Before tying the knot, many couples tend to overlook the practical aspects of marriage, particularly finances. Indeed, arguing about finances is a top predictor of divorce. Here are some effective tips for newlyweds to help avoid common financial mistakes that could lead to the demise of a marriage:
1. Know your spouse’s financial mindset: For example, did he/she grow up with money? This will give you better understanding of his/her attitudes toward spending. If your partner could not afford certain things growing up, it may be the reason why he/she likes to indulge now. Understanding the root cause will help you garner perspective in order to address spending. It is also important to acknowledge cultural differences between you and your spouse. For example, your spouse may have grown up in a culture where it is normal to financially support immediate or even extended family. Understanding each other’s norms and values early in a relationship will help you avoid conflict and create boundaries.
2. Talk about money: Do not keep financial secrets from one another. If you have high debt or poor credit, make it known and address ways to fix it. Otherwise, these facts will inevitably be revealed if you want to do something like jointly apply for a mortgage or purchase an automobile. It is also a good idea to create a budget based on your joint income, bills, savings, retirement plans, and future goals for your money. Also, it is never too early to start discussing children. Having children will present new financial decisions to be made, such as the type of home and neighborhood you want to live in, whether you want your child to attend daycare, and whether a spouse may continue his/her employment once the child is born. Having regular discussions about money will keep you and your spouse financially accountable to one another and will help you avoid pitfalls associated with lack of financial preparedness.
3. Talk about taxes: Once you are married, your tax filing status will change. Most spouses will go from “single” to “married filing jointly” in order to realize greater tax benefits. There are, however, circumstances which may dictate the need for spouses to file separately. For example, a spouse who is unwilling to assume legal and financial responsibility for the other spouse’s tax obligations should strongly consider filing separately. Also remember that, for tax purposes, you are considered married in the tax year that you were married. So, if you get married on December 31, 2019, you and your partner will be considered married for the tax year 2019. You should talk to your partner in advance to see what factors will affect your taxes, particularly your first year together.
Examining and discussing finances prior to entering marriage is an excellent way to show commitment to your union with your spouse and will help minimize conflict and arguments that could result in the collapse of a marriage.