The joining of two people in marriage is quite a significant event, not only for the families of the newlyweds, but for their finances as well. While bringing together two incomes is a pretty straight forward endeavor, bringing together various expenses, assets, liabilities and the possible emotion connection to them can be tricky.
In my previous post “You’re Engage, Create a Financial Plan”, I discussed some of the advantages of having a financial plan before you’re actually married. In short, creating a financial plan can help you and your future spouse explore your life’s goals and objectives before tying the knot. This will help significantly reduce the possibility of disagreements when managing your finances in the future.
If you are a newlywed or recently became engaged, start the financial planning process by defining your combined goals and objectives. Once complete, the following steps will help you merge your finances and create a joint financial plan.
Data Collection and Analysis
During this memorable time in your lives, it’s important to locate all of the data that will impact your financial well being. This information will be used to construct your financial planning statements and determine the strengths and weaknesses that exist in your current financial situation.
The first step is to gather your qualitative financial planning data. This information will help you explore and document your risk tolerance, past experiences with money, feeling towards different investment products and your retirement expectations. This data is mostly used in the consideration of shared values and the emotional connection to various financial decisions.
In contrast, quantitative financial planning data is more numerical in nature. Gathering this data can be accomplished by listing the title and value of your cash accounts, insurance policies, estate planning documentation, and historical tax returns. This data will be used to develop forecasts and determine the affordability of your goals and objectives.
Once you have gathered and listed all of your financial planning data, it’s time to determine which accounts and policies should be merged, eliminated or simply left alone.
Merging Accounts and Financials
The decision to merge accounts and other financial planning tools, can be difficult. This is not only due to the volume of forms that will have to be filled out, but also the fear of losing control over a very important aspect of your personal life.
To begin merging accounts, it’s important to understand the advantages and disadvantages of each one. This will help determine if there could be any savings or added complexity from merging accounts (such as consolidating insurance policies or changing beneficiaries).
Once all of your options have been laid on the table, it’s time to merge the accounts that have the most advantages. When merging accounts, remember you don’t have to do it all at once. As long as there is open and honest communicate accompanied by a clear action plan, you can merge your financial accounts when it’s best for you and your schedule.
In today’s fast moving and advanced world, marriage is more than a romantic commitment to the person you love, it’s a business arrangement as well. Newlyweds should take the time to create a financial plan. This will ensure that the business side of you relationship is healthy and moving in the right direction.