Getting married, or re-married, means blending the financial management practices and beliefs, not to mention the income, assets, and debts, of two different people. Sometimes, this is not easy. For example, "spenders" married to "savers" are bound to experience some conflicts. For people who re-marry, there are additional challenges, such as relationships with step-children and handling child support payments to or from a former spouse.
One of the dilemmas that all couples face is developing a successful way of handling their money and paying bills. Some couples choose to pool their money in one account while others keep their income and/or assets separate. There is also the issue of how much each spouse contributes toward household expenses and how much they keep for personal expenses.
There are also "technical" details like who keeps the checkbook register, pays the bills, and makes investment decisions. While one spouse often assumes these tasks, the other should be familiar with the couple's cash flow and net worth. If both spouses receive employer benefits, they need to be coordinated. In addition, spending decisions, such as the choice of furniture or a vacation destination, must be made and often involve compromises.
Below are six suggestions related to financial decisions upon marriage or remarriage:
In two-paycheck households, pro-rate the amount that each spouse contributes toward joint household expenses. The fairest way to do this is to base each spouse's deposit upon his or her respective income. For example, if a husband and wife earn 65% and 35% of household income, respectively, the husband should pay about two-thirds of family bills and the wife the other third.
After all bills are paid, each spouse should have some "spending money" that is theirs to do with as they please without consulting their partner. In one-earner households, a system for providing spending money for the non-earning spouse should be established.
Take advantage of each spouse's access to retirement savings plans such as 401(k)s and 403(b)s. Contributions can be written off against a couple's joint income and both spouses benefit. If cash is limited for retirement plan contributions, fund the plan with the higher employer match. Two other important considerations are the investment options offered by each employer and the time required for benefits to become vested.
If the lower-earning spouse is the only one with access to an employer retirement plan, he or she should contribute as much as possible. In return, the higher-earning spouse can provide the lower-earning spouse with some additional spending money to offset the reduction in salary or pay for a higher percentage of household expenses.
Review and revise the beneficiary designations on life insurance policies and pension and retirement plans (e.g., 401(k)s) and name your spouse as primary beneficiary, where appropriate. When you remarry, you'll probably want to provide for your children from your former marriage as well as your new spouse. One way to do this is with a bypass trust or a qualified terminable interest property (a.k.a., QTIP) trust. Income from these trusts goes to the surviving spouse but, upon his or her death, assets are distributed to children or whomever the trust maker designates. In addition, it is important to get a will drafted or revised to reflect your changed marital status.
Communicate openly and honestly about financial matters with your new spouse. One effective way to do this is with "I messages." Instead of blaming or accusing each other (e.g., "You're spending too much money and we're going to end up in the poorhouse"), you state the message beginning with the word "I" and explain how you feel. An example of an "I message is "I get worried when we charge more than $300 per month because I'm afraid we won't be able to pay it back."