Love and Money: Real Life Advice for Every Relationship Status
Leisl L. Cording, CFP®
Senior Vice President & Financial Advisor
Few things can stress a relationship like the issue of money – from how to divvy up bills, to whether or not to share a bank account, to budgeting and how (and how much) to save and invest for the future can all present tense discussions. But they are essential discussions to have in order to ensure financial wellness for each of you as well as a healthy relationship.
Here are some helpful financial tips to consider for various stages of a relationship...
Financial Advice for Unmarried Couples
As unmarried partners, you need to decide whether to handle your nances separately, together, or in some combination. Whatever you decide, there are several important things to consider.
The most immediate need will be to decide how to handle household finances. If you prefer a simple financial arrangement and want to avoid the liability of a joint account, you can keep your finances separate and agree on how to divvy up expenses. Another approach is to open a joint checking account for shared bills, while keeping separate checking accounts for personal expenses. You can also opt to pool your incomes and pay expenses from a joint account. This may work best when you're in a long-term relationship, when your incomes are comparable, or when you've made equivalent tradeoffs.
It’s also important to think about long term finances, particularly retirement. Will you plan for retirement separately or as a couple? Remember that unmarried couples lack certain benefits available to married couples, such as social security benefits and defined benefit pension plans, so you should consider creating your own separate safety net when it comes to retirement. Another option is to designate your partner as the beneficiary of your qualified retirement plan.
Merging Your Money When You Marry
Getting married is exciting, but it brings more financial planning questions into the mix. Planning carefully and communicating clearly are important, because the financial decisions that you make now can have a lasting impact on your future.
The first step is to discuss your financial goals. Start by making a list of your short-term and long-term goals. Next, you should prepare a budget that lists all of your income and expenses over a certain time period. You can designate one spouse to be in charge of managing the budget, or you can take turns keeping records and paying the bills.
At some point, you and your spouse will have to decide whether to combine your bank accounts or keep them separate. If you're thinking about adding your name to your spouse's credit card accounts, think again. When you and your spouse have joint credit, both of you will become responsible for 100 percent of the credit card debt. And if one of you has poor credit, it will negatively impact the credit rating of the other.
If you and your spouse have separate health insurance coverage, you'll want to do a cost/benefit analysis of each plan to see if you should continue to keep your health coverage separate. It's a good idea to examine your auto insurance coverage, too.
Finally, if both you and your spouse participate in an employer-sponsored retirement plan, you should be aware of each plan's characteristics. Review each plan together carefully and determine which plan provides the best benefits. If you can afford it, you should each participate to the maximum in your own plan.
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How to Protect Your Finances If You Get Divorced
Divorce is emotional, and financial protection may not always be top of mind. But being cautious and prepared early on can help prevent financial stress later down the line. If you’re in the midst of a divorce, keep the following in mind…
- Make sure you’re familiar with your family’s finances, especially if you weren’t as involved with them before, because nearly every financial aspect of your life is scrutinized and addressed during a divorce. Gather and protect important paperwork – the divorce process requires detailed records. Also do an inventory of your home to prevent headaches and stress later on. Through photos or video, document all items of value in your home and the condition they’re in.
- If you and your spouse share a joint credit card, you’ll want to close the account as soon as possible. Neglecting to close the account could make you liable for paying any charges your spouse accrues on the card. On a similar note, it’s likely your spouse is listed as the beneficiary for various accounts, policies and assets. If you’d like to change your beneficiary designations, you’ll need to do so for every instance where they are listed.
- Next, reevaluate your budget, because divorce isn’t cheap. An uncontested divorce costs between $600 and $1,600 on average in lawyer fees, while a contested divorce could put you back upwards of $15,000. Once the divorce is finalized, you may need to readjust your own expectations for saving and spending as a single person.
- Lastly, build your team of legal and financial professionals. This can be a crucial step in protecting your assets and financial wellbeing during a divorce.
Whatever stage of life or relationship you're in...
It pays to plan and be strategic in order to maximize your finances and meet the goals you have for yourself and your loved ones. At Weiss, Hale & Zahanksy Strategic Wealth advisors we help our clients do this through a strategic Plan Well, Invest Well, Live Well™ process that considers your entire financial picture, personal circumstances and individual dreams and desires.
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Presented by Senior Vice President, Financial Advisor, Leisl L. Cording CFP®. Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. These materials are general in nature and do not address your specific situation. For your specific investment needs, please discuss your individual circumstances with your financial advisor. Weiss, Hale & Zahansky Strategic Wealth Advisors does not provide tax or legal advice, and nothing in the accompanying pages should be construed as specific tax or legal advice. 697 Pomfret Street, Pomfret Center, CT 06259, 860.928.2341. http://www.whzwealth.com