To be exact, it hit me on the flight back from the honeymoon. I had just finished an amazing week in a Hawaiian paradise with my beautiful bride. Life was good. There she was sleeping soundly through the slight turbulence that had awoken me. It had been a great time, but it was time to drop her back off at her place and get back to my plans, right? No? I honestly remember thinking, “Oh yeah, I’m married to her. Now what do I do?”
Many of my friends have shared having their own “Aha moment” similar to mine, where they realized what they had done by getting married. Can you relate? I hear that from the “Aha moment” forward it’s a wonderful, lifelong journey, but always a work in progress, and after a few years of marriage, I believe it. This is a long way of saying that I do not have all of your marriage answers, but I might have a few ideas that can help your financial matrimony. Here are a few suggestions:
- Have a Plan. This is by far the most important nugget I can offer. In a perfect world, part of this discussion would have probably happened before saying "I do," but making a plan shortly after marriage while you’re trying to get your name changed and write all those thank-you notes will be just fine. You need to decide which accounts to combine and which to keep separate. You need to be in agreement on what is going to be saved, know who is going to handle what expenses, and decide in what order your large, post-marriage expenditures are going to be addressed. I know couples who smash everything together. I know couples who keep everything separate. As long as it works, either is fine, but I personally would combine as much as possible. It’s easier to keep up with, it’s more transparent for both spouses, and at the bare minimum, it means less mail telling you that you have been pre-approved to buy the country of Lichtenstein! If you are completely truthful and talk about your finances frequently with your new spouse to ensure you are sticking to your plan (or adapting appropriately), I can almost promise you the rest will eventually work itself out.
- Develop a Budget. Guys, you may no longer be able to save up money for golf by eating at Taco Bell three times a week. Girls, guys are always going to be in shock at how much it costs to do your hair. Now that those two bombshells are on the table, let’s move forward. Make a budget, just like you did or should have done when you were still flying solo, and stick to it. The good news is there are hopefully two incomes and a few duplicate expenses that can probably be eliminated by living together and combining your finances. The bad news is you have to mesh two spending/saving/investing philosophies into one or else this could be a battle for the rest of your marriage. Keep trying to save at least 10%, keep donating or tithing if you choose to, and keep making those Roth IRA contributions and at least maximizing your employer’s 401(k) or retirement plan match like we talked about last week. I know you need to buy furniture, but it comes a piece at a time. I find many newlyweds (myself included) have this itch to try to live like their parents from the very beginning of their marriage. Please realize that it took your parents years of saving, sacrificing, and working to achieve the lifestyle you were born into. Instant gratification and spending can feel good, but it can set you back terribly. Also, keep paying off all those credit cards and obliterate any remaining student loans or car loans that are hovering. In my book, the only long-term debt you should be considering is relative to buying a home.
- Buy a Home. If you are uncertain about your job or you and your spouse aren’t fairly certain about where you want to live for the next 5-10 years, you might be able to skip this paragraph. I just know that I would be remiss to not address buying a home since this is so high on many married couples’ lists. What I can tell you is that in the short term, renting is better, and in the long term, buying is better. Here is an interactive graph by The New York Times that may help make my point and will give you the chance to examine your particular situation. Buying a home is a great way to work towards building equity and is a life goal for many people, but it is a decision that warrants careful consideration. With historically low interest rates and many discounted properties out there right now, it may still be a good time for you to buy, but make sure you can afford your obligations. By purchasing a home you will have a monthly mortgage payment, you will have to purchase homeowners insurance, and most painfully, you won’t be able to call the landlord to fix something when it breaks. Another consideration you will need to make will be relative to your life insurance and wills. If you purchase a home, you will at least partially own a fairly large asset, and with that large asset, comes responsibility. You must make sure you and your spouse can afford to keep that asset should something happen to either of you by likely taking out life insurance policies on both of you that exceed your loan amount. You must also make sure you and your spouse can easily and clearly keep that asset should something happen to either of you by likely drafting wills. I’m not trying to scare you from buying; my wife and I bought a home ourselves. I’m just telling you that home ownership costs more than you ever think, so save, save, save, and don’t rush into anything you could regret.
- Save More. Whether you are saving up for that home down payment or not, my suggestion to save more deserves its own bullet point. I advised you to work towards having at least $10,000 in a rainy day fund as a bachelor or bachelorette, but it’s time to up the ante. After you’ve made that marital budget, you are going to want at least 3 to 6 months' worth of living expenses. In this crazy world, lean towards 6. After you have that saved up for emergencies only, your additional savings can go towards new pieces of furniture and buying things no one gave you off your wedding registry. After those expenditures, your additional savings can go towards debt principal payments, into a home purchase fund, or towards savings for the next car.
Of course, you could always start saving money for a baby fund. Wait, that’s next week…