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SARAH AND I GOT married earlier this summer. We’ve always been on similar pages when it comes to money. We both track our finances with gusto. She’s one of the few people I know whose budgeting spreadsheets are more intricate than mine.
We both try to spend reasonably and save consistently. We’d rather devote money to a vacation or an occasional late-night pizza than to fancy things or swanky surroundings. One indication: During the pandemic’s initial lockdown, we managed to coexist peacefully—along with our dog—in a one-bedroom condo.
We honeymooned in Belize. It was the most expensive trip either of us has ever taken. Even so, we used airline points and hotel discounts to make the cost more palatable. One of the hotels we stayed in was in the rainforest. Our room had visitors almost every night, including a massive bug, a not-so-massive spider and a garden snake that I had to coax outside with a fireplace poker.
Hoity-toity, we are not.
While I’m confident about the broad strokes of our finances, there are some practical matters we need to sort out now that we’re married. Here are the six items that have been on our minds lately:
1. Updating beneficiaries. We recently started the process of adding the other as the beneficiary on our retirement accounts. The process has been straightforward. In most cases, changing a beneficiary on an IRA or 401(k) only requires a few computer clicks, sending in a form or calling the plan provider.
You can also add someone as a beneficiary to an individual investment account or bank account through a “transfer on death” or “payable on death” designation. Doing so will allow these accounts to pass immediately to the other without going through probate, which can be costly and time-consuming.
Of course, estate-planning needs can change as families grow and wealth builds. I tell my financial-planning clients it’s important to review your beneficiaries periodically to make sure they still align with your broader estate goals.
2. Estate documents. Newly married couples should set up some basic estate-planning documents if they haven’t already done so. I advise all clients to get the “big four”: a will, a medical power of attorney, a financial power of attorney and an advance medical directive. You can knock out all four fairly easily using an online provider like TrustandWill.com.
One suggestion: Tread lightly when having estate-planning conversations. They can be especially sensitive, and it’s possible you and your spouse may have different reactions.
3. Tax-filing status. After years of filing as single individuals, we’ll now have the option to file our 2022 taxes either jointly or separately. While the usual choice may be to file jointly, there are some instances where filing separately can make more sense. For example, if one spouse is on an income-based student loan repayment plan, filing jointly might cause the required monthly loan payment to jump, offsetting the tax savings realized by filing jointly.
A second reason for filing separately: The lower-paid spouse might have large medical deductions that would be lost if the couple filed jointly. I recommend contacting your tax advisor or CPA before making a filing choice. He or she can run the numbers to determine the best course of action based on your specific situation.
4. Life insurance. Couples count on each other for many things, including ongoing contributions to the family’s finances. The best way to protect your family financially from an unexpected tragedy is to get life insurance. I typically recommend term insurance. It’s the most cost-effective way to provide financial protection.
Life insurance can be useful even if you and your partner are well-off. I listened to a podcast recently in which the guest—a successful financial advisor—described how she lost her husband early to cancer. The proceeds from his life insurance policy allowed her the time and flexibility to start her own business, rather than immediately going back to work. For a relatively modest cost, the protection offered by the policy proved invaluable.
On a lighter note, my wife and I have joked that we should detox from our honeymoon dessert binge before we apply for insurance, so we can get the best rating possible. That may take a while. The food in Belize was delicious.
5. Combining bank accounts. When it comes to joining finances, I believe there’s a host of possibilities that lie between full merger and complete separation. Each couple needs to figure out what works for them.
Perhaps having a joint checking account to pay for monthly fixed expenses makes sense. In the same way, having a joint high-yield savings account can help ensure that certain savings goals are met.
On the other hand, it’s important that each spouse feels some level of autonomy over his or her spending. Having only joint bank accounts could lead to friction over spending choices. I don’t need to know how much my wife spends on her hobbies, and I doubt she wants to know how much I spend on mine.
One couple I work with has joint checking and savings accounts, while diverting “fun money” into individual accounts each month. This seems like a great compromise. They have a level of trust and teamwork when it comes to handling their finances. If those factors aren’t there in your relationship, it could point to bigger issues.
6. Savings goals. I often hear from couples who want to know how they should structure their savings. Many of them are already contributing to their workplace retirement plans and some have built up nice cash reserves. Now they’re asking, “What’s next?”
It’s common for people in their 20s, 30s and 40s to have competing interests. Ultimately, the proper savings plan comes down to personal priorities and time horizons. Money that’s needed in the short term—such as for a house down payment—shouldn’t be risked in the stock market or cordoned off in a retirement account. Long-term money, like retirement savings, can benefit from tax deferral and can be invested more aggressively.
