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The Year of Marriage

This is a blog for young professionals, and being one myself, I am pretty shocked at how many weddings have been happening this year.


If I were to speculate, I’d say a lot of it has to do with COVID. The pandemic delayed a lot of weddings from happening in 2020 and 2021; so not only are we seeing a lot of weddings, but we’re comparing it to seeing no weddings over the past two years. Additionally, maybe love blossomed due to the circumstances - if you can make it through a pandemic together, you can make it through anything amirite?


To set the stage, marriage is a legal contract that has some major impacts on your finances; tell me something more romantic than that, I’ll wait…


I think one of the most important things you can do as your relationship gets more serious is to get [financially] naked with your partner - talk about what you each own and owe, credit histories and scores, how you grew up around money, your feelings with money, how you use money, and so on. I suggest there to be no judgment, but have the uncomfortable conversation in an effort to be vulnerable with each other.


Ideally in my opinion, a lot (or all) of these financial topics are discussed before marriage, but I know that doesn’t always happen. If you haven’t yet, it is never too late.


Here are some of the major topics and actions you should take when getting married:


Goals


The idea of “goals” is super broad, but going through the exercise of thinking about and discussing each of your goals can help to better understand each other - and may even explain some of your behaviors with your money!


Some of these items may include early retirement, charitable giving, moving to a different country, having or adopting kids, leaving a legacy, supporting your parents when you’re older, and so on. Some of these can have really big financial ramifications that can influence how you live and work.


Maybe one of you loves investing, and the other sees it as gambling. Maybe one of you wants a massive house and the other wants the convenience of renting.


You're no longer working on your financial goals alone - you have a partner to help you reach those goals, together. Make sure you’re being open and making a plan to work together.


Cash Flow


Are you a spender or a saver? What about your partner?


I suggest you get on the same page here and understand what you’re getting into! If you’re a natural saver and need someone similar, that should be considered. If you’re a saver and want a spender to help balance you out; go for it.


I don’t think we pick our partners solely on this characteristic… but it is important to know, so that if this is a “deal breaker” to you, it doesn’t uncover itself after you’ve gotten married.


But, make sure you’re having these conversations, and being open about your tendencies with spending and saving. I think cash flow along with goals are the two emotional discussions you should be having to start understanding how each of you feels towards money.


Additionally, who will be taking care of the day to day financial management? Will one take the lead, will you do it together, will you hire somebody to help? Will you combine finances, or keep them separate?


My other items below have some money saving tips about integrating your life, but they can be used for anybody getting married. They have specific actions. But goals and cash flow do not. These are about getting on the same page, becoming a team, and being super vulnerable about what is important to each of you individually, and as a unit. If you can agree on these things, then I think you’re in really good shape.


Many of the articles I read related to money-fueled divorces are due to disagreements around financial emotions, attitudes, and mismatched priorities. According to this research study, feeling that one spouse spends money foolishly increased the likelihood of divorce 45%.


Typically divorces don't happen because of the stocks you choose - they happen because of the emotions surrounding money.


I recommend having these conversations before and during your marriage - your finances are a journey and should have ongoing discussions to keep the relationship with money, and each other, healthy.


Taxes


We all get married for the tax advantages, right? Just kidding, and I could even come up with situations that show a marriage penalty on your tax return. This is the situation where your taxes actually increase due to getting married.

Wouldn’t that be a fun conversation for me: “hey [client], I have a new strategy to help save you money on your taxes! Get divorced.” Luckily this is for super high earners, and not something the vast majority of people have to look out for.


Anyways, I want to point out that your filing status for the full year is based on your relationship status as of 12/31. You got married on 6/20/2022? You’re considered married for all of 2022. You’re getting married on 12/30 this year? Your tax return will report you married for all of 2022.


If you got married in January this year and end up getting divorced in December this year, you’d be considered unmarried for the full year.


This should influence your withholding for the full year, so I suggest considering updating your Form W-4 and equivalent state withholding form and getting that to your employer so there are no surprises in April the next year.


Are both of you up to date with tax filings, or owe any tax debts? The IRS protects the spouse that marries into this situation, but it is still probably something you want to discuss and come up with a plan to resolve together. What’s mine is yours, for better or for worse!


Finally, there are certain accounts that can be used depending on your income that can change as a married couple. For example, after you get married, can you still contribute to a Roth IRA? Sometimes marrying a high earner pushes your income too high to contribute to certain accounts. Maybe marrying a lower earner brings your relative joint income down enough to allow you to contribute to certain accounts.


Insurance


There are quite a few ways to insure yourself, and oftentimes you can find some discounts by being on joint policies. Here are the major policies to consider:


Health Insurance: getting married is a qualifying event. Take a look at each of your coverages, and see if it makes sense to get on the same policy. Maybe one employer has better coverage; maybe each of your employers offer free coverage for individual policies, so it makes sense to each have your own.

There is no right or wrong, but I encourage you to look these over and pick the best for your situation. And if you have an HSA, your single contribution limit may expand to a family contribution limit that you can take advantage of.


Life Insurance / Disability Insurance: Is your spouse relying on your income? It may be time to consider paying for that policy provided by your company, or getting a private disability or life insurance policy. It is not all about you anymore!


Property & Casualty Insurance: If you have cars, a home, renters insurance, an umbrella policy, etc., it probably makes sense to get on the same policies. It is typically cheaper to have one policy with both of you insured, than to have two separate policies.


Estate Planning


The most unsexy legal document - the Prenuptial Agreement. To be honest, I think it is beautiful. I don’t think it is necessary for most people, but I also don’t think it should be viewed so negatively. Here is why:


Due to marriage being a legal contract, the marriage laws have already been made for us in each state. There is something to be said about using professionals to help you understand the marriage laws you are agreeing to, and give you a chance to mold that legal contract into something that suits the two of you as a couple.


I’ll give you a moment to grab a tissue because of how beautiful that is 🤧


Now some other estate planning considerations for everybody:


Estate documents: In my opinion, all adults should be getting estate documents in place. The basics include a Will, a Living Will, and Powers of Attorneys for both health and financial decisions.


Whether this includes updating your current documents to include your spouse, or creating your original documents, it is important to get these in place.


Beneficiaries: On many accounts, you name a designated beneficiary, which trumps anything written in your Will. These are important to review and update with your new spouse if you choose. The major accounts to review are:


1. Retirement Plans including your 401(k)s, 403(b)s, IRAs, Roth IRAs, SEPs, SIMPLEs, 457s, pensions, and so on.

2. Health Savings Accounts.

3. Transfer on Death (TOD) and Payable on Death (POD) accounts.

4. Life Insurance Policies.


Asset Titling: Finally, if you are combining assets or acquiring new assets, pay attention to the titling. This will ultimately have an effect on how and whom the assets are passing.


Final Thoughts


I hope this wasn’t overwhelming, and hopefully a good mix of actions items and discussions to have with your new, or soon to be new, spouse.


It may be hard, but it is important to have discussions around your money goals and histories, and how you’re going to build the life you want to live; together.


There are some upfront actions to take together, but I also want to point out that your finances are a journey. All of us are different, and we adapt as we continue through life. An important part of combining finances is having ongoing conversations around it and being open with your feelings. Because money = feelings.


Consider having monthly, quarterly, semiannual or even annual money date-nights to review your finances and goals, and have open discussions about money. Or, consider hiring a financial planner to help you coordinate finances and ongoing meetings.


You’re now a team; for richer, for poorer. Congrats!