Navigating Newlywed Finances: Building a Strong, Financial Foundation Together
Over the years, my wife and I have counseled young couples as they prepare to get married. One of our favorite starting points in the pre-martial counseling journey is to ask, “so who plans to clean the toilets?” Depending on each person’s experience at home, you may hear a different answer. If my wife watched her Dad clean the toilets growing up and I watched my Mom, we may assume the other person may be doing the job, when in reality, no one is getting it done!
For newly married couples wondering what their first steps should be in their newly unified financial journey, I recommend asking questions in the same vein. “What was your family experience with finances? How well do you understand each other’s financial upbringing, financial history, and financial habits?”
Finances are a personal and sensitive topic for many people. If this is true, how DOES a new family start off on the right foot?
1. Get to know your spouse’s financial life, and let them know yours.
One of the great fears we may have in this process is being “fully seen” but not being “fully understood.” My encouragement for newlyweds is to “seek understanding before being understood.” When we take more interest in our spouse’s financial journey and how finances affect them holistically, we begin to know our spouses on a deeper level.
Questions to ask your spouse:
“From your perspective, how did your family talk about money and finances? Do you feel there was stability in the home or tension and conflict around finances?”
“What sort of accounts do you have? How much funds are in them? How are you thinking about these funds? Is your savings a rainy day emergency fund or saving up for a vacation?”
“How much debt you carry currently? Where are these debts from?”
“What do you think about combining our finances in a joint account? What boundaries and financial etiquette would we need to work “together” in our finances?”
In summary, try asking questions to help you understand your family situation in a way that encourages confidence and transparency with one another with your finances.
2. Begin to draw up a plan together.
There will be a lot of variables and change over the lifespan of a young couple’s financial journey. However, habits and plans made today can have a considerable impact on your financial journey down the road.
Here are some things to decide on as a family
“Will we hold our accounts jointly or individual? Can we hold both types of accounts? If so, what are the purposes and guidelines for how we use those accounts?”
Debts, such as students loans and credit cards, can takeaway spending more and investing more meaningfully due to interest payments. Choosing a debt strategy, such as the debt snowball, and drawing out a plan to knock those debts off the table. It is a great feeling to be moving towards a goal of removing burdensome debt from a family financial strategy.
In order to begin setting action items, such as savings and paying down debt, an accurate and detailed budget may provide a more clear picture of reality.
What is a budget?
If I were to describe this simply, how much income is coming in and how many expenses are filing out. A good starting point for building a budget is to monitor your expenses intently for 3 months. At the end of those 3 months, average out your expenses into specific categories into a spread sheet or budgeting app. Are you spending more than you are bringing in? Are you making minimum debt payments? Are you surprised by the money spent on subscriptions, lattes, or groceries?
3. Trying comparing this budget summary to the 50/30/20 budget rule, where 50% is allocated towards needs, 30% for wants, and 20% savings.
50% - Needs are the necessary bills needed for survival (mortgage, groceries, utilities, etc).
30% - Wants are discretionary spending that may be important in some respects but not necessary for survival (dining out, subscriptions, Taylor Swift concerns).
20% - Savings includes creating your emergency fund, retirement account contributions, investments, and additional payments towards debt.
Every family will have a slightly different variation of that breakdown, but this may serve as a helpful starting point. The first step to creating a more robust financial plan is understanding what money is coming in, and what money is going out, then agreeing on that budget together as a couple.
As you deepen your understanding of one another, as well as your financial picture, your budget will serve as a foundational tool to setting goals and moving forward towards financial health. We look forward to helping you and your family on that journey. Thank you.