From informing your future in-laws to figuring out the perfect venue for the ceremony and reception, engagement is exciting … and filled with to-do lists. But while some tasks can seem like a total time suck (how different is buttercream and frosting, really?) other tasks are essential in making sure you start your future together on sturdy ground. One key task is making sure both of you are on the same page when it comes to finances, both in terms of how you want to manage your day-to-day cash flow and how you want to prepare for your future.
Here, six financial steps to take before tying the knot.
1. Make a decision on how to handle finances
Some couples create a joint account, some maintain separate accounts and some do a combination — keep separate accounts but create a joint account for mutual expenses. While there’s no wrong decision, it’s important to be explicit about your decision. One important consideration is each of your financial histories. For example, if one of you has poor credit or is working on improving your credit score, opening a joint account may bring down your partner’s score and could make it harder for both of you to be eligible for the most competitive rates on, say, a mortgage.
2. Talk through financial goals
What do you want to do? It may be to pay down debt or eventually save for a downpayment. Having financial goals in mind can help give both of you something to work toward, and can also be a good way to delegate any money you receive from the wedding. Speaking of, it’s also important to decide how your financial goals fit into the size and expense of your wedding. If you’re paying for the party yourselves, it may make more sense to do a lower-key reception so you can afford a down payment in the near future.
3. Assess your insurance needs
Do you have life insurance? If not, now’s a good time to get it. While you may have a policy through work, that policy may not be sufficient to cover the surviving partner’s needs if one of you were to die. Life insurance can protect the financial decisions you make together, as well as help ensure that any children you have in the future have a financial cushion if something were to happen to you. It’s also a good time to cross “buy life insurance” off your list sooner in life. Why? Rates tend to be lower when you’re young and healthy. If you plan to have children down the road, buying a policy now ensures that your rate is locked in for the term length you choose. That means if you’re 25 now and purchase a term policy, you’ll still be covered and paying the same amount into your fifties. And applying for insurance doesn’t need to be a time suck or break the bank: At Mosaic Life, you can get a quote and apply online in under 10 minutes
In addition to life insurance, it’s a good idea to do an audit of other insurance policies you may have or need, and what is covered by them. For example, do you have homeowner’s insurance or renter’s insurance and is the engagement ring covered under the policy? Having insurance in place can give you both peace of mind and help protect your finances.
4. Make a will
Yes, it’s a downer. But if you don’t have one in place, making sure you have a will now will help your spouse avoid headache on top of heartache if you were to die. Besides a will (officially known as a Last Will and Testament) it’s a good idea to also have Power of Attorney and Living Will / Advance Directive documents. You can find online templates that allow you to make legal wills; having the documents overseen by an attorney can help ensure that you’ve covered all your bases and considered all options.
5. Set financial roles
Even if you’ve been living together for years, marriage can bring up additional financial roles, especially if you’re planning to have children in the future. If you haven’t already, consider setting aside time every few weeks for a “financial date.” Open a bottle of wine and go through your finances from the past month. This can include reviewing big purchases, assessing where you are relative to your goals, and coming up with a plan for any future financial challenges, like saving for a vacation. You might want to consider using a budgeting app that allows both of you to input data — that way, you can both be on the same page regarding spending.
6. Assess your investments (and consider seeing a financial advisor)
Sure, retirement seems like a long way away (can’t you get past your honeymoon, first?) but having a smart retirement strategy, including investments, can be good to lock down now (if you want to know why sooner is better, read up on compound interest). Even if you’re not planning to combine finances, it may make sense to see a financial advisor to make sure you’re on track to reach your financial goals, including being able to retire comfortably in the future.
Take time now to take care of financial to-dos before marriage
While financial to-dos may not be as fun as, say, cake-tasting, getting these out of the way ensures that your marriage starts on stable financial footing. It’s also important to make sure that any financial goals or obligations are mutually understood. And remember: Getting these out of the way now means more time to enjoy actually being married once the wedding is over.
