You’ve probably heard that money problems are one the most significant factors that can lead to divorce. Sometimes couples have a hard time changing their individual mindsets to the coupling mindset, and choose to treat their finances independent from one another. Most people, individuals and couples alike, don't make financial planning a priority. Financial and taxwise, it is very beneficial for couples to learn how to merge their finances. There is no more mine and yours after you say "I DO." If one is struggling financially, the you both are. There is no way around it. Power couples are created when couples learn how to identify their goals, work their budget percentages, finance, and tax strategies.
Step 1: Share your philosophy about money
How do each of you feel about money? What are your thoughts on how financial affairs should be managed? You should also both disclose what you learned about money as a child so you can gain a better understanding of your respective views.
Step 2: Chat about credit reports and scores
After you’re married, you will continue to have your own credit file, but you may also share joint accounts – like credit cards, car loans and a mortgage. If one or the both of of you have a bad credit score, that fact will negatively affect the interest rate you get on joint accounts. You can get a free copy of your credit report on AnnualCreditReport.com.
You can also learn how to fix your own credit with ScoreNavigator.
Step 3: Disclose financial obligations
Is your money being spent in places that your partner is unaware of? Now’s the time to come clean and discuss all arrangements, such as charitable contributions to relatives, child support or alimony payments. Other outstanding obligations, such as tax debt, auto loans, student loans and credit card debt, should also be disclosed.
Step 4: Create Goals
Your short-term, medium-term, and long-term financial goals will have a huge impact on your overall budget. You will need to share your individual goals and establish joint goals. Schedule a “Money Date” once a week to check in and re-evaluate your goals. keep communication open and ongoing.
Step 5: BUDGET ! ! ! !
If you’re going to spend the rest of your life together, why not learn how to manage your money as a unit? Determine Your Net Income, fixed mandatory expenses, variable expenses, and out of those variable expenses, determine what you can live without in order to trim the fat to meet goals. Calculate what you need to save for emergency funds, retirement, and home purchase. Set a Budget for the wedding.
Step 6: Divvy Up Discretionary Spending
Discretionary spending is just what it sounds like—spending on things you want but don’t need.
Step 7: Tax Planning
It is also important to disscuss how marriage will affect you filing taxes with a professional. If you're legally married as of December 31, you're considered to have been married for the full year and must file as either Married-Filing Jointly or Married-Filing Separately. No one can claim either of you as a dependent any longer . It is important to know your tax bracket and how each of your income streams will be taxed as a couple.
The Bottom Line - Setting up a budget, keeping track of it, and meeting once a week to review where you are can keep money conflicts to a minimum and help you, as a couple, meet the goals you set out for yourselves.
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