Marriage - Tying the Financial Knot

So you're getting married? Have you sat down with your fiancé and discussed finances? Have you talked about how you'll combine your income? How you'll pay your bills? Have you talked about your saving and investing goals, your philosophy about money, your spending habits, your debts?

Disagreements about finances is the number one cause of divorce, so getting these issues out in the open and coming to an understanding before marriage can greatly increase your chances of staying out of divorce court.

Pre-Nuptial Agreements: Only for the Rich?

We've all heard about pre-nuptial agreements among the rich and famous, but do they ever make sense for the average American? Pre-nuptial agreements can save many a bloody battle if your marriage ends up in divorce, but since most of us don't get married with an eye towards the divorce courts, we never even consider a pre-nuptial agreement.

There are times when one makes good sense, however. For example, if one of you expects an inheritance, has a trust fund, or owns a business, it makes good sense to spell out how those things will be handled during the marriage and in the event of a divorce. Such agreements can also protect first families if you've been married before and want to ensure that children of a first marriage will not lose their inheritance due to a second marriage.

Paying for the Wedding

The average American wedding now costs over $19,000. Why do so many people start their married life together spending such a large sum of money on a celebration that lasts a few hours when they could use it for a down payment on a house or to pay off burdensome debt? Can you have your wedding cake and eat it too? Experts say yes, you can have your fancy wedding for less money. You Can Plan an Affordable, Memorable Wedding will help you save money and still have have the things that matter most to you.

Preparing for the Marriage Tax Penalty

If you're planning on tying the knot, be prepared for the marriage tax penalty. The first dollar of income earned by the second working spouse is taxed at the highest marginal income tax rate of the first spouse. For example, if the first spouse earns $50,000 a year, placing him or her in the 28% tax bracket, the second spouse's income is taxed at 28% instead of 15%. In other words, their income is combined as though it were earned by one person, and they end up paying more taxes than they would have had they remained single. There is good news, though. The marriage tax penalty will gradually be phased out over the next several years.

Mingling Your Money

It's best to discuss how you will mingle your money before you actually tie the knot. Discuss your financial goals. Get copies of your credit reports and review them together. Decide whether you'll keep separate credit cards, add your names to each other's existing credit cards, or get new joint credit cards. Talk about how you'll handle your checking account: separate or combined? and how you'll save for your financial goals. These are money issues that have long-term consequences but are often overlooked in the rosy glow of romance before the wedding.

Avoiding Arguments About Money

Once you're married, how do you avoid arguing with your spouse about money? Determine your money personalities. Review your finances together on a regular basis. And most importantly, talk about money matters openly and honestly.