Will wedding bells soon be ringing? If so, you have many things on your mind. Preparing your guest list, finding a venue, choosing a caterer — the list goes on and on. But these decisions, while meaningful, will affect the events of just one day. The financial choices you and your future spouse make together, however, will have an impact on the duration of your married lives.
And it pays for the two of you to see that your financial lives are compatible right from the start. “Money issues” were cited as being among the top three catalysts for marriage breakups, according to a survey of financial analysts specializing in divorce.
If you are a millennial, your impending marriage marks only the beginning of a long road taken together. And if you are remarrying at any age, you may already understand firsthand the importance of being in step with your spouse financially. To help make your journey more rewarding, take the five following vows before you stand together before loved ones and say, “I do.”
- Discuss your values: Do you and your marriage partner hope for the same things? Do you have the same financial goals and priorities? One of you may want to spend little on personal preferences and donate instead to various charities, while the other would rather travel extensively. Write down your priorities separately, then compare lists and discuss where your goals overlap and where you can compromise.
- Assess your individual financial situations: Not all married couples combine their finances. But if you and your soon-to-be spouse choose that route, you should share all the relevant information with each other. What amounts do you hold in saving and checking accounts? Are you already investing in a 401(k), IRA or other retirement account? What do you owe on your credit cards or student loans? If you are going to merge your finances, you both need to know what to expect.
- Try to save ten percent: Given the challenges of a difficult job market and high housing costs, it may not be surprising that millennials, on average, spend about two percent more than they earn, according to Moody’s Analytics. Start with a joint budget and strive to commit to saving ten percent of every dollar you earn in a long-term, untouchable account, such as your 401(k), IRA or Roth IRA.
- Communicate regularly: You and your new spouse might want to consider holding monthly or semimonthly “money dates,” in which the two of you discuss your finances. By staying informed, and avoiding secrets or surprises, you can proceed harmoniously toward your collective financial goals.
- Be prepared — for anything: Planning for the unexpected is a crucial step in your financial journey together. Protect loved ones by having adequate insurance coverage and by creating the appropriate legal papers, such as a will or a living trust, or drawing up a prenuptial agreement. You might also want a power of attorney, so that someone can make decisions on your behalf if you become incapacitated. If your marriage is a remarriage for one of you, you will need to revise any existing documents and arrangements. Your wedding day is a happy event for you and your spouse. Taking time now to address your financial future as a married couple may help your new life together begin on a solid foundation — and help better ensure long-term happiness that extends to your golden anniversary and beyond.
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This article is provided by RBC Wealth Management on behalf of Pamela J. Carty, a Financial Advisor at RBC Wealth Management, and may not be exclusive to this publication. The information included in this article is not intended to be used as the primary basis for making investment decisions. RBC Wealth Management does not endorse this organization or publication. Consult your investment professional for additional information and guidance.
RBC Wealth Management, a division of RBC Capital Markets, LLC, registered investment adviser and Member NYSE/FINRA/SIPC.
