Getting married is one of the most exciting moments in a couple’s life. However, it’s important to remember that financial preparations must be made before the big day.
According to data released Tuesday from the New York district of the Federal Reserve, household debt in the United States hit a new high of $15.6 trillion at the end of 2021. It was found that 77.5 percent of the couples in the United States without children had debt in 2019, compared to 90.3 percent of couples with at least one child.
When getting married, it’s important to have an open and honest discussion about finances with your partner. If you’re not sure where to start, here are five financial preparations to make before getting married:
Get a handle on your debts
This means knowing how much debt you have and what the monthly payments are. If you have a lot of debt, you may consider paying it off before getting married. This can help reduce the debt you’ll have to deal with as a couple.
You should also ensure you’re on the same page when dealing with debts. For example, if one person is comfortable paying more for a home or car while the other isn’t, this could cause problems down the road. Be open and honest about your thoughts and feelings on debt before getting married.
Create a budget
A budget can help you and your partner track your spending and ensure that you’re both on the same page regarding your finances. When creating a budget, be sure to include all of your income and expenses. This can help you determine how much money you have to spend each month and may help you find ways to save money.
Creating a budget includes deciding who will handle the finances. For example, one person may be responsible for paying the bills while the other manages the budget. This is something that you and your partner should discuss and agree on before getting married.
Set your financial goals
It’s important to have financial goals as a couple. These goals can be short-term, like saving for a down payment on a home, or long-term, like retirement. Some areas of goals you need to talk about are:
Insurance
You need to ensure you have coverage for both you and your spouse in case of an emergency, for it will give you peace of mind as you start your new life together. There are different types of insurance, including health, life, and auto.
You may already have some coverage through your employer. Still, reviewing your options is important and ensuring you have the coverage you need. You can get quotes from different insurers and compare rates to find the best deal. It’s also a good idea to review your coverage every few years to ensure it still meets your needs.
Buying a house
A house is one of the essential items a married couple may have. Before getting married, consider the expense of moving in together, which includes purchasing a home! Now is a great time to start looking at your loan choices if you can’t afford to buy a house outright and don’t want to rent for the rest of your life.
There are different types of mortgage loans available, which depend on several factors like your credit score and employment history. You can get pre-approved for a mortgage loan, which can give you an idea of how much money you’ll be able to borrow. This can help narrow your search when you’re ready to start looking for a home.
Saving for retirement
This may seem like a long way off, but it’s never too early to start saving because the sooner you start, the more time your money has to grow. You can choose from different retirement accounts, such as a 401(k) or an individual retirement account (IRA). You may also consider saving in a taxable account, such as a brokerage account.
When it comes to retirement savings, there are a few things you should keep in mind.
- First, if available, you’ll want to ensure you’re contributing enough to get the maximum employer match.
- Next, you’ll want to choose appropriate investments for your risk tolerance and time horizon.
- And finally, you’ll want to rebalance your portfolio periodically to ensure your asset allocation is still on track.
Outside Financial Responsibilities
Suppose either you or your spouse has children from a previous relationship. In that case, you’ll need to consider how this will impact your finances. For example, you may be responsible for child support payments or the medical bills of your aging parents.
You might also want to separate your finances from your spouse. For example, if you’re carrying a lot of debt, you may want to keep your finances separate until you’ve paid it off. This can help you avoid damaging your spouse’s credit score.
Discussing these financial responsibilities before getting married is important so there will be no surprises down the road. Plus, it will prevent arguments in the future.
The Bottom Line
Now that you know about some key financial preparations before getting married, it’s time to start. Take the time to sit down with your partner and discuss these items. There is no need for either of you to go into this marriage feeling overwhelmed or unprepared.
Marriage is a beautiful journey, but like any other journey, it helps to have a plan! By taking the time to do these things, you can start your marriage on the right foot and set yourselves up for a bright future together.