks into action. Here are eight things to do once you’ve come down from your honeymoon high:
- Establish an emergency fund.
If you don’t already have an emergency fund, work on establishing one now. This should come before all other financial goals because it’s really hard to get ahead if you’re always having to dip into debt when the unexpected happens. It’s not a matter of IF a financial emergency will happen, it’s a matter of when, and it’s best to be prepared for when it does. We recommend having three months of living expenses in an emergency fund for married couples, and closer to six months if you only have one income or one income is significantly higher than the other.
- Calculate your joint net worth.
Getting married means a whole lot of merging is going on, whether that’s space, goals, families or finances. Up until now, your money has been yours and yours alone, and you’ve been the only one controlling it. Now that you and your partner are merging lives, it’s important to have a comprehensive picture of your household financial life. Determine your joint net worth by adding all of your assets (property, investments, cash accounts, etc.) and subtracting your liabilities (mortgage, student loans, auto loan, credit card debt, etc.). It’s important to know exactly where you stand as a couple now so you can decide your goals moving forward.
- Develop a joint budget.
A lot has changed since you got married. You now have two incomes instead of one, you may have only one housing expense now, and some of your expenses have increased, such as utility bills. A budget is the most valuable tool to make sure you and your spouse are on the same page when it comes to your finances, and it allows both partners to feel in control of where their money is going. Many people cringe at the word “budget,” but think of it as a tool that allows you to decide where your money is going, instead of your money controlling you. You are going to have the same amount of money whether you have a budget or not, so you may as well ensure that money is going toward the items that are most important to you and your spouse.
- Update your beneficiaries and estate documents.
This is one of the first items you should tackle because it will ensure that your spouse inherits your assets should something happen to you. This will include any investments accounts, employer-sponsored retirement plans, IRAs, savings accounts and insurance policies. This is often a part of financial planning that people tend to push off because it’s not the most exciting task. However, making sure your loved one is taken care of in the event the worst happens is one of the best things you can do for them. You can also designate these assets in a will, but having them listed as your beneficiary is the easiest way to make sure those assets transition smoothly. Speaking of a will, you’ll probably want to go ahead and have estate documents (will, power of attorney and healthcare directive) drafted if you don’t already have them. If you do, then you’ll need to make sure they get updated too.
- Review your insurance coverage.
Hopefully you had sufficient insurance coverage when you were single, but now you need to make sure you’ve got two people covered. Review all of your insurance policies to make sure you don’t have lapses in coverage and you aren’t duplicating coverage. If you’re just now combining households, you’ll likely have one home or renter’s insurance policy to drop, and you’ll need to make sure your new or current homeowner’s insurance covers any additional valuable items that your spouse may have contributed to the household (art, jewelry, collectibles, etc.). You’ll want to review your health insurance to see if it makes sense to drop one plan or keep both. This is also an opportunity to find out if you can save money by combining any insurance, such as auto policies.
- Start tackling debt.
If you or your spouse has any debt, it’s time to come up with a plan for tackling it. If you have credit card debt, you will want to focus on paying it off as quickly as possible. Credit cards typically come with very high interest rates and can quickly spiral out of control, so this should be your highest priority. After credit cards, you’ll want to evaluate your remaining debt by determining the amounts, the rates, the terms, etc. It’s not always best to pay off other debt (auto loans, student loans, mortgage, etc.) at the expense of saving for the future. You can read more about paying off debt in this previous blog post.
- Review your financial goals.
Ideally, you will have had this conversation before you got married, but you’ll want to discuss your goals with your spouse on an ongoing basis. The health of your financial life as a couple is not a “one and done” task. It’s important to continually review your short-term and long-term goals to make sure you are heading in the same direction. Talk about your debt-payoff plan, savings goals, any further education or career goals, having children, housing desires and retirement (it’s never too early!). Revisit these on at least an annual basis.
- Decide how your finances will be managed going forward.
Now that you’ve implemented some of these items and crossed off some tasks from your financial to-do list, it’s time to decide how you will handle the management of your finances going forward. Will you have just one joint checking account and one joint savings account? Who is going to make sure the bills get paid, or will you split those? Where are extra payments toward debt coming from? Who is going to keep an eye on the budget?
Regardless of who handles what responsibilities, it is vitally important that you are BOTH aware of what’s going on with your finances and you remain on the same page. Check these items off your Newlywed To Do List, and you and your spouse will be well on your way to a long and healthy financial life together!