Maneuvering finances tend to be less complicated for couples marrying early in life. They have fewer accumulated assets, they are more flexible about career options, and often, no kids are involved. For couples marrying later in life, there’s more to discuss because they likely have substantial assets, debts, or even kids.
Finances are one of the most significant aspects that can make or break a marriage. According to Divorce.com, 40-50% of marriages end up in divorce. Therefore, it’s best to talk and communicate clearly about expectations before marriage, especially if you’re marrying later in life. Here are four tips to help you navigate the murky waters of finances with your partner.
1. Agree on an Approach to Combining Finances
Comingling finances often works as the best approach for married couples. However, as you grow older and build your asset portfolio, combining finances might be quite the adjustment. Couples typically pick one of the following approaches when it comes to money.
- Combining all the money into one joint checking and savings account.
- Maintaining joint and separate accounts.
- Maintaining separate accounts.
Since you’ll have some shared financial obligations, it’s preferable that you find a way to combine part of your finances. Also, remember that combining finances is more than money, it’s about lifestyles. Take time to understand your different money personalities and spending habits.
2. Agree on an Asset and Debt Management Plan
If you marry later in life, you have likely accumulated assets or debts. For example, you may own a house. According to Ibis World, the market size of home builders in the U.S. is valued at $118.8 billion. Both parties need to be clear about what they bring on board. The priority is not to air poor financial habits on your partner but to devise a management plan that works for both parties. For example, is it more feasible to move into a home than rent? Consolidate how much debt each party is bringing to the table. Come up with a budget that includes a plan to finance the debt.
3. Start Estate Planning Early
It’s never too early to start estate planning to ensure your family is taken care of when you’re gone. Estate planning is even more essential if one or both of you are coming into a relationship with children, whether adult or young. If you agree, you may need to update your will and make your spouse a life insurance policy beneficiary.
Prenuptial agreements are increasingly becoming popular and signing one before marriage is no longer controversial. It gives guidelines on what happens to your finances in case of a divorce. If you have young kids, you may want to ensure they get a quality education at one of the approximately 36,000 private schools in the U.S., as per Thought Co. An estate plan helps realize this dream.
4. Update Tax Filling Info
Finally, a vital financial aspect is updating tax filing information, especially if you marry late. One of the benefits of matching your info in Social Security Administration records with your IRS records is ensuring your tax refunds aren’t delayed. As a married couple, you’re entitled to some tax relief. If you were entitled to some benefits before getting married, check with the relevant institutions to check if you still qualify.
Many couples end up divorcing because of poor communication before marriage. Finances are one of the leading causes of divorce, so it’s best to divorce-proof your marriage with a well-thought financial plan. If you can agree on the basics with your spouse, there’ll be little room for miscommunication.
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