Financial Advice for Newlyweds

“It’s tough to stay married. My wife kisses the dog but won’t drink from my glass.”

“I haven’t spoken to my wife in years. I didn’t want to interrupt her.” – Rodney Dangerfield

While attending a recent wedding I was asked what financial advice I would offer to the newlyweds. Here’s what I came up with:

Lay it all out there by calculating your combined net worth to create a personal balance sheet. Pull together all of your statements of assets and debt between the two of you so you know exactly where you stand financially. Adding it all up, especially your debts, can put your financial situation in perspective and cause you to take any needed action. You should also aggregate all of your retirement and investment accounts to get a sense of your combined asset allocation for your portfolio to help create your comprehensive investment plan.

Come up with a 5 year financial plan. Once you know where you stand with your net worth, figure out where you’d like to be in five years. This plan can include your financial goals for saving, debt repayment, retirement contributions, vacations or anything else you would like to do within the next 5 years. This is a process that you can continue throughout your marriage to track your financial goals.  Thinking in 5 year increments is a good way to set goals without becoming overwhelmed by the long-term.

Discuss your spending habits. You should have a good idea by now, but many married couples come into the relationship with very different financial habits. Discuss some general rules for large purchases. You shouldn’t feel the need to ask for permission to buy something, but maybe having a $150-$500 limit before making a purchase can ease potential financial tension in the marriage.

Don’t be in a rush to buy a house. Take your time with your housing decision. Many newlywed couples buy a house right away because that’s “the next step” or they assume “it’s a waste of money to pay someone else’s mortgage.” Never make a huge decision like buying a home because you feel it’s something you have to do. Make sure you both have stable jobs, like the city you currently live in and plan on staying for at least 5 years.

Otherwise you will be paying large switching costs in commissions, closing costs and interest payments if you decide to move after a short period of time. Don’t buy a house until you are ready to really settle down and stay in one place for the long haul.  Renting offers the flexibility to be able to change cities and jobs if you aren’t content in your current situation.

Figure out who will be paying the bills. Determine which one of you will take care of certain financial tasks like budgeting, bill payments and setting up new accounts. Then have periodic meetings to review your financial standing since one of you won’t be as aware of the finances.  These 5 minute meetings can keep financial surprises out of the equation.

Do not play team sports together (on the same team). Bill Simmons at ESPN had a funny story about him and his wife in a column a few weeks ago:

Ever watch a married couple play doubles? It’s impossible for them to get along for one full set. It can’t be done. For instance, I played doubles with my wife at a summer wedding — our friend Daniel kept hitting it right between us hoping my wife would jump over to my side and I’d get pissed about it. Of course, that’s exactly what happened because my wife absolutely loves jumping in front of my forehand so she can try a lunging backhanded volley that has a 12 percent chance of working. So I bitched about it, then she got mad that I bitched about it, and we totally fell apart and ended up losing in three sets. 

Other teamwork events that can be detrimental to your marriage: canoeing, bowling, any card or board game and golf. Staying away from these activities will save you hours of arguments and unnecessary fights.

Open joint checking/saving accounts. One study showed that couples that disagree about their finances at least once a week were 30% more likely to get a divorce than couples who only disagreed a couple times a month. You could try to have separate accounts but if you do you will be asking for future disagreements. Think of this as playing doubles tennis together. It will invite arguments. Having both of your incomes go to the same accounts relieves the stress of figuring out how to split up bill payments, how much you save and who pays for what. This is especially true for couples that have different salary levels.

Save 15-20% of your gross income. It never gets easier to save down the road when you are “ready to save.”  Start early and make it a habit. Set your saving lifestyle right from the start and you’ll never even notice the money is gone for spending purposes later.

Talk to successful married couples that are older than you for advice. This one goes hand in hand with the 5 year financial plan. You can figure out what you will need to save and prepare for financially in the future by talking to married couples that have already been through some of life’s milestones. Knowing in advance how much your financial plans will cost you can help you plan ahead for future goals.

Go on a few vacations. A good life is all about finding the right balance between preparing for the future and enjoying yourself in the present. In your first few years of marriage you should definitely travel. Once you have other responsibilities (mortgage, kids,  more responsibilities at work, etc.) kick in down the road you won’t be able to travel as much to the places you would like to go, so take advantage of your newlywed status and have some fun. My one caveat here is that you should not go into enormous debt to go on a trip. Start a vacation fund right away and make it a priority. Save first, then travel.

Any other good newlywed advice that I missed? Or something that worked in your marriage?

Money Fights Predict Divorce Rates (NY Times)
The Summer of No Mailbag (Grantland)