The financial-planning software I use asks clients to prioritize their goals. Often, clients will put items like paying off debt, buying a home and funding retirement in the “needs” category. They might put other items, like children’s college costs, a vacation home or travel, in the “wants” category. It often takes further discussion to figure how strongly each of these goals resonates.
My wife and I are overdue for a conversation about our next set of goals. We spent much of the past year planning our wedding and honeymoon. Now that those are behind us, we finally have time to think longer term.
Matt Trogdon is a financial planner with Craftwork Capital, LLC. He’s based in Washington, D.C., and has a special interest in helping Gen X and Gen Y families. He also serves as a workshop instructor for the Babson College Financial Literacy Project. Follow Matt on Twitter @Matt_Trogdon and check out his earlier articles.
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Great advice Matt. I know too many people who never get around to this list. A family friend’s husband died of a sudden heart attack while on vacation. It was his second marriage. After his divorce he changed his beneficiary to his mother. He never got around to changing it on his life insurance. When he died his mother was the beneficiary, It caused lots of trouble for the widow.
I would like to hear opinions on using software to prepare estate documents as suggested in this article. I like the idea of preparing our own documents and the flexibility of making changes ourselves. But will these documents be accepted when our estate(s) are filed with the court upon death?
As with many marriages, ours evolved to where each of us became responsible for certain tasks. These often align with interests and skill set. My wife, by her own admission, is clueless about our finances. I’ve tried cajoling and have oft repeated how many men take advantage of their wives, but through a combination of trusting me and lack of interest, she chooses to demure. Fortunately, I caught the living below your means, diversifying, passive over active, low expenses preferably within tax shelter dogma early. We both work for non-profits and though we are hardly paupers will never earn significant compensation. I regularly remind myself of the trust she’s put in me and act accordingly. I put as much in her name as mine, access and costs being near-equal. Finding a compromise that works for both is a key to a long marriage.
David – my wife is capable but she has no interest in finances either and trusts me as well. I prepare a detailed personal financial statement each year and I at least make her look at it and she will do that. I use it as a roadmap along with a details/passwords of CC’s, utilities, insurance policies, etc. so if anything happens to me, she will have a complete picture of what we own/owe and where to start.
Great article. In the tax-filing section one caution I’d add is that filing separately has the potential to significantly change the cost of medicare. In my case, if my wife and I filed separately I’d be paying $540 a month for medicare instead of $170. So while there’s definitely circumstances where filing separately makes sense, one does need to include the medicare IRMAA brackets when considering this option.
You note that higher required student loan payments might offset saving from filing a joint tax return. Personally, I’d rather pay off a loan faster than pay higher taxes. Is that selfish?
My wife and I tracked everything in Quicken for a year before we got married. That eliminated a lot of surprises. We kept accounts separate for a few years and then combined them. We’ve tried to keep things simple but even making that effort doesn’t keep some complexity from creeping in. Things just evolved over time.
Now that electronic transfers are so simple, I don’t know that it would really be any easier to have combined bank/brokerage accounts.
But we may be an exception. We were a couple for 25 years before marrying so we already had systems and paperwork in place.
Great article Matt! How would things change if was a late in life second marriage of two widow/widowers.
Good advice, Matt. You bring back “fond” memories of hammering out the details of family finances with my wife in the early years of our marriage.
Matt, you being recently married and me being over half a century not, I’m thinking we have different ideas about marriage and money.
I use “ours” in all aspects of our financial lives, everything is joint. On the other hand I see you use, “his, hers, personal priorities, we both track our finances with gusto…”
You correctly note the importance of trust and teamwork in a marriage. What is your opinion, is there some basic need in the X and Y and perhaps other generations to always have an element of mine, his and hers at the expense of all ours in a marriage?
After 26 years together, my wife and I continue to have both individual and joint checking accounts and credit card accounts. While I would be fine having everything joint, my wife prefers to use her individual accounts for personal transactions. She readily admits that her preference is a holdover from what she went through to establish her financial independence when her first marriage failed. Despite having been the primary breadwinner, she had a very difficult time even getting a credit card after her divorce (the early 1980s).
We share our finances on a combined Excel spreadsheet and the individual/joint distinction has never been a source of conflict. Of course, our retirement accounts are separate but our RMDs go into our joint account.
Her view point is quite understandable given her experience
Great question, and thanks for reading! I think the transition from “his” and “hers” to “ours” probably takes a little time for everyone to become accustomed to. And given that both Sarah and I have kept such faithful track of our finances up to now, I think the mindset shift will be even more pronounced as it occurs.
But we’re getting there, and it’s a nice transition so far!
Yes, the “hammering out” I referred to above was a process that took us from a mildly competitive his and hers to a more peaceful ours.