Budgeting for Newlyweds: A Guide to Family Finance
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The basics of building a budget are similar whether you’re married or not. You need to plan for your bills and financial goals given a certain finite resource — your income. Adding another person to the mix, changing personal finance to family finance, can increase security and income while decreasing some expenses, but it can also muddy things. With ample communication and flexibility, you can lessen the risk of complications.
Talk about money early and often
Hopefully, you’ve had some serious conversations about money long before your wedding day. If not, don’t wait any longer — knowing your new spouse’s money history, hang-ups and hopes will help you craft and stick to a budget.
“It’s better to find out now whether you’re even in the same ballpark, instead of learning later that you’re the equivalent of financial oil and water,” says Charlie Bolognino, certified financial planner with Side-by-Side Financial Planning LLC.
Here’s what to discuss:
What money was like growing up. Your history and even your parents’ attitudes about money can shape your personal beliefs and behaviors today.
How you’ve managed money until now, including regrets, how much debt you’re bringing to the table and your current credit score. If you don’t know yours, sign up here. It’s better to openly discuss money woes upfront than to find out about them down the road.
How money makes you feel. Does the exhilaration of a shopping trip or the checking off of this month’s bills satisfy you most?
Your financial goals. Discuss what you hope to accomplish with your money, both in the short and long run.
Have these discussions regularly — your financial picture and your attitudes about money can change over time.
» MORE: How to have tough money talks
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Combine your finances, or some of them
Whether or not to combine finances in marriage is a personal decision, and there are several ways to merge your money. However, even if you and your new spouse decide to keep individual accounts, it makes sense to have one shared account for recurring household expenses such as your mortgage or rent, utilities and shared vehicle payments. Settle on what bills will be paid out of this account ahead of time — the “needs” column of your budget, discussed below, is a good place to start.
Still, Bolognino doesn’t advise throwing everything in one pot: “Make sure each partner has an amount of cash in the budget that’s just for them to enjoy, no strings or judgment attached.” After all, no adult wants to ask permission for haircut money.
If you do combine all accounts, make sure to set ground rules. Make it clear how much can be spent per person on wants each month, and set a ceiling that neither spouse will go over without first consulting the other.
Regardless of your decision, be flexible. As with most aspects of budgeting, you’ll learn which specific money management approaches work best for your marriage over time.
Know your priorities
If you’re an experienced budgeter, you likely already know the importance of saving for retirement, paying off debt and having an emergency fund. But if this is the first time you and your spouse have set financial priorities, here are the basics:
Save for retirement. Make sure you’re both setting aside money for retirement, enough to take full advantage of any employer match on your respective 401(k) plans.
Tackle toxic debt such as credit cards, payday loans and title loans. Consider paying this out of your shared account. Even if one spouse amassed more debt before the marriage, alignment on your financial goals, such as getting out of debt, should help buffer any potential conflict here.
Build your household emergency fund. While you’ll want to have at least a small buffer for emergencies at all times, don’t stress about stockpiling several months of replacement income until you’re regularly contributing to your retirement and no longer paying high interest rates on toxic debt. To help you tackle any of those, try boosting your income with side hustles — just figure out how to make money in a way that fits your schedule.
This series of financial priorities is cyclical. In other words, once you’ve eliminated toxic debt and you’re comfortable you have enough in your emergency fund to cover unexpected expenses, revisit your retirement, aiming to ultimately contribute at least 15%. Rinse, repeat.
Do the math: Budgeting basics still apply
If possible, get a head start on your joint, household spending in the weeks and months leading up to the marriage. It will be one less thing to work through during the honeymoon stage.
Calculate your combined take-home income. Add back automatically deducted contributions for health insurance and retirement; you’ll budget for those later.
Choose a budgeting approach. We recommend the 50/30/20 budget as a starting point. With this budget, 50% of your income will go to needs — including the expenses deducted from your paycheck — 30% to wants, and 20% to savings and debt paydown beyond making minimum payments. The 50/30/20 budget calculator can help get you started.
Track your progress. There are numerous budgeting apps and software programs to help you track and automate your finances. You can even opt for pencil and paper; just make sure you’re tracking everything.
Adjust as needed. Evaluate your progress quarterly and make necessary changes. Maybe you can stand to allocate more money to savings, or perhaps an unexpected expense means you need to tighten the purse strings for a little while.
» MORE: Budget worksheet
Don’t forget these post-wedding to-dos
Once it’s official, there are a few bookkeeping matters that need to be taken care of right away. This list applies only to budgeting, so don’t forget to update things like your life insurance and retirement beneficiaries and your will.
Carefully choose your health insurance. If you both have health insurance through an employer, talk to your human resources departments to find out how your premium will change by adding a spouse. Compare this with the benefits offered, and choose the plan that will give you the most bang for your buck.
Update any name changes with all financial institutions. Among others, you’ll want to make sure you let your bank, credit card companies and loan servicers know that your name has changed.
Add your spouse to any accounts that are now joint. Consider credit cards and utilities in addition to bank accounts — you want to make sure your husband or wife is able to make changes to services like electricity and cable, when needed.
Update your tax withholdings. Some married couples stand to pay more income taxes when they file jointly in what’s known as the “marriage penalty.” You can lessen the blow by updating the amount withheld from your paycheck and by maximizing your deductions when it’s time to file.
