By DANIELLE DOUGLAS-GABRIEL - Washington Post
You've unpacked the wedding gifts, written the thank-you notes. But before you settle into married life, take some time to discuss your finances. Here's advice from a few experts that should help couples make this transition:
Budget: Make a list of your monthly income and expenses, said Joe Sullender, senior vice president and investment officer at Wells Fargo Advisors. Figure out which expenses are a must, such as rent/mortgage, utilities, joint cash reserve, and which are extras, like your monthly manicures.
Anna Behnam, a financial adviser at Ameriprise, advises her clients to discuss their financial goals early on and map out the best way to accomplish them. "Getting over the single life and moving into the emotional readiness of a joint life is probably the biggest hurdle," Behnam said.
Bank accounts: You can combine all of your accounts, keep them all separate or opt for a combination of the two.
Combining them can make it easier to manage your money, but that might entail more negotiation on how every dime is spent. Keeping everything separate might give both of you more autonomy, but it also means keeping track of more accounts. Behnam advises her clients to set up a joint account for shared household expenses and savings goals while maintaining separate accounts for personal spending.
Retirement: Behnam said that if the couple has individual 401k plans through employers who match their contributions, she encourages them to fund those plans first. Any money that is left after that should go into a joint retirement account - preferably a Roth IRA because of the tax break on the money withdrawn from the account during retirement, she said.
Taxes: One of the first things you should do after getting married is adjust the withholding allowances you claim on your W-4 form. Allowances are used to help your employer calculate the amount of income tax to withhold from your paycheck based on income, deductions and marital status.
When it comes to filing your taxes, couples have the choice of "married filing jointly" or "married filing separately." Consult an accountant or use an online calculator to figure out which status will result in the lowest taxes.
Keep in mind that filing separately as a married couple has limitations, said Jackie Perlman, of H&R Block Retirement.
If you itemize deductions, your spouse cannot claim the standard deduction, so you both would have to itemize or use the standard deduction. You would both also be ineligible for many tax credits, including education tax credits, student tax deductions and the earned income credit.
Another disadvantage to filing separately is that you and your spouse will be ineligible for the premium tax credit, a refundable tax credit designed to help low- or moderate-income people buy health insurance through the exchanges established in the Affordable Care Act. (There are exceptions for victims of domestic abuse.)
Perlman said there are some compelling reasons for couples to file separately, especially when one person has fallen behind in student loan payments, or owes back taxes or child support. Joint filers are liable for each other's debts and could have both of their wages garnisheed regardless of who owes the money.
Credit cards: If you and your spouse have multiple credit cards, make a list of which cards have the best terms - cash back or travel points and no annual fees - and close the rest once you've paid off the balance, Behnam said.
Be careful here. Canceling cards can hurt your credit score if doing so raises your balance in relation to your overall available credit, said Anthony A. Sprauve, FICO's director of public relations. You can offset the effect by asking for an increase of the credit limit on the cards you want to keep, but do it before you cancel anything.
Opening joint credit cards is also tricky. Both of you are responsible for the full balance of the account, so "bad behavior by either spouse will hurt both FICO scores," Sprauve said.
Insurance: You and your spouse should do a cost-benefit analysis of your individual plans and the family plans offered by your employer, Behnam said. More often than not joint health insurance is the best way to go.
If you both have cars, consider consolidating your auto policies. Many large insurers offer multicar discounts. Depending on the insurer, you could also bundle your auto and homeowners insurance.