Now that we’re in the middle of wedding season, most people focus on the cost and price tag of the actual wedding. We’ve never been to a wedding that has mentioned finances in the ceremony or vows, but money and finances is one of those things that should be discussed before you tie the knot. According to the Institute for Divorce Financial Analysts, money issues are one of the leading causes of divorce. This isn’t to say that financial matters will lead to divorce, but being able to handle your finances as a couple, talking about money and figuring out how to use your money (spending and saving) together, are all things that need to be addressed when you start to combine your finances. We’ve discussed how money works differently for everyone. And there is no one size fits all option because of this, that’s why we give you a few options on how to take the next steps to combining your finances.
Being One Financial Team
As you can imagine, most couples come into relationships with different financial situations and views. Things like salary, expenses, bills, loans and debt, pensions, benefit, and the list continues can be different from one partner to the other. But if you start thinking as a team and utilizing what financial means each other have on how to approach things such as savings or debt, for example, these decisions will become more straightforward for both of you. It can be hard for new couples to merge finances immediately after getting married, but it is worth it to open a joint account. After putting your money on the table with your significant other, meeting with your financial institution and establishing an account for both of you is the next step to take to help get your money in order. And this is not to say that you should be closing down all of your individual accounts but is how you can start learning the money habits of your partner instead. Because you’re not just merging your money, you’re merging your lifestyle as well. And this means that your spending directly affects one another. Everyone has their own tips and tricks when it comes to their money. How you spend, how you save, and how you manage your funds may be different than your partners. So you may be doing something that can help them or vice versa. Be open with your money tips because working on these things together will help for better money management in the future. So whether you’re treating yourself or booking that vacation, your finances become one of those shared things when you say “I do”.
Take a Look at Taxes Together
The Canadian Revenue Agency won’t send out a wedding announcement, but they do like to know when you tie the knot as your marital status has changed. This also means that when tax season rolls around, there may be some differences in the way you file. There are things like Transferrable Credits, Combining Credits, Pension Splitting, Joint and Coupled Returns that now apply. So what does all this mean? Turbo Tax helps break down when it comes to love and taxes with The Married Couple’s Guide to Taxes. A lot of your filing as a married couple includes being entitled to different things including, transferring a number of credits to your spouse such as tuition, disability or pension or combining credits like medical expenses or charitable donations. As Turbo Tax helps break down, when filing as a couple but have leftover credits, you can choose to either bank them for next tax season or transfer them to your spouse. And depending on your situation, if you transfer them to your spouse, this could mean that your spouse would receive your credits to lower their tax bill.
Another big discussion to be had when considering whether or not to combine your finances is your long-term financial goals. Because your money matters and financial means and stages of life are continually changing, when it comes to merging your money with someone it is best to always be on the same page. Getting married is only the first financial hurdle as a couple you will face, that’s why it’s best to layout your financial priorities from the start. Having kids and starting a family, tackling debt, buying a house and taking on a mortgage, revaluating your investments, savings and retirement plan? To achieve your goals, you first need to agree on what they are. Once you know what you want to do, you can then decide on your financial role as a couple. Maintaining one household income can definitely be easier than two (goodbye second Netflix account), and knowing what each person is financially responsible for can lead to better and more open communication about financial responsibilities.
Your Own Financial Rules as a Couple
Even with everything we’ve talked about, the one thing to always remember is that your financial lives coming together is your decision. No two people have the same financial situation, so as much as we can help guide you, you need to be ready to make your own financial rules as a couple together. But how do you do that? Because every relationship (including financial) is different, the best approach is to find what works for your family. You and your partner can and should create a system tailored to your lifestyle and your unique financial goals by bringing in everything we’ve already discussed. There are no specific ways on how to do things, but what you are comfortable with in terms of your finances and education. You know what you have financially as an individual, but now with a dual income, the tools and banking you’re doing now may not work as a couple. Take a look at your numbers together to determine your expenses and how to start creating a financial future.
The most important thing in deciding how to combine finances is to be honest about your feelings from the start and always keep an open line of communication. Money is frequently considered to be the biggest strain on relationships according to Business wire, but working together to find solutions that work for everyone can reduce some of the stress.