Financial planning for newlyweds

Vows have been exchanged. The honeymoon is over. Now it’s time for clients to work out a financial plan as a couple.

Read: Help clients save for their marriage

“Worrying about finances as a single person is hard enough. Adding in another person’s financial aspirations and money issues can make it that much more daunting and complicated,” says Dean Urbanski, vice president and national sales manager, BMO Harris Financial Advisors, Inc..

“Agreeing on certain points financially can establish guidelines, direct actions and hopefully prevent future disagreements,” he adds.

What should they do with their money now that they’re joined financially? According to Urbanski, the most important things in the short-term are:

• Have a conversation. Sit down and have a frank discussion about each other’s money history. Don’t be ashamed of mistakes made in the past. Commit to not repeating these mistakes again.
• Create a spending plan or budget. Develop a written budget and make sure that each person knows about all of the expenses. In addition, they should decide together how both will contribute to household expenses. Even if one person is the primary bill payer, the other spouse needs to have an idea of what’s going on.

Read: The wedding planner: Help your newlywed clients live happily ever after

• Set goals together. Besides getting a handle on income and expenses, it’s wise to talk about the future and what they want individually. This does not mean they have to have the same goals but it’s important to get buy in from each other on their hopes and dreams.
• Build an emergency fund. Create an emergency fund that equals three-to-six months of living expenses.
• Save for your home. If a home purchase is in their plans, begin saving for a down payment. But don’t overextend.
• Save for your retirement. Save 10% of annual income, which includes contributing to retirement plans.
• Avoid debt. Steer clear of credit card debt if possible.

Read: Should clients rent or buy?

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.