Top Money Tips For Newlyweds
How To Nail It As Newlyweds
Money doesn't have to define a relationship, but it can break it.
Getting married is one of the most exciting times in a person's life. Getting settled in with your life partner after marriage is fun and romantic, but it can also be stressful. Learning how to live with your spouse is the first hurdle. If you weren't living together already, you'll be learning a lot about each other, very quickly. Living habits can be hard to break so if someone isn't happy with the other person's behavior, it may take some time to work through any issues.
Money habits are no different. You've likely been forming them for years and when two worlds collide, some decisions have to be made. Everyone manages their money differently and everyone has a different opinion on what to do with each dollar they make. Coming up with a plan on how to manage money with a partner and making sure everyone is happy with the plan is difficult. If both people aren't steering the financial boat in the right direction, it's going to be hard to land on the same shore.
Here are some tips for newlyweds:
Tip 1: Wait To Buy A House
Renting can bring a lot of cashflow. Enjoy it! When you buy a house you have to pay for house maintenance. Houses are expensive, especially if you want to keep them nice. Heck, maybe don't buy a house at all. That'll be up to the couple, but the world will tell you that once you're married, you better buy a house! Don't feel like you have to, you may be better off by being patient and buying a house when you're ready. It's also important to wait to figure out where you want to live. Renting allowed us to save a lot of money because we rented cheap, but in a great location. Buying a place in the same community would have cost us 4x what we were paying in rent.
In the three years we've been in our house, we've had to replace the water heater, furnace, and the air conditioner. We've also chosen to redo our driveway, bathroom and kitchen. Oh, and we bought a few pieces of new furniture and painted the house. We knew we bought a fixer upper when we moved in, but neither of us thought we'd be spending 50k in the first 3 years.
Obviously, not all of those things were necessary but many were. When you rent, you don't have to pay for major repairs. Ignore the people that tell you to buy a house just for equity. You can save what those people are spending on their house maintenance, improvements, and repairs; and it will probably be more than what they gain in equity.
"Buy a house because you really really want to buy a house. Don't do it for financial reasons. "
Learning to live with your new spouse and learning how to be a good husband or wife takes a lot of work. Buying a house right away is just another stressor on top of those things. If you can wait a year before buying a house, that's great! If not, it'd be good to at least try and give it a few months before you jump into home ownership.
What We Did
We rented for 4 years after getting married to save up a bunch of cash so we could buy our house. It was an awesome and unifying experience to share a common savings goal and then when we finally did buy our house it was that much sweeter.
Tip 2: Develop A Plan On How You'll Manage Your Money Together
Maybe both of you are on top of your finances, or maybe one or neither of you are. Either way, you are married now. If you already lived together before getting married you may think you're already prepared to handle your money matters, but in my experience getting married changes things.
Once you're married, one major thing changes. The 'M' in Me gets turned upside down. Money decisions become about 'We'. Before getting married most people are spending their money on themselves. When you get married you are much more likely to tackle life's financial challenges together because you are a team. That means figuring out how you'll manage your money together to meet these goals. Buying a house, cars, funding your retirements, or kids college funds. There are lots of decisions to make that are no longer just about what you want, but what you want together.
Going from a single income to being married to someone changes your financial life. Even if you decide to keep your money completely separate you will be spending on shared goals. So the subject will need to be approached one way or another. It can be a trying time to determine how you can handle two incomes together, but it is also a great way to super charge your savings and investments. Two people working towards a goal is always more fun than doing it yourself, so have fun with it. Develop a plan together that gets you both excited about your future together!
questions to ask each other to get you started on your plan:
Are you a saver or spender? What about your spouse?
Will you both be bringing in income? If so, do you both earn similar incomes or will one person be making a lot more than the other?
If one person makes a lot more than the other, are they comfortable with their spouse spending their money?
Do you prefer to share accounts? Or are you more comfortable keeping all your money separate?
Once you've answered these questions and had an honest conversation, you can put together a plan you are both comfortable with.
What we did
We set up a joint savings account which is our families savings fund. We both put all our savings into it so we can achieve our investment and savings goals together. We are both aware of what we use that money for and no one transfers money from it without communicating to the other person what we're spending it on.
When we were first married we put the rest of our paychecks into our own checking accounts after funding our joint savings account. This worked out well for us so we could still feel like we had our own money and could buy each other presents without the other person knowing about it.
Once we had kids, things changed a bit. My wife left her 9 to 5 job to help watch the kids but she is still able to make decent money through her photography and marketing business. It's not consistent income however which does make it hard to predict. That's when we decided I would continue to fund our savings as much as possible and the rest of my paycheck covers our living expenses. Everything my wife makes through her business goes straight into our savings account because we don't need it for any of our recurring expenses.
Tip 3: Be Honest With Your Money, Financial Infidelity Is Not Cool
"Make sure everyone in your 'boat' is rowing and not drilling holes when you're not looking."
Hopefully you've found a spouse that has similar goals as you and wants the same things you do. If that's the case, you'll likely have a lot of success in your relationship and managing your money.
The worst thing that can happen in a relationship in regards to money is Financial Infidelity. What does this mean? It's basically cheating, but with your money. It's buying things that you know your spouse wouldn't approve of. It's spending more on things than you know you should because it takes away from your communal money goals. There is nothing wrong with keeping your money separate and spending whatever you want to spend on things within your budget. We're talking about things like opening up credit cards that your spouse doesn't know about and racking up debt. Or making big purchases like cars without communicating that you're doing it and how you two will pay for it.
It is hard to succeed with money if you're bailing water and someone else is drilling holes in your boat. Managing finances is one of the top 10 reasons people get divorced. So if you want to have not only a happy marriage, but one where the two of you are stronger together than apart, it's a good idea to get on the same page with finances and make sure you're both 'rowing'.
What We Did:
As mentioned, we have our joint savings account so we can have transparency with our savings goals. We also have the rest of our income going into a joint checking account to pay for necessities throughout the month.
By sharing our accounts we have a shared understanding of where our money is going. This exact solution may not work for everyone, but it's a great way for us to hold each other accountable and make sure we're always making the best decisions for our family.
Tip 4: Teamwork Makes the Dream Work: Super Charge Your Financial Goals
One of the best things about being married is financially you now have two people to help meet your life goals. That can mean getting creative and finding ways to make more money and saving more money together. When you are married you have a built in business partner. You are now a household of earners instead of an individual.
If nothing else, you can double your household net worth by being married.
Also, according to this Money Under 30 article:
"Research has shown the financial benefits of marriage. Long-term marriage offers a 77% better rate of return than staying single and total wealth of married persons increases 16% year over year. In other words, the longer you are married, the more money you make. Heck, if this was the reported returns on a stock growth fund, we’d all be jumping in."
What We Did:
Since being married we've increased our net worth by 5x. I wouldn't have been able to do that on my own. Managing our money and raising a family together allows us to make decisions that are in our entire family's best interest. For example, having the freedom to have my wife stay home and bring in a side income doing a job she loves has allowed us to avoid childcare expenses while still saving for our goals.