Eight Things to Do Before You Say “I Do”

Cast of a newly married coupleHere are some steps you can take to help you and your spouse lead a financially healthy lifestyle.

1. Get on the same (financial) page

Before you enter into a spousal agreement, talk about salaries, savings and debts. Most financial planners advise couples to routinely discuss financial priorities and spending habits.

Create a budget to help you get started and decide how you’re going to share expenses, establish an emergency fund and save for retirement. Prioritize your spending choices; decide who will pay the bills and handle investments and discuss regularly – maybe once a month – to see if you have to make adjustments.

2. Picture your goals and how you’ll get there

Decide what your financial goals are, how and when you hope to achieve them. Set your goals for the short term (within a year), intermediate term (one to five years) and long term (more than five years). You can then put money away according to the schedule you’ve developed.

Think about things like: Will you buy a new home together? Do you want to go back to school? Do you want children? Will one parent stay home (leaving you with only one income)?

Now is the time to discuss these types of situations with your partner, so you can start planning for whatever path you choose.

3. Decide how you’ll combine your savings and assets

There’s no one right way to combine your accounts; it just depends on your situation and what makes you comfortable. You can organize your finances several different ways:

  • Pool everything together: One person pays the bills from a joint account. If this is your first marriage, you may have more debt than savings, and assets are not yet in the picture. Since you’re starting from scratch, it may make sense to combine everything.
  • Keep everything separate and each person pays certain bills: For example, one person might pay the mortgage, and then the other pays the utilities and groceries. Then you both pay down your own student loans, buy your own gas, clothes, and pay credit card bills.
  • Three accounts. You each have your own accounts for your bills and expenses, but you contribute a percentage into one “household account” to pay for shared items, such as your mortgage and utilities.

Every relationship is different. Based on how you decide to organize your accounts, you may still choose to keep a separate sum of money that is yours only. In the event of an emergency, or if you and your partner decide to part ways, you could find yourself needing extra savings to pay for items you previously split (such as rent and other monthly bills).

Also, be sure you understand state laws governing “marital assets” as many states do not provide for truly separate marital assets in the absence of a prenuptial agreement.

4. Start saving and investing early

Saving even a little bit can make a world of difference. But, it can be tough to save when much of your income is going toward paying credit card bills, student loans and other monthly expenses.

Learning how to manage the debt you have while still being able to save for things like retirement and other long-term goals is a critical part of your overall financial health. While it can be difficult, it’s important to consider taking a set percentage out of your paycheck each month and putting it into a retirement account.

If you pay yourself first, you’re less likely to miss the extra money. That money can potentially make more money, and your savings can potentially grow. One good way to set aside money is through your employer’s retirement savings plan, like a 401(k) or 403(b ), if it’s offered.

You may also want to consider using online tools. They can help you reach your goals and stick to your plan — with adjustments along the way to account for life’s milestones.

5. Prepare for rainy days

An emergency savings account is a critical part of anyone’s financial health. You may have to tap into it in cases like unemployment, medical expenses – even a leaky roof. As best as you can, try to put away three to six months’ worth of living expenses.

The best place to keep a rainy-day fund is in an account where your money will be safe and liquid (easy to get to quickly). If you have to take money out of the fund, make sure you quickly restore the balance so you'll have enough cash available later.

6. Protect each other

Purchasing life insurance can enable you and your spouse to weather any financial hardship in the case of a spouse’s death. Life insurance provides a generally income tax-free lump sum to your survivors in the event of your death (See IRC Section 101(a)). While your employer may offer a specific rate for life insurance, it’s also smart for you and your spouse to each consider owning at least 10 times your annual salaries in protection (in addition to whatever amount your employer may be offering). You may need more or less insurance depending on your personal circumstances.

7. Decide if you need a prenup

If you’re going into marriage without serious debt or assets, there might not be any reason to get a prenuptial agreement. But if one of you has a lot of money or major debts, stands to inherit a fortune or has children from previous marriages, it might be worth it. You’ll both need to consult lawyers if you decide to get one.

8. Talk to an expert

Finances are complicated – an experienced financial professional can help you and your spouse feel more comfortable in planning your future together. She or he can help you learn about the various savings and investment vehicles available to you.

It's important to choose a financial professional who is either a Registered Representative (RR) working for a brokerage company licensed by the Securities and Exchange Commission or a Registered Investment Advisor (RIA). An RIA must adhere to a fiduciary standard of care, meaning he or she is required by law to look out for your best interests and is legally held to a higher standard of care than a brokerage representative.

The advisor you choose may also be accredited by one or more of the standard professional organizations. The most common credentials are Personal Financial Specialist (PFS), Certified Financial Planner™ (CFP®), Chartered Financial Consultant® (ChFC®), Chartered Financial Analyst® (CFA®) and Master of Science in Financial Services (MSFS).

Make sure you know which services you’ll be getting and how much it will cost. Financial professionals typically fall into three categories based on their services and compensation structure, so it will be important to choose the one that you believe will meet your personal financial planning needs.

The road ahead

It’s never too late to improve your financial health. By considering these suggestions, you'll be taking one step forward toward addressing your financial needs.

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