I'm engaged! I'm 34 and used to living on my own and managing my own finances.
Now that I'll be in a committed relationship, I'm wondering how to approach merging expenses and finances.
When planning a life together starting an open an honest dialogue about finances will serve as an excellent foundation for the relationship. No partner or spouse wants to learn of a $20,000 credit card debt that had been accumulated by the other partner, especially after the big wedding day.
Understanding your partners "balance sheet" will allow the family to properly plan for all future financial goals. Roughly 20% of all relationships keep their finances separate. While this decision can make retirement planning more complex it's not a deal breaker.
Decide who is responsible for what! While one partner may take the reins for all bills the other may be responsible for all investments and retirement plans. Assigning these responsibilities and then performing a semi-annual "accounting" of those responsibilities will allow for fewer financial surprises in the future.
Where’s the money going monthly? Let’s face it no one “likes” to budget but no financial plan will ever take flight if there is no concept of the family spend. So don’t reinvent the wheel. Use free budgeting apps such as Trim to track your finances. Once the budget is finalized make sure both parties are staying the course. If there are multiple bank accounts verify that they “balance” monthly and don’t forget to let your bank know if you change your name.
Whether in a committed relationship or legally married remember to update beneficiaries. Reviewing all retirement accounts, insurance and annuities for proper beneficiary titling is an essential part of estate planning. Married couples can file taxes either separately or jointly. Discuss with your CPA or tax preparer which way to file is most optimal and adjust those W-4’s accordingly.
Planning a life together is a never-ending journey of commitment and compromise. Having candid conversations regarding finances is a skill that needs to practiced with regularity. Incorporate the expertise of a financial professional to stay on track. A financial expert can help sort through the complexities of day-to-day and longer-term planning. Your financial professional can create a financial framework or road map to increase the chances of financially succeeding.