Money Milestones: How to Prepare Your Finances for Marriage

Introduction

Establishing a solid financial foundation before you get married will start you and your fiancé off on the right foot. Planning ahead can help couples avoid conflicts and work toward mutual goals. Here’s how to prepare your finances for marriage.

1. Determine How to Pay for Your Wedding

The average cost of a wedding is over $33,000 according to a 2018 survey by The Knot. Many couples go into debt to finance their big day. Budget for a wedding and honeymoon that leaves you debt-free or with a plan to quickly pay it off. Whether that involves saving, careful budgeting, asking for help from family, or just doing the deed at the courthouse depends on your plans and desires.

Tips for a Budget-Friendly Wedding

• Keep the Guest List Small: Reducing the number of guests can significantly cut costs.
• Look for Affordable Caterers: Find budget-friendly food options.
• Borrow a Friend’s Backyard: Consider hosting the reception in a borrowed or inexpensive venue.

Image Description: Illustration showing a small, budget-friendly wedding.

2. Establish Your Financial Goals

Discuss and choose financial goals to focus on together. This could include buying a home, starting a family, paying down debt, saving for retirement, or traveling.

Prioritizing Goals

• Emergency Savings: Create an emergency savings plan.
• Debt Repayment: Prioritize paying down debt.
• Retirement Savings: Begin saving for retirement early.

Consider hiring a financial planner to analyze your finances and help you put together a plan.

Image Description: Infographic showing different financial goals for couples.

3. Do a Financial Inventory

Each partner should do a complete inventory of their income, debt, retirement accounts, bank accounts, and assets. This transparency helps you create a budget, tackle debt, and pursue your financial goals.

Importance of Financial Transparency

• Avoid Surprises: Know each other's financial situation.
• Create a Budget: Work together to manage finances.
• Tackle Debt: Make a plan to pay off any existing debts.

Image Description: Illustration showing a couple reviewing their financial inventory.

4. Decide How to Split Financial Responsibilities

Decide how to split financial obligations like bills, savings, and everyday purchases. Options include:

• Joint Accounts: Easier for shared expenses but may cause issues if one partner has significant debt.
• Separate Accounts: Maintains financial independence but requires more work to manage shared expenses.
• Combination: Joint accounts for mutual expenses and separate accounts for discretionary spending.

Image Description: Infographic showing options for splitting financial responsibilities.

5. Create a Budget

A well-defined budget is critical for success. If you live together, you may already have one. If not, establish one now. Focus on necessities like rent, bills, and savings, then see how much is left for discretionary spending.

Benefits of a Joint Budget

• Open Communication: Transparency about finances helps avoid misunderstandings.
• Smart Spending: Both partners can make informed decisions.
• Common Goals: Work together towards financial goals.

Image Description: Illustration of a couple creating a budget together.

6. Make Sure You Both Have Adequate Insurance

Life Insurance

Life insurance protects spouses and children from financial disaster in the event of a death. Compare plans to find the policy that fits your needs, focusing on income replacement.

Health Insurance

Evaluate if you can save money or get better coverage by moving one spouse onto the other’s health plan.

Image Description: Illustration showing the importance of life and health insurance for couples.

7. Create an Estate Plan

Estate plans dictate what happens to your finances and assets after you die, as well as who will care for any minor children. Create an estate plan, such as a will or trust, naming each other as beneficiaries.

Steps to Create an Estate Plan

• Consult an Attorney: Talk to an estate planning attorney to evaluate your needs.
• Update Beneficiaries: Add your spouse as a beneficiary on existing plans.

Image Description: Infographic showing steps to create an estate plan.