Starting your life together as a newlywed couple comes with many new responsibilities and opportunities, including creating a solid financial foundation for your future.
Here are some essential financial planning tips to help you navigate this exciting chapter while securing a stable and prosperous life ahead.
Maintain healthy communication
The foundation of any successful financial plan is open and honest communication throughout the entire process. Begin by sitting down and having a straightforward conversation about your individual financial backgrounds, including income, debts, and spending habits, so you each can have a better understanding of the other’s circumstances.
As you continue in your combined journey, make sure to keep your communication open to help avoid any misunderstandings that may arise. Schedule regular financial check-ins to review your progress, discuss changes in your situation, and adjust your financial plan as needed. These conversations will foster transparency, collaboration, and a shared sense of responsibility.
Define shared goals
One of the key steps of financial planning is to discuss your short-term and long-term goals as a couple. Consider both short-term ones, such as traveling the world, and long-term ones, whether that involves paying off debts, buying a house, starting a family, or saving for retirement. By understanding your shared and individual aspirations, you can work together to achieve them, each doing your part to make those ambitions a reality.
Consolidate finances wisely
There are many different ways to combine your finances as a couple—you can keep your individual finances separate, merge them completely, or adopt a hybrid approach, where you maintain both combined and individual accounts. Each option has its pros and cons, so you’ll need to decide which one aligns best with your individual communication styles and combined financial goals.
Create a budget
To help you stay on track toward your goals, you and your spouse should develop a budget based on your new circumstances. First list all your sources of income, including salary, bonuses, and any passive income streams, and your expenses, such as mortgage or rent, debt payments, and other essentials. You can then work together to allocate your funds accordingly, determining how much you are putting toward your necessities and how much you can save or use for discretionary spending. Once your budget is in place, regularly review and adjust it to better accommodate any changes in the future.
Build an emergency fund
Life is full of surprises, and unexpected events like a medical emergency or job loss can leave you financially strapped. Creating an emergency fund can help you better prepare for these situations, ensuring you can stay afloat as you navigate through them. As a general rule, you should aim to save three to six months’ worth of your total living expenses in a separate account that you don’t touch until absolutely necessary. This fund becomes a safety net during unexpected events, helping to ensure that you’re financially prepared for whatever comes your way.
Manage debt strategically
If either or both of you have existing debts, such as student loans or credit card balances, it may be more difficult to secure a loan or mortgage together. Depending on your financial goals, create a strategic plan for tackling any major debt. The snowball and avalanche methods, which target loans according to their principal amount or interests, could help you pay off your debts sooner rather than later.
Save for retirement
It’s never too early to start saving for retirement. You should each take advantage of any employer-sponsored retirement plans, like a 401(k), and consider opening individual retirement accounts (IRAs) to maximize your savings potential. The sooner you start putting money toward retirement, the more you will have saved up so you can enjoy your golden years together.
Review and update beneficiary designations
When you get married, you’ll want to update the beneficiary designations on your various accounts, including life insurance, retirement plans, and investment accounts, right away. This can help ensure that your assets are passed on according to your wishes in case of unforeseen circumstances.
As newlyweds, embarking on your financial journey together is an exciting opportunity to build a stable and prosperous future. Just remember to work together and stay committed to your shared financial well-being. For extra guidance, consider reaching out to a financial advisor who can help you throughout the process.