Merging Finances as a New Couple
Getting married or deciding to merge finances is an exciting step in your life. By merging your assets, you may have the financial power to make a real estate purchase you would otherwise not be able to afford on your own. Plus, you may be able to travel a little more and save more, as you share expenses.
This is also a great time to really think through your short and long-term financial goals to make sure that the two of you are on the same page about your approach to finances. Here are some tips for couples merging their money:
Communication is Key
We cannot stress this enough. Money can be very stressful for couples, so we recommend getting all financially related information on the table before you merge your finances. This includes all income and all debts, student loans, monthly payments, car payments, debts to family members. Hidden debt can be devastating to a relationship.
It is always best to talk through all financial issues early on so that there are no surprises down the road.
Decide How Much of Your Finances to Merge
Finances can be complicated and there may be reasons not to merge all of your finances or refrain from doing it all at once. Plan this process out so that you avoid arguments and even negative impact on credit scores.
Make a Plan that Both of You can Stick With
Come up with a plan for who will pay the monthly bills and who will balance the checking account so that things do not get lost during the transition to merging finances. Forgotten payments can result in dings on your credit report — so you want to make sure that you have a plan that ensures that all bills are paid on time.
Develop a Monthly Budget
Come up with a spending plan together that you can both work with. This should include “extras” like entertainment, clothing, etc.
Think Ahead About Tax Implications
There are a lot of rules to keep in mind. For example, for tax purposes, you are married for the full year you were married in if you tied the knot before December 31st. That tax year (and all subsequent ones), you can file as married filing jointly or as married filing separately. Most couples prefer to file jointly as it can yield benefits like some tax credits and filing only one return.
You should also look at your tax withholdings after you get married. Getting married will definitely change your tax rate, especially if both spouses work. Married persons filing jointly qualify for a lower tax rate and other deductions. You want to account for this on your W-4 by adjusting allowances, so that you are not surprised by a big debt (or refund) come tax time.
Get Advice from the Experts
If you are getting ready to tie the knot and/or merge your finances and have questions about benefits, pitfalls and important strategies, give Success Tax Relief a call at 1-877-825-1179 or contact us.
We have helped many new couples come up with a plan for merging their finances that minimizes the negative impact on their annual tax return. Our team can help sort through complex and difficult situations so that you can be confident as you start your new life together!