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Bassett, Dawson & Foy, Inc.Fred Dawson, ChFC, CLUWealth Manager1011 Centre RoadSuite 110Wilmington, DE [email protected]
Planning for Marriage:Financial Tips for Women
February 10, 2014
Planning for marriage should involve more than justpicking out invitations and deciding whether youshould serve chicken or fish at the reception. Moreimportantly, you'll want to take a look at how marriagewill impact your financial situation. And while thereare a number of issues you'll need to think about,careful planning can increase the likelihood that you'llhave financial success as you enter this new chapterin your life.
Consider a prenuptial agreementIf either you or your future spouse has or may inheritsubstantial assets, or if either of you has children fromprevious marriages, you may want to consider aprenuptial agreement. A prenuptial agreement is abinding contract between future spouses that definesthe rights, duties, and obligations of the parties duringmarriage and in the event of legal separation,annulment, divorce, or death. A prenuptial agreementtypically addresses the following areas:
• Assets and liabilities--What assets will each of youbring into the marriage? What liabilities do each ofyou have (e.g., credit card/mortgage debt)?
• Contributions of each partner--Will there beparticular consideration given for specialcontributions that either of you make (e.g., onespouse limiting his or her career)?
• Divorce--If you and your future spouse divorce, willthere be alimony or a lump-sum payment? Howwill you divide assets purchased from joint funds?
• Estate planning--Who gets what at the death ofeither spouse?
Discuss your financial historyMarriage is the union of two separate individuals ...and their finances. While talking about money can bea stressful topic for many couples, you'll want to sitdown and discuss your financial history and yourfuture spouse's financial history before you mergeyour money.
Start out by taking stock of each of your respective
financial situations. You should each make a list ofyour individual assets (e.g., investments, real estate)and any liabilities (e.g., student loans, credit carddebt) you may have. This is also the time to addressitems such as how much each of you earns and ifeither of you has additional sources of income (e.g.,interest, dividends).
Agree on a system forbudgeting/maintaining bankaccountsRight now, you are probably accustomed to managingyour finances in a way that is comfortable for you andyou alone. Once you are married, you and yourspouse will have to agree on a system for budgetingyour money and paying your bills together as acouple.
Either of you can agree to be in charge of managingthe budget, or you can take turns keeping recordsand paying the bills. If both of you are going to beinvolved in the budgeting process, make sure that youdevelop a record-keeping system that both of youunderstand and agree upon. In addition, you'll want tokeep your records in a joint filing system so that bothof you can easily locate important documents.
Once you agree on a budgeting system, you'll be ableto establish a budget. Begin by listing all of yourincome and expenses over a certain time period (forexample, monthly). Sources of income can includethings such as salaries and wages, interest, anddividends. Expenses can be divided into twocategories: fixed (e.g., housing, utilities, food) anddiscretionary (e.g., entertainment, vacations). Be sureto include occasional expenses (e.g., carmaintenance) as well. To help you and your futurespouse stay on track with your budget:
• Try to make budgeting part of your daily routine• Build occasional rewards into your budget (e.g.,
going to the movies)• Examine your budget regularly and adjust/make
changes as needed
According to the U.S.Census Bureau's 2012American CommunitySurvey, the median ageat first marriage forwomen is 27.1.
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Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2014
This information, developed by an independent third party, has been obtained from sources considered to be reliable, but Raymond JamesFinancial Services, Inc. does not guarantee that the foregoing material is accurate or complete. This information is not a complete summary orstatement of all available data necessary for making an investment decision and does not constitute a recommendation. The informationcontained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. Thisinformation is not intended as a solicitation or an offer to buy or sell any security referred to herein. Investments mentioned may not be suitablefor all investors. The material is general in nature. Past performance may not be indicative of future results. Raymond James Financial Services,Inc. does not provide advice on tax, legal or mortgage issues. These matters should be discussed with the appropriate professional.
Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC, an independent broker/dealer, and are not insuredby FDIC, NCUA or any other government agency, are not deposits or obligations of the financial institution, are not guaranteed by the financialinstitution, and are subject to risks, including the possible loss of principal.
This might also be a good time to decide whether youand your future spouse will combine your bankaccounts or keep them separate. While maintaining ajoint account does have its advantages (e.g., easierrecord keeping and lower maintenance fees), it issometimes more difficult to keep track of the flow ofmoney when two individuals have access to a singleaccount.
If you do decide to combine your accounts, eachspouse should be responsible for updating thecheckbook ledger when he/she writes a check orwithdraws funds. If you decide to keep separateaccounts, consider opening a joint checking accountto pay for household expenses.
Map out your financial futuretogetherAn important part of financial planning as a couple isto map out your financial future together. Where doyou see yourself next year? What about five yearsfrom now? Do you want to buy a home together? Ifyou decide to start a family, would one of you stay athome while the other focuses more on his or hercareer?
Together you should make a list of short-termfinancial goals (e.g., paying off wedding debt, savingfor graduate school) and long-term financial goals(e.g., retirement). Once you have decided on yourfinancial goals, you can prioritize them by determiningwhich ones are most important to each of you. Afteryou've identified which goals are a priority, you canset your sights on working to achieve them together.
Resolve any outstanding credit/debtissuesSince having good credit is an important part of anysound financial plan, you'll want to identify anypotential credit/debt problems either you or yourfuture spouse may have and try to resolve them nowrather than later. You should each order copies ofyour credit reports and review them together. You areentitled to a free copy of your credit report from eachof the three major credit reporting agencies onceevery 12 months (go to www.annualcreditreport.comfor more information).
For the most part, you are not responsible for yourfuture spouse's past credit problems, but they canprevent you from getting credit together as a coupleafter you are married. Even if you've always hadspotless credit, you may be turned down for credit
cards or loans that you apply for together if yourfuture spouse has a bad track record with creditors.As a result, if you find that either one of you doeshave credit issues, you might want to considerkeeping your credit separate until you or your futurespouse's credit record improves.
Consider integrating employee andretirement benefitsIf you and your future spouse have separate healthinsurance coverage, you'll want to do a cost/benefitanalysis of each plan to see if you should continue tokeep your health coverage separate. If your futurespouse's health plan has a higher deductible and/orco-payment or fewer benefits than those offered byyour plan, he or she may want to join your health planinstead. You'll also want to compare the premium forone family plan against the cost of two single plans.
In addition, if both you and your future spouseparticipate in an employer-sponsored retirement plan,you should be aware of each plan's characteristics.Plans may differ as to matching contributions,investment options, and loan provisions. Review eachplan together carefully and determine which planprovides the better benefits. If you can afford to, youshould each participate to the maximum in your ownplan.
Assess your insurance coverageneedsWhile you might not have felt the need for life anddisability insurance when you were single, once youare married you may find that you and your futurespouse are financially dependent on each other. Ifyou don't have life or disability insurance, you willwant to have policies in place in order to make surethat your future spouse's financial needs will be takencare of if you should die prematurely or becomedisabled. If you already have life and disabilityinsurance, you should reevaluate the adequacy ofyour existing coverage and be sure to update anybeneficiary designations as well.
You should also take a look at your auto insurancecoverage. Check your policy limits and considerpooling your auto insurance policies with onecompany (your insurance company may give you adiscount if you insure more than one car with them).As for renters/homeowners insurance, you'll want tomake sure your personal property and possessionsare adequately covered.
If you and your futurespouse obtain jointcredit, both of you willbecome responsible for100% of the debt.
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