Eight Things to Do Before You Say “I Do”

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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 get married, talk about each other’s’ salaries, savings and debts. Most financial planners advise couples to routinely discuss financial priorities and spending habits.

To help you get started, create a budget and decide how you’re going to share expenses, establish an emergency fund and save for retirement. Decide upfront who will pay the bills and handle investments, and discuss your choices regularly — maybe once a month — to see if you want to make adjustments.

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

Decide what your financial goals are, then talk about how and when you plan 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 this timeline.

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’s 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.” Without a prenuptial agreement, which state you live in could determine what you walk away with.

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. It’s critical to your financial health to learn how to manage the debt you have while still being able to save for long-term goals like retirement. 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 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 or 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 without penalties for withdrawals), like a money market account at a bank. If you have to take money out of the fund, make sure you replace it as soon as possible so you'll have that cash available if you need it again.

6. Protect each other

Life insurance provides a generally federal income tax-free lump sum1 to your survivors in the event of your death, helping you or your spouse weather the financial hardship that event can cause.

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). Individual needs vary any you and your spouse may need more or less coverage.

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 considering. You’ll both need to consult lawyers if you decide to get one.

8. Talk to an expert

Finances are complicated—an experienced financial advisor 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 accounts available to you.

It's important to choose an advisor 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.

Make sure you know which services you’ll be getting and how much it will cost. Financial advisors typically fall into different categories based on fee structure, so it will be important to choose the one that you are most comfortable with.

The road ahead

Entering into marriage can be daunting enough. By following this list of tips, you’ll be on your way to finding peace of mind when it comes to your new financial situation.

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