Money Matters: Financial Advice for Engaged and Newly Married Couples

Newlyweds shouldn’t wait to get their finances in order. Photo: Allegra’s Studio (2015)

I decided to write about this topic after talking to my recently married son and his new wife about some aspects of getting their finances in order that they hadn’t thought about. After a wedding, it’s easy to get distracted writing thank-you notes instead of doing important paperwork and planning related to your new legal status as a married couple.

The first thing that may come to mind is taxes. According to Geoffrey Kulik, a partner at Sterck Kulik O’Neill Accounting Group, Inc., newlyweds have to file their taxes for the entire year as either “married filing jointly” or “married filing separately.” “Because of the way the laws are written, this change of status could result in a significantly higher, or lower, combined tax bill,” he explains. “Couples—especially those with high net worth—should do a tax projection before the end of the calendar year to avoid surprises and see if there are any actions they can take to affect the outcome.” Since tax laws haven’t changed significantly, you can do your own projection this year by using what Mr. Kulik calls “ballpark information” from 2014.

Other tasks include changing your name with Social Security and getting a new driver’s license and passport (if necessary). Review each person’s health insurance policy to see if you’re better off adding a spouse to one policy or the other. With each existing insurance policy you have (life, auto, renter’s), both of you should be named. Also, it may be time to review your retirement accounts and change beneficiaries.

It’s understandable if you want to wait a while to change beneficiaries for life insurance and retirement accounts so you can make sure the marriage is going to last. “A beneficiary designation is definitely one of the most important considerations for married couples,” says financial expert Daven Sharma, principal of Davis & Company. “Like a freshly potted plant, a marriage needs time to grow.”

More importantly, Mr. Sharma strongly believes that couples who are serious about a long-term relationship should start discussing money matters long before their wedding day. “One thing you can do is create a balance sheet that shows what each party has in terms of assets and liabilities,” he suggests. “Be honest in disclosing what you own and owe. If one person comes with a $150,000 student loan, the other person may be surprised that this was never disclosed before the wedding, and at that point, it becomes a community debt that they both have to pay off. Lack of disclosure may create a wedge in the marriage, which can be avoided by being honest and open right away.”

You should also consider creating a realistic budget for expenses and savings, differentiating between personal and community expenses, and keeping separate bank accounts. Mr. Sharma doesn’t recommend co-mingling everything at the beginning of a relationship. When it comes to resolving financial disputes, he says many couples benefit from having a mentor. “Agree on a mentor within the family—someone who has gone through certain life cycles and can guide you through disagreements over money.”

Mr. Sharma notes that money issues cause many divorces, and most of these problems could be avoided by having a solid financial plan in place. He believes that one of the best wedding gifts parents can give their children is a consultation with an expert. “Pay for a three-hour consultation with a financial professional you know and trust,” he says. “All the couple has to do is show up, sit down with the consultant, and discuss topics like financial and estate planning.”