Published by Zachary Langan, Associate Wealth Advisor
Getting married is super exciting and simultaneously stressful. Planning the wedding can consume nearly all our thoughts and energy, yet there’s a combining of life and finances that will continue long after the special day.
What are the best things a newlywed couple can do to set off on stable financial footing? Let’s look at a few…
Number 1: Get Basic Documents in Order
- Getting basic wills created is the most obvious of these, but there are some accompanying and lesser-known items that are just as important.
- In Texas, a basic “Will Package” consists of 4 documents – the Will itself, a Durable Power of Attorney, Medical Power of Attorney, and Directive to Physicians. So that’s 4 documents for each spouse, 8 documents in total.
- These documents are standard and the cost for the full package is very reasonable. While most attorneys can help with this, an estate-planning attorney is ideal and will be better prepared to discuss your options and handle any non-typical situations.
Number 2: Update Your Beneficiaries to Your Spouse
- An often-overlooked item is updating beneficiaries. Many types of financial accounts, like a 401(k) or IRA, will pass to designated heirs not by the Will, but by the listed beneficiaries on the account. It may be helpful to see the beneficiary designations as overriding whatever the Will says.
- Beneficiaries can be updated at any time by contacting your financial institution or advisor. If that beneficiary was named as a parent or sibling prior to getting married, that designated individual will receive that account even if your spouse is listed in the Will. Having your beneficiary designations accurately reflect your intentions is just as important as having a Will.
Number 3: Protect Your Most Valuable Asset
- What is your most valuable asset? Your home, car, or savings account? However expensive or large those items may be, I would argue your most valuable asset dwarfs all of them – that is, your ability to earn an income to provide for your family.
- For most of us, money used to buy everything in our life and all the savings we ever have will come from money we gain the old-fashioned way – by working.
- We are MUCH more likely to become disabled than to die early. A 35-year old has a 50% chance of becoming disabled for longer than 90 days, and 1 in 7 will become disabled for longer than a 5-year period.
- Losing the ability to work will crater most every plan a family has – and protecting that ability is vital to the financial success and general well-being of your marriage and future family. Disability insurance, specifically Long-Term Disability insurance, is the tool used to protect from this risk.
- While employers sometimes offer small amounts of life and/or disability insurance, even when coupled with Social Security disability, these are nearly always insufficient at replacing even a small piece of current income.
- This is not a situation to learn the hard way. Contact your advisor today to discuss what coverage would be appropriate to maintain the minimum lifestyle you would like for yourself and family.
Number 4: Start Saving!
- The amount doesn’t matter… just start saving ANY amount into an account of your choosing. Saving is a habit we all need to teach ourselves and the short-term sacrifices to spending will be more than made up for in future benefit.
- Where’s the best place for you and your spouse to save? Start by seeing if your employers have retirement plans available (think 401k) and if they will match any money you each put in yourself. It’s typical for employers to match 3% of the amount you save. Check to see if that’s available and if so, we recommend saving at least as much to get the full, maximum match. That match is essentially ‘free money” for your future self.
- After getting the employer match on your work retirement plans, many younger folks will start saving into an IRA or Roth IRA. There are significant tax advantages to these accounts and the IRS restricts who and how much can be saved.
- Some of the largest accounts our firm helps manage were started 30 years ago with a small contribution going in automatically each month. Discuss with your tax professional and financial advisor what makes the most sense for your situation, and what options are available for your income. It may just be $50/month, but that monthly saving is the start of something that significantly impacts your life down the road.
Number 5: Create a Budget & Discuss Responsibilities
- Do we have enough for that? Did the electric bill get paid? When are we renovating the kitchen? There will always be questions like this that come up but discussing a budget and specific responsibilities of each spouse will greatly improve not only your finances but general enjoyment knowing each spouse has a financial awareness and goals to work toward.
- Take some time to create a balance sheet of your current debts and savings accounts. Discuss your goals in terms of how you would like to prioritize paying off debt and set specific time frames.
- Write down all your sources of income and all your expenses, and then create a budget that keeps you on track. It’s so easy for couples to end up with a ton of credit card debt and not know how it happened – creating a budget and being intentional with how you spend is your best chance at avoiding debt overload.
- Agree to review your financial situation on a specified time frame – this may be weekly or just once a year, but there’s evidence to support the more often, the better. At a minimum, use your annual or bi-annual meeting with your financial advisor as an opportunity to discuss where you as a married couple are financially and where you would like to be.
Every marriage is unique and so is each financial situation. While you may have special circumstances or financial complexities, we know taking action on these things will start your marriage on a stable financial foundation. Please reach out to us if there’s any way we can assist, and congrats to all you nearly or newly married couples!