Please welcome finance expert Karen Condor, a writer with some solid advice for all you married couples out there.
Making a marriage commitment to share your life with someone can help you live longer, lower your stress, get better sleep, and even improve your success after major surgery. But does that commitment mean you have to share your finances, too?
There are many benefits to doing so, resulting in marriage also being able to help you become richer.
We’ll look at five benefits of going in together on finances, including combining auto insurance after marriage. But first we’ll share how to properly form a financial union.
With money usually being the number one topic couples argue about and with money-related conflicts frequently cited as a reason for divorce, we want to help you learn how to reduce the fighting and enhance the bliss.
Set the stage for sharing finances: You may think this sounds crazy, but having a “money talk” can enhance your married romance.
A survey published by the American Institute of CPAs (AICPA) found that 47 percent of married or cohabitating couples had experienced intimacy issues as a result of financial tension in their relationship.
Even more telling, only 44 percent of couples were comfortable discussing finances with their partner.
Put those two results together and you can see how discussing a shared financial outlook will not only bring you closer to your joint financial goals but will also help bring you closer together as a couple.
Let’s look at how to aim for achieving financial bliss.
When to have the money conversation: The time to talk is when you become serious about each other and start thinking about creating a future together.
The engagement period isn’t just a time for planning the perfect wedding day and honeymoon.
It’s a time when couples receive advice about married life from family, friends, and coworkers — whether solicited or not. But it’s also a time when many couples seek advice from church leaders about learning the tools for a successful marriage, including communication, honesty, and intimacy.
Sometimes religious instruction touches on money, but engaged couples should build from that and make a commitment to sit down and assess their financial compatibility and then agree to work together on how to overcome any challenges regarding that.
For couples who are nervous about financial talk, or who feel they need help to create and attain their financial goals, they should seek the expertise of a professional financial advisor.
Everyone could use a higher dose of financial literacy; in fact, in a 2020 National Financial Literacy Survey conducted by the National Foundation for Credit Counseling (NFCC), 78 percent of U.S. adults agreed they could benefit from financial advice and answers to everyday financial questions from a professional.
And it’s no wonder: Only 55 percent of Americans give themselves a grade of A or B on their personal finance knowledge.
What to include in a pre-wedding money talk: Start the conversation by sharing your family’s relationship with money growing up, and how that informs your relationship with money today.
Be honest about your financial situation and your financial expectations for the future.
Talking points can include:
- The state of each person’s finances, including income, all debts, and savings
- How finances will be combined
- If and what finances will remain separate
- The division of labor regarding financial responsibilities, such as how bills will be paid and by whom
- Life goals and the finances needed to meet them, including hopes and dreams regarding a home, children, retirement, vacations, etc.
- What money lessons you want to teach your children
Then list each of your incomes and expenses, and review your financial goals.
Now comes the biggest ways to avoid money problems in marriage: Set a budget. If you want a test run, create a wedding budget. Work together to decide on how the wedding will be financed. And for a test financial goal, discuss what should be done with all of that anticipated wedding gift money.
Benefits of combining finances: While money doesn’t buy happiness, making things simpler and saving more money will certainly enhance your marriage.
#1 – Simplify Your Married Life With Joint Accounts: When my husband and I became engaged, we had the money talk and were luckily on the same page as far as our financial situation and our financial goals. But I harbored such deep trust issues from the disastrous financial outcome of a previous relationship that I declared I would never agree to joint accounts again.
My husband is a patient man. He bided his time, waiting for me to realize that I could trust him in every way, including financially. He didn’t take a drastic turn and splurge uncontrollably or hide money from me.
Since I’m the one who wanted to be in control of the finances, it took me about six months after our marriage to realize it was a headache to pay bills, maintain a budget, and properly save for our goals by keeping all our accounts separate.
Combining finances not only reduces the number of accounts (and banking fees, including checks), but it also makes it easier to keep tabs on debt and put away money for shared financial milestones.
Also, if you share a savings account and each keep contributing the same amount you did before combining your savings, your interest payments will increase thanks to compound interest.
#2 – Get a Better Mortgage Rate: Two incomes are better than one. And in getting a joint mortgage, lenders will consider both of your incomes. The larger total income will often qualify you for a bigger loan with better repayment terms than you could get on your own.
Generally, getting a joint mortgage means that couples can come up with a higher down payment, which can lower the interest rate and result in paying less over the life of the loan. If the down payment is high enough, it can eliminate the need for mortgage insurance.
Also, most joint mortgages allow for a survivor to gain full ownership of a house if a partner or co-borrower passes away. This way the surviving spouse won’t have to deal with costs and other frustrations associated with probate court.
#3 – Get Better Auto and Home Insurance Rates: When you get auto insurance as a couple, you get favorable treatment. Joint ownership auto insurance for married couples is almost always going to cost less than two individual policies.
In the eyes of insurers, married couples are considered a lower risk than singles because of the widely held belief that they’re more careful behind the wheel so they’ll get in fewer accidents.
You could save anywhere from $13 to $44 a month by putting both drivers and both of your vehicles onto the same policy.
Home insurance companies also usually give a flat-out discount for being married. And if you combine your homeowners’ insurance with your auto policy, you can save hundreds of dollars annually by bundling your insurance in this way.
#4 – Get More Affordable Health Insurance: Most companies provide an option for coverage for an employee’s spouse. If each of you has access to company-sponsored health insurance, you can compare the cost of staying on separate plans versus being added to one of the policies.
It’s often cheaper to have a family plan than two separate policies.
Also, married couples receive discounts on long-term care insurance, which can be up to 40 percent. The rationale to insurers is their liability is reduced because couples tend to care for each other at home for as long as possible.
#5 – Save on Taxes: Tax breaks aren’t one of the more compelling reasons to get married, but why not take advantage when the government wants to give money away?
If one of you makes less money than the other, the tax brackets can work in your favor for filing a joint return. Your income together is taxed at a rate somewhere in the middle, which can result in a lower tax than you’d pay as two single taxpayers.
Filing jointly also allows for more deductions. One example is if one of you has a business loss. Filing singly, tax benefits from that loss are slim to nonexistent; filing jointly, your business loss can help offset the income of a spouse who earned a good income.
In addition, married couples get bigger tax breaks than single people in other instances, like selling a house. A spouse without a job can put joint income into an individual retirement account (IRA), which they wouldn’t be able to do otherwise. Spouses also don’t have to file a gift tax return for giving each other money or pay federal estate taxes when their spouse dies.
And don’t forget the convenience factor — you only have to file one return instead of two.
We hope we’ve shown you why it’s worth it to pool your money in matrimony. May your sense of togetherness build along with your wealth!
Karen Condor is a finance and insurance expert who writes and researches for the auto insurance comparison site, AutoInsuranceEZ.com.