Jean's Blog

Ask Jean Tuesday: Money and Marriage

Posted by Jean

“I recently got engaged, and am looking to prepare financially for life after our wedding. I’m not sure what we should do about things like taxes and health insurance. We’re just a little confused about what we should be doing.” – Amanda, Arizona

Well, first of all – congratulations on your engagement! I’m glad that you are thinking ahead about how your life will change financially once you tie the knot. It’s important to have that money talk now, rather than let it slide until applying for a mortgage reveals credit card debt you didn’t know your spouse had.

So what should you do first? Ask – and answer – the following questions: What do you own? What do you earn? What do you owe? And what do you spend? Being open and honest about these things opens a platform for discussion, and allows you to plan for your future. You’ll be able to make the right decisions about opening joint bank accounts and credit cards (I, personally, prefer the yours, mine and ours system, in which each partner has his or her own bank account, and they share a joint account for household expenses).

You also need to talk about what you both want in the future. When do you want to retire? What kind of house do you want to live in? In the city or the country? How many children do you want to have? While these aren’t money-specific questions, you can be sure they’re important financially. Once you can see eye-to-eye about where you see yourselves down the road, you’ll be able to plan and save accordingly – both together and separately.

When it comes to specific things like taxes and your benefits at work, you need to give yourself a little check up. Start with double checking your withholdings at work – you should always do that after a major life change – and updating your W-4 if necessary. You’ll be considered married by the IRS if you were married for even one day during the last tax-filing year, which means you’re going to have to decide whether to file jointly or separately. This is a personal decision, and has a great deal of financial consequences, but in most cases couples benefit from filing jointly. If you’re unsure, run the numbers both ways by enlisting the help of your accountant or an online tax preparation program. Finally, do a benefits comparison to see if you’d save money or get better insurance coverage by combining plans, or if it’s more cost-effective to keep things separate.

Regardless of the decisions you make, however, they should be made as couple, during an open and honest discussion.