You’ve finally tied to the knot, and managed not to break the bank on wedding costs. What comes next? A whole lot.
If you managed to stay under budget planning your wedding, then you’ll probably be off to a great start when the real financial planning work begins. Here are some tips on how to make the next chapter in your life as a married couple run smoothly.
Should You Combine Bank Accounts?
Not necessarily, some experts feel. In fact, combining accounts could be the kiss-of-death for couples that fail to disclose all the blemishes in their financial pasts.
“There is nothing more dangerous than couples who combine finances since very few couples have done due diligence before marriage” says author and divorce coach Susan Allan. “So many couples these days find out the hard way about unpaid debts, bankruptcy, IRS penalties, exorbitant spousal support and other financial disasters lurking in one another’s past which have a profound negative effect on their new life together.”
It may take trial and error, but striking the correct balance will go a long way in making sure you can avoid financial mishaps.
“The key is to do what is best for the two of you which means talking about it” says New Jersey-based marriage counselor Kimberly Leatherdale. “Additionally, what you choose to do at first may not fit forever, and you may later renegotiate how you handle money.”
Taxes: Should You File Jointly?
The question of whether to file as a couple or independently will probably be an easier question to answer than the previous one simply because our tax system is much more of a science and leaves very little to the imagination. Your tax rates will vary greatly depending on how much both you and your spouse make and whether you decide to file taxes jointly or separately. Here are the tax rates for wages earned in 2010:
|Tax Rate||Married, Filing Separately||Married, Filing Jointly|
|10%||$0 to $8,375||$0 to $16,750|
|15%||$8,375 to $34,000||$16,750 to $68,000|
|25%||$34,00 to $68,650||$68,000 to $137,300|
|28%||$68,650 to $104,625||$137,300 to $209,250|
|33%||$104,625 to $186,825||209,250 to $373,650|
|35%||$186,825 and up||$373,650 and up|
If you’re a couple that has a combined taxable income of $135,000 but one makes $100,000 while the other brings home $35,000, then it could make sense to file separate tax returns. Filing together would place you in the 25% tax bracket, meaning you’d owe no more than $33,570 in taxes. Filing separately both couples would owe up to $36,750 in taxes as the high earner’s tax bracket shifts up to 28%.
Here’s another example of when your incomes could make a big difference in your tax liabilities. A couple could have a combined taxable income of $108,000 with the high earner making $103,000 of that amount. Filing together that couple would owe up to $34,640 in federal taxes. Filing separately, the same couple could save up to $6,300.
Pay Down Your Old Debt
One of the single most important areas to begin focusing on is the repayment of any outstanding individual debts. Graduates of four-year universities are saddled with roughly $23,186 in student loans on average, which makes tackling this kind of debt early important. Other debt, like credit card balances and even outstanding hospital bills, can also free up your income for large purchases like a house. We’ve written extensively about online tools you can use to effectively manage your finances and pay-off your debt, but your banking institution may also have programs to help you along.
Learn more: New debt Management tools available online
Planning Your Nest Egg
Deciding just how much of your finances to combine with your significant is no easy science, but the earlier you are able to establish these parameters, the easier it will be for you both to begin making long-term investments like retirement.
It may seem like quite a long time away, but setting retirement goals will be an important next step for newly weds. Putting aside an appropriate amount of fund from your monthly income and investing it wisely could mean the difference between retiring by the age of 40 or several more years (or, decades) down the road.
And the List Goes On…
There are myriad financial issues you and your spouse will need to plan for during the course of your marriage. If you decide have children, you’ll need to decide when and how much to save for his or her higher education. Setting up an emergency fund for unexpected expenses and purchasing life insurance will be other financial items to plan for. No matter what your priorities may be overall, setting up a sound financial budget and sticking by it can effectively ensure you a long and happy union.