7 Tips for Blending Family and Finances
According to a popular wedding planning site, June marks the start of peak wedding season, which runs through early fall.1 If you’re among the thousands of couples planning a wedding in the months ahead, consider giving some thought to how you will approach your finances once you’ve tied the knot. The following tips can help as you prepare to blend your lives, households and finances.
1. Prioritize communication
Many people are surprised to learn that a lack of communication, not money, is a leading cause of marital financial stress.2 Miscommunication often occurs when spouses have different perspectives about money. One spouse may have been raised in a household where it was considered taboo to talk about money while the other grew up participating in discussions about the family’s finances. Blended families, where one or both spouses have children from a previous relationship can also present unique challenges. To promote positive and productive communication, take time to understand and acknowledge each other’s perspectives, concerns, and past experiences with money. Review your finances together on a regular basis at a time and place where you will be free from distractions, and be transparent about spending, debt, credit scores, investments, etc. Most of all, remember that you’re on the same team. Agree to refrain from passing judgement on past financial decisions. While it’s important to learn from the past, focus your energy on how you will move forward as a couple to pursue your goals.
2. Document your goals
It’s hard to have productive discussions about your finances if you don’t know what you’re working toward. It’s also hard to make progress toward your goals if one partner’s priority is saving for a downpayment on a house while the other is focused on paying down student debt. While you can work toward multiple goals simultaneously, begin by documenting each goal. That makes it easier to agree on priorities and a strategy for pursuing them. Keep in mind, your priorities may change over time as you grow your family and your wealth, change jobs or careers, and encounter different milestones and circumstances. To remain on track, review your goals regularly.
3. Create a budget
Maintaining a budget is critical for managing your household finances and building family wealth. Your budget provides a clear view of your income, debt, spending, savings, and investment assets. It not only helps you track money coming into your household but shows you where every dollar is going. That enables you to manage your money in a way that best supports your goals. One of the easiest ways to manage your budget is through an online or mobile app that allows you to aggregate data from all of your financial accounts. You can also set up alerts to quickly spot areas where you may be overspending or identify excess cash that can be redirected to savings.
4. Build a financial safety net
Unexpected events, such as a job loss, medical emergency or expensive car repair can happen at any time. Yet, according to a recent survey, only 43% of U.S. adults say they could pay for an emergency expense from their savings.3 Setting aside enough money to cover several months of living expenses in a liquid savings account can help you avoid borrowing money or incurring high-interest credit card debt to cover an unplanned expense. That can go a long way toward helping you remain on track when life throws you a curve ball.
5. Consider life insurance
Life insurance can also help protect against unexpected events. A life insurance policy can provide income protection for your family in the event of your passing. While most policies provide a payout to your beneficiaries if you pass away, different kinds of policies can provide other benefits as well. Determining how much insurance you need depends on a number of factors, including your age and income, the number of your dependents and their ages, and your financial goals. Life insurance can also be used as an estate planning tool to help transition assets in a tax-efficient manner.
6. Update your estate plan
Updating your estate planning documents is critical whether this is your first or a subsequent marriage. Begin by updating the beneficiary designations on your retirement accounts and any insurance policies you own. Proceeds from these accounts bypass your will and are paid directly to the designed beneficiaries upon your death. (In a number of cases, proceeds have gone to an ex-spouse, instead of a current spouse, simply because these designations were not updated in a timely manner.) Then work with an estate planning attorney to create or update your wills, powers of attorney, trust and any other estate planning documents that may be appropriate for your situation.
7. Determine your tax filing status
Finally, plan ahead for how you will file your taxes next April. In many cases, married couples filing a joint tax return can realize significant tax savings. For tax year 2023, most married couples under 65 filing a joint return receive a standard deduction of $27,700, while couples filing separately receive a standard deduction of $13,850. However, if you file a separate return from your spouse, you will be automatically disqualified from certain tax deductions and credits. Keep in mind, there are instances when it makes sense to submit separate returns. To determine the best filing strategy for your circumstances, meet with a tax professional.
If you’d like to learn more about strategies for combining your finances and building a confident financial future, call the office to schedule a time to talk.
1 Iacia, Samantha. “When Is Wedding Season? Here Are the Most Popular Wedding Months.” The Knot, 17 Feb. 2023. https://www.theknot.com/content/is-there-an-off-season-for-weddings.
This information was written by KRW Creative Concepts, a non-affiliate of the Broker/Dealer.
This communication is designed to provide accurate and authoritative information on the subjects covered. It is not, however, intended to provide specific legal, tax, or other professional advice. For specific professional assistance, the services of an appropriate professional should be sought.
The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased. Before implementing a strategy involving life insurance, it would be prudent to make sure that you are insurable by having the policy approved. As with most financial decisions, there are expenses associated with the purchase of life insurance. Policies commonly have mortality and expense charges. In addition, if a policy is surrendered prematurely, there may be surrender charges and income tax implications.
7 Tips for Blending Family and Finances
May 22, 2023