Newsletter Signup

Couple arguing about moneyA significant factor in marital success is how couples handle their financial lives. In fact financial discord could be the biggest marriage warning sign, according to a study conducted by researchers at Kansas State University.

"Arguments about money are by far the top predictor of divorce," said Sonya Britt, a Kansas State University researcher and program director of its personal financial planning program. "It's not children, sex, in-laws or anything else. It's money -- for both men and women."

Here are seven things newlyweds can do to avoid allowing money issues to tear their marriages apart:

1. Communicate honestly.

Before walking down the aisle, couples need to be frank with each other about their income, assets, and debt. Can you imagine after marrying someone, for instance, that you discover that your partner has $100,000 in student loans? That would create significant financial stress for an unsuspecting spouse.

2. Establish financial goals.

Discuss what your financial goals should be as a couple. Do you want to buy a house, save for retirement, repay student debt, buy a car, go to graduate school, or pursue some other goal?

Even if you can’t save much, it’s important that you both start saving for retirement right away, and preferably through automatic deposits (such as a 401(k)).

3. Decide how to manage your finances.

There are three main ways in which married couples handle their finances.

  • They combine their finances.

  • They keep their finances separate. In this scenario, spouses decide which bills each will pay. Any debt brought into the marriage, whether student loans, credit card balances, or something else is that partner’s responsibility.

  • They choose a combination of these two approaches. They may open a joint account for paying bills, saving for a house or other mutual financial goal but keep some of their money in separate accounts.

4. Reduce taxes.

Once you’re married, you should check your tax withholding at your workplace. Newly married individuals need to complete IRS Form W-4, Employee’s Withholding Allowance Certificate. This document determines how much an employer withholds from your paycheck for state and federal income taxes.

5. Create a will.

Even if you have a will, you will need to update it when you marry. Dying without a will can create tremendous hardship for survivors.  Once you have gotten your estate plan in order, you should review it every three to five years.

6. Check your retirement accounts.

Who receives the proceeds of a retirement account isn’t dictated by the terms of a will. When you create an Individual Retirement Account, for instance, you will designate one or more beneficiaries. If an ex-spouse or parent’s name remains on an IRA, the money will go to him or her even if you subsequently re-marry/marry.

7. Understand how student loan debt is handled.

In most cases, a spouse is not legally responsible for his or her partner’s student loan debt. Cosigning a student loan, however, would make the spouse liable.

Post Categories: 

Share this page