Time, work, responsibilities, feelings/ emotions, your perspective about life, your view of the world, and how the world is looking at you two (as a now-married couple) – are some of the many things which are affected by marriage if not fully altered.
In addition to the above-stated aspects, the financial life and money element is indeed worth proper discussion and mindful management.
Financial arguments make divorce 30% more likely among married partners. (2020)
Some facets of how you both are going to handle money in the future married life could be:
- Would both or any one of you is handling the financial obligations of routine life?
- What are each other’s financial goals and financial priorities?
- Would you both keep the finances separate or opt for joint accounts?
- Who is a saver/ spender among you two? (your money personality)
This sit-down discussion pre-marriage is not the most romantic thing to do, no lies!
However, putting all your financial information/ status on the table is extremely crucial today. Assets, liabilities, wedding budget, credit file, credit scores of both partners must be disclosed – ask your already-married friends; their opinion would be no different.
Communication, sense of responsibility, mutual financial planning, and trust are extremely significant whenever you both are trying to plan finances as there is no mathematical way of doing so!
Financial Advantages of Getting Married
Whenever and wherever you two make vows of building and spending a life together – you are indeed making plans for each other’s health, happiness, and wealth.
Undoubtedly money is a big segment of a married life, which can bring storms if not dealt with smartly – though it also brings some sweet financial perks to both partners:
Retirement Benefits
Married spouses can certainly avail the social security benefits of their partners. Partners can claim spousal retirement benefits (depending upon the partner’s work record).
The number of married people in Canada is about $14.3 million.
There are conditions for these benefits like these spousal perks can be claimed at the age of 62 (at least). However, if one applies at the full retirement age, the value of these boons would shrink.
Moreover, partners together are a wise duo. Each can help the other to plan for retirement in the best way possible (relative to the situation and condition).
Social Security Benefits
The partners are entitled to the social security benefits for their spouses (in case the couple qualifies for these perks).
Also, when the spouse retires, he/ she is eligible for such benefits in case the partner passes away. However, your social security benefits are neither increased nor dropped because of getting married.
If you remarry or file a divorce, you are no longer entitled to claim for your ex-spouse benefits (conditions available depending upon the age of your marriage).
The maximum amount of social security subsidy that a worker’s family can claim ranges from 155% to 188% of the person’s monthly benefit amount.
You may collect these social security benefit payments if you get single again.
Credit Building
While some Canadian financial institutions are reluctant to allow co-signing, others allow married couples to own a joint secured credit card i.e., the spouse is a co-signer/ authorized user/ joint credit cardholder.
45% of people (27-36 age group) are of the view that credit score influences their decisions regarding relationships.
When one partner has a poorer credit score, the other one can play a helping hand role by:
- Co-sign loans
If you have a bad credit score but want a loan for autos, home, or other necessities – your spouse with a fine score can help you borrow this amount.
- Joint Credit Cards
Your spouse can be an authorized user of your credit card (unsecured and secured credit cards) account. If you are unable to pay off monthly balances – your partner can pay on your behalf (if he/ she earns more).
Moreover, they may motivate you in planning to clear monthly payments smartly and remind you in case any bills skip from your mind.
Wealth Building
If both spouses are employed, one can pay the mortgage while another can contribute to family savings and investments. Thus, it is easier for families to build wealth.
How Can a Newly Married Couple Manage Debt and Money Ideally?
“Smartly!” is a one-word answer to this question. The following points would help you behave pocket wise in a marital partnership:
- Financial Goals and Priorities
You can avoid financial ding-dongs by having a talk to understand each other’s financial priorities and goals. By doing so, you both get another way to know each other and discover how similar or different you are from each other!
- How would you be portioning your income for household necessities?
- What is your viewpoint regarding saving and spending?
- How would you be portioning your income for luxuries (like travel/ annual vacations, expensive valuables like vehicles and jewelry)?
- Are you planning any children? (If yes, who and how would you be managing expenses like college education and upbringing costs)
- Do you believe in donating and how much?
While answering these questions, you both may discover similarities in your financial priorities or differences. This is the best time for partners to decide whether or not they can compromise on some-to-all factors.
