You’ve said your vows and have settled into your new life. Maybe you’ve even started merging your bills. While the first few months of marriage may feel like you’re walking on cloud nine, it is important to make sure you are on the same page about managing your finances. Start talking about your financial goals early and you can build upon a strong foundation!
If you haven’t done so already, now is a good time to talk about your finances and go over your plans for the future. You shouldn’t have to say “I do” to debt, so here are six tips to help newlyweds save for the future.
1. Adjust your tax status
Although this doesn’t offer quite the same financial benefits as it used to, one of the first things you should do as a married couple is adjust the tax status on your W4. You can manually adjust your status at any time, which makes it easier for you to lower your taxes and pay the appropriate amount.
On the same note, it’s usually in your best interest to adjust your filing status on your tax returns as well. Changing your status to “filing jointly” automatically qualifies you for a lower tax rate and helps with other deductions. However, there are some instances (e.g. you or your spouse has a large debt or outstanding payment) when it may be in your best interest to file separately.
2. Get on the same page
If you haven’t already, take the time to sit down and start planning – as a couple – for your financial future. Get all those floating debts out into the open; come clean about your spending and saving habits, and discuss your spontaneous spends. The best way to plan for the future is to be as honest about the present as possible.
It’s important to clear the air and talk about your financial goals now as opposed to a few months (or years) down the line. Doing so will give you both a better idea of where you stand and where you want to be.
3. Break down your budget
A great way to help you both get on the fast track to saving is to organize your monthly payments into buckets. To start, divide every recurring payment into one of two categories: essentials and extras. Your essential payments should include housing (rent, mortgage, HOA), transportation (car payment, auto insurance, etc.), and utilities (e.g. electricity, gas, and water). Your extras should include everything else (cable, subscriptions, gym memberships, etc.).
From there, see when and where you can free up some room in your extras, and where you can come together to put a little more towards your essentials. And, if possible, see if you can both start contributing more money to your savings account every month.
4. Open a joint savings account
On the topic of savings, you should also consider opening a joint savings account if you haven’t already. Having a joint account makes it easier for both of you to track, manage, and allocate funds towards your everyday payments.
This account should be reserved for your mutual recurring payments and can help take the strain off having to scrounge through your individual accounts every month to help cover costs. Most financial experts recommend creating a joint account for everyday bills, including mortgage, insurance, loans and more.
5. Cut down your excess debts
In addition to being more transparent about your spending, it’s also important to be more aware of your various debts. Take the time to look over each other’s credit cards and prioritize paying off the ones with higher interest rates.
If your credit cards are already paid off, investigate which ones offer the best benefits and terms, and designate these as your go-to cards. Some experts recommend canceling your excess credit cards after you get married, but that may hurt your credit score — especially if the cards are older. That’s because your length of credit history makes up roughly 15% of your overall FICO score.
If you and your spouse have more cards than you can keep up with, then you should talk to a financial advisor to help you go about closing them without negatively impacting your credit.
6. Start planning for the future
Sure, it could be far off, but it never hurts to get a headstart on your retirement. It’s easier to begin by going over the crucial details: when, how, and how much. Decide on a tentative time frame and create a flexible budget that will help both of you reach your financial goals.
This is also a good time to start shopping around for life insurance – especially if you’re planning on having children. While it’s not crucial that you decide on a plan today, it’s worth taking the time to shop around and compare rates.
Interested in finding out how to plan for the present and the future? Reach out to FJY Financial today.