How Being Married Affects Your Money

In a perfect world, nobody would ever marry – or get divorced, for that matter – for financial reasons. Forging a good marriage is a difficult enough proposition without factoring in fiscal issues as a basis for the relationship. 

That being said, however, there is no getting around the fact that getting married and being married materially alters the way you both will handle money. Your expenditures will change shape: health costs, housing costs, retirement, and even tuition costs will begin to play a more prominent factor in how you manage your financial affairs. Here are some important ways that being married can affect your financial status and the choices you will make in managing your finances.

Sharing Information and Working Together

Perhaps the most significant change in how marriage affects your money is that, just as with everything else in your marital decision-making, the focus must be “we” and not “I.” Even before you say “I do,” be frank with one another about where you are financially: your assets, your debts, your income. Decide beforehand how you are going to manage these key financial metrics. Even when assets and debts are legally under separate ownership, you need to agree on whether you will continue to manage them separately or work as a single financial entity moving forward. 

Iron out important decisions about money management. Who will exercise day-to-day budget matters like paying the bills? What are your respective financial temperaments: are you both thrifty, are you both spendy, or do you have different temperaments? Do you agree on your financial priorities and support each other’s spending habits? How will you resolve disagreements about money? 

These may seem like pedestrian concerns until you realize how many marital fights and break-ups result from financial stress. An Ameritrade survey discovered that a whopping 41% of divorces for GenXers and 29% for Boomers were primarily a result of financial disagreements. Money is essential, but you do not want it to be the source of marital strife.

It is important early on to understand the basic attitudes each of you has toward money. Your lives will involve thousands of decisions about how you spend or invest your funds, so make sure you open the channels of communication early and create a solid foundation on which to build a collaborative and mutual financial relationship. 

Taxes

Many financial decisions are influenced by or based on tax policy. Married couples, in particular, should consider tax ramifications when it comes to the choices they make for themselves and their families in how they manage funds.

For the most part, most state and federal tax rules no longer have a “marriage penalty” the way they once did. However, there are still a few states where you will pay considerably more in taxes as a married couple than you would for two single individuals who earn the same combined income. The only way to avoid the state marriage penalty is to move to a state with more favorable policies. In other words: being married may mean that, financially, it makes sense to live elsewhere, and that’s a significant impact on your lives.

There are also other ways that tax policy can affect your financial decisions. You will probably start looking at more ways to minimize your tax exposure. Look at programs that can limit your tax liability now but provide dividends or benefits for your family later, such as 401(k) plans, traditional and Roth IRAs, HSA accounts, and permanent life insurance. 

Social Security and Insurance

Marriage means assuming responsibility for the welfare of another as well as yourself. Take time to think about how your spouse – and, if applicable, your children – would be able to cope if something were to happen to you. Social Security and insurance are two primary avenues for taking care of someone if you are unable to or are not around.

Spouses and children have rights with respect to your federal Social Security benefits, and vice versa. This may not seem like a big deal when you are young, but it can be crucial as you get older or if something happens to you. While you have no say in how the Social Security system operates, learn your rights and your spouse’s and children’s rights. 

Finally, you may also want to consider purchasing a life insurance or disability policy that provides financial support to your spouse in the event of your death or disability. 

Ownership and Debt: Know What You Have

Marriage creates a legal relationship that affects not just your financial decisions but your financial status. Your financial status will depend upon things like how the title is held for property and whether you live in a community property state or a common-law property state.

Many married couples often ignore the legal status of how they hold the property while things are going well, but it can become critical in the event of divorce or death. Unless a couple has an agreement or is very careful about handling their separate and joint assets and funds, there can be serious financial consequences or unwelcome surprises down the road. Life has no guarantees, so be prudent and knowledgeable about what your separate and joint financial ownership and obligations are. 

Marriage spurs you to evaluate, long-term, what you are trying to build. When you are single, you only have to think about yourself, not worrying about how your financial choices can affect others. But marriage, and particularly the arrival of children, changes that. You have to look out for those you love and who depend on you, and you also have to look further into the future and consider the long-term effects of your financial decisions.

To learn more about and get the help you need in managing finances for you and your spouse to build security and wealth, or if you need help setting up some helpful management strategies as you enter into marriage, contact Mountain Financial today.