Furthermore, the partners-to-be can share the financial goals like:
- Plans on retirement (late or early)
- Business ownership
- Renting or owning a house/ estate property
Foolish money spending can increase 40% chance of divorce among married couples.
3 Ways for Accommodating Finances as a Newly Married Couple
These options of money strategies would help you to manage your money better.
Utilizing Joint Accounts as a Married Couple for Money Management
Groceries, shopping, children expenses like schooling/ sports, home improvement/ vehicle maintenance, health expenses like gym, hospital, and medicine charges, sudden expenses can be managed well with joint accounts.
Incoming and outgoing money is continuously recorded on bank account spreadsheets and budgeting applications help the couple to keep a track of this information.
Utilizing Separate Accounts as a Married Couple for Money Management
Both are at freedom to keep their finances separate from each other – as they did pre-marriage.
However, this financial strategy requires a good amount of communication clearly specifying who would be responsible for what. If not opting for a joint bank account, both should share a spreadsheet to track expenses.
28% of married couples keep their bank accounts totally separate.
Utilizing Both Joint and Separate Accounts as a Married Couple for Money Management
Having an amalgam of both may be difficult to manage. But it is a good choice for the ones who want to manage income/ savings/ investment together in a joint account. Also, they can enjoy the liberty of separate accounts in which they transfer a set amount each month.
This money can be utilized for luxury spending or buying gifts for your partner.
77% of married spouses share at least one account with each other.
- Prenuptial Agreement
In case your marriage fails, this agreement specifies how both’s assets would be divided beforehand.
Arranging this agreement may seem you both are distrusting each other and bring a bitter feeling to your lifelong promise to live together.
As per Statista’s 2020 research, 2.7 million people filed a legal divorce in Canada.
However, if both are wise and are bringing some assets – or debts – into marriage, the significance of the prenuptial agreement is even higher.
Advantages of Prenuptial Agreements
- Distribution of debt liability
- Immunizing pre-marital assets
- Post-divorce settlements and expectations are pre-decided
- Handling of possible future conflicts is convenient
In Canada, the cost of prenuptial agreements is about $500-$2,000 + HST
- Monthly Budgeting | Budget Date Night
Even if the couple is too rich, managing money is still fundamental.
Both should have an open conversation about what came and what went (financially) the previous month and how can we improve the situation next month.
In Canada, the average living expenses (excluding rent) are $1,200 monthly.
Monthly budgeting is important even if only one partner is handling household expenses. You may arrange a budget date night at a restaurant, your home couch, or your dining table. Spending time together while conversing on something this worthwhile is a win-win!
Monthly income and expenditures, distribution of fixed and variable expenses, and making adjustments can help you make the most of a household budget.
- Debt Management as a Couple
Lying or hiding your debt/ financial situation is a very bad idea – you both must take courage in discussing the factors (below bullets) to avoid future disclosures, actually future shocks!
- Do you have any outstanding debts?
- Till when will you be able to pay off these debts (if any)?
- Are you a saver or a spender? | Spending habits
- How many credit cards do you have? What are their balances?
- Credit score
- Are you bringing any expenses (child support) from a previous marriage?
Without sharing this information, the couple can never be able to contribute to mutual future goals.
Avoid Debt
There are myriad ways you can do so, the key is to obey the plan no matter what!
- Student Loans: Look for repayment options and opt for the most suitable one.
- Credit Cards: Make an effort to pay any balances fully each month.
- Credit Counselling: You may seek counseling in the initial days of marriage and obey the advice for debt management.
- Loan installments: Pay off the high-interest loans as soon as possible to get rid of piling up interests.
- Debt Consolidation: To clear debt quicker and more efficiently, partners can gather info regarding debt consolidation. It generally means combining debts to obtain a relatively lower interest rate.
- Work Together
Once you make vows, it is “our team,” “our debt,” and “our income.”
Being empathetic of each other and avoiding a blame game is not easy, but you gotta do what you gotta do, right?
Some best budgeting apps for couples are:
- Personal Capital
- Stash
- Acorns
- Current
Love is not effortless especially when it comes to responsibilities (monetary obligations). Make an effort to listen to each other, make a debt resolving plan together, and motivate each other to stick to it.
Not just money, this team spirit would help the newly married couples in all aspects of spending life together, all those ebbs and flows.