Happily Ever After: 5 Tips For Financial Fairy Tale Endings
With my friend’s wedding coming to a close, I enjoyed the last sips of bubbly and final number from the band. As I made my way to the door, I passed a small table laced with gold cards prompting me to leave a note in the newlywed “tip jar.”
As a CPA, I have plenty of conversations with married couples about finances. Specifically, how to consolidate accounts and manage money when one becomes two. With that said, I have, not one, but five tips for newlyweds that will make for a financial fairy tale ending.
Make A Budget
Start from the beginning with a detailed list of your combined monthly incomes and expenses. From there, identify the expenses that are non-negotiable, such as rent or utilities, and which are the “extras” like dining out or a round of golf.
Take a hard look at the numbers, discuss your financial priorities, and come up with a 6-month plan. You can always revisit and adjust. As a side note, I suggest having surplus left over at the end of the month to squirrel away for rainy days.
Combine (Some) Accounts
There is more than one approach here, and the answer will not be the same for every couple. Combining all accounts will make it easier to manage your money across the board, but can add strain from having to negotiate every penny spent. Conversely, keeping funds separate may give you both more autonomy, but also requires tracking more accounts while taking away transparency.
I recommend a happy medium. Set up a joint account for the “non-negotiables” from your budget that is intended cover shared household expenses, savings, retirement contributions, etc… Then keep smaller separate accounts for personal spending.
Step one after saying “I do” is adjusting the withholding allowances you each claim on your W-4 forms. Allowances help your employer calculate the appropriate income tax to withhold from your paycheck.
I suggest visiting the IRS website to figure out how many allowances you’re due. The idea here is to ensure you are not over or under withholding.
When it comes to filing taxes, you have the option to file jointly or separately. I strongly recommend consulting a CPA to determine which option is best for you.
Expect The Unexpected
At some point, life will throw a curve ball and you both will be up to bat. Whether it be from an entrepreneurial venture, medical leave, career transition, or countless other scenarios, there will likely be a time when you will need to support your spouse.
Come to terms with that and plan accordingly. I recommend working towards having at least six months of living expenses set aside to cover both of you if need be.
At the end of the day, the serious snags I see stem from hiding spending or expenses from one another. If I leave you with one piece of advice, it is this: Never, ever hide a single dollar from each other.
As I said, I am an advocate for some pocket change to spend freely, but those funds should be cleared with both parties prior to being set aside. Recipes for disaster include hidden credit cards, undisclosed loans, and unaccounted for ATM withdrawals. Remember, you are in this together and need to trust each other to build the nest.
Whether you are heading down the aisle or just said your vows, planning and transparency are vital. If you want to talk through a financial consolidation plan for your happily ever after, let’s talk.