Till death—or financial discord—parts you

Getting hitched – and hitching your finances

When Lana Axelrod and Alan Perlman got married in 2014, they were happy to merge their finances. “We have a similar approach to money management, our values are aligned, and we feel that marriage means everything is shared,” said Axelrod, 33, who lives in New York City.

To that end, they opened a joint account where they deposited their wedding gift money and started funnelling their salaries into it every month. They agreed to use one credit card for all spending, and connected their accounts on personal financial management site Mint.com so they could track transactions. They made a plan to pay off their combined student loan debt, and later opened a joint investment account for retirement and other savings.

“We talk really openly and frequently about our finances,” Axelrod said. “It brings us closer together because we feel like a team tackling life together and trying to optimise for our future.”

Admittedly, Axelrod and Perlman are ahead of the game. Axelrod was so surprised by the lack of couple-centric financial resources available that she used her financial background to create a company called SageCouple. The site launched last year and offers money workshops for partners. 

For much of the rest of the world, marriage and money aren’t as easily combined. In the US, finances are the leading cause of relationship stress, according to a survey by SunTrust Bank. In the UK, the average couple has 39 arguments per year about money, according to the Money Advice Service — and 24% of married couples say their partner would be “upset, angry or surprised” if they knew the true state of their finances. In Australia, money is one of the biggest reasons couples quarrel, with nearly 85% of people believing that financial issues cause couples to break up, according to Relationships Australia.

“At whatever point in your life marriage happens to arrive, it’s a significant change, and it needs to be taken seriously,” said Howard Pressman, a financial planner with Egan, Berger & Weiner in Washington, D.C.

Here’s how to proceed after you’ve exchanged vows:

What it will take: Be prepared to be open and honest about your financial situation — and to accept your partner and all their financial foibles. “You have to be brutally honest with one another about your income, expenses, assets and liabilities,” said Susan Chesson, a financial planner with Focus Wealth Management in Virginia in the US. “If you don’t have a clear picture of your partner’s financial situation, you shouldn’t be combining finances.”

How long you need to prepare: If you’re planning to marry, you should be talking about money as soon as you're engaged, and preferably sooner, especially since the average US wedding now costs more than $30,000, according to TheKnot.com. And, if you’re going to spend the rest of your life with someone, get to know how they feel about money, how much debt and assets they’re bringing to the table, and what plans they have for retirement.

Do it now: Get on the same page. One of the biggest mistakes newlyweds make is working toward separate financial goals. So talk about what you’re both hoping to accomplish financially — and aim to sync up. “If you are saving up for a deposit to buy a house, then both parties need to contribute to that financial goal, or it will cause friction,” said Brett Evans, managing director of Atlas Wealth Management in Southport, Australia. “If one partner is shopping or having a good time and the other is saving all of their available funds, you aren’t going to get a favourable result.”

One fun, no-stress way to evaluate your financial feelings: Talk about how you would spend $10 million. “A lot of times when couples sit down to talk about money, they get all serious,” said Niv Persaud, a financial planner with Transition Planning & Guidance in Georgia in the US. “If you make it fun, you find out what’s important to the other person. It allows you to start dreaming, and it helps you to create goals that you want to achieve.”

Make a budget. This can’t be avoided. If you’re working towards common goals, you need an action plan, even a loose one. “Outline what’s coming in, what’s going out, and figure out how to set up the household finances equitably,” said Shannon Lee Simmons, a financial planner with Simmons Financial Planning in Toronto.

One suggestion: If you don’t combine bank accounts, create a joint account into which you each deposit an amount of money commensurate with what you earn. For instance, if you bring in 70% of the household income, you would contribute enough to that account to cover 70% of expenses.

Update your nearest and dearest. Make sure you update your beneficiary designation on retirement or other accounts to reflect your new marriage, if you’re planning to leave your savings to your spouse upon your death.

Address the insurance question. Being married doesn’t automatically mean you need life or disability insurance — but you might. “As soon as you have somebody who is financially dependent on you and whose lifestyle may suffer if you have the loss of one of the main breadwinners, then you have the need for life insurance,” Pressman said.

If you rent an apartment together, own a home or have a child, for example, the loss of an income will have an impact.

Do it later: Visit an estate planning lawyer. If you don’t have children or serious assets, you probably don’t need a will yet. But you should have powers of attorney that reflect your newly married status. That means potentially naming your spouse as the one to make healthcare and financial decisions for you if you’re incapacitated and can’t do it yourself — very helpful in an emergency.

If this is a second marriage for you and either of you has children, seeing a lawyer that specialises in estate planning is important. For instance, if you have a child from a previous marriage, you may want to explicitly leave him something in a will, since many governments automatically pass your assets to your new spouse after you die, bypassing the child completely.

Do it smarter: Involve a professional if necessary. Not everyone is skilled at discussing money with their partners. Consulting with an independent third party who can strip the emotion from a situation — such as a financial planner or marriage counsellor — may be your best bet at keeping your marriage sound. “It’s a very healthy way of addressing the fact that many people aren’t very comfortable or they feel they don’t understand personal finance,” Chesson said.

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