Getting married and starting a family are two of the biggest events in many people’s lives. These events usually come with great excitement and celebration, but they also include some stressful financial decisions that are important to discuss and consider. Hopkins Investment Management is focused on preparing you for these life transitions and helping you face the changes with positive and definite direction.
Whether you are just thinking about future marriage or are about to tie the knot, we desire to see our clients’ marriages begin with the right financial foundation. There are numerous financial considerations to think about in marriage, and if you are getting married later in life, the decisions are likely a little more complex. Here are a few questions we recommend you think through:
- How well do you know your future spouse’s finances?
Regardless of age, it is important to have a full understanding of your significant other’s finances before marriage. You should be aware of how much they have saved, what debts they owe and how fiscally responsible (or irresponsible) they are. Couples marrying later in life should also discuss family obligations, such as caring for a parent and/or children. Any alimony payments or income should also be talked about. Furthermore, couples near or in retirement ought to discuss Social Security benefits. (A new marriage will impact divorced (?) spouse benefits.1)
- How much should you merge your finances?
Perhaps the most important consideration is how you will handle maintaining your personal financial independence while also beginning to merge the overall family finances. Will you open joint accounts together? Will you still maintain a separate credit card and checking account so you can buy your partner a birthday gift without he or she knowing? If you plan to purchase property or investments – will you title them jointly?
- Who will be responsible for the budget?
Who is the “spender” and who is the “saver?” Do you have a rough budget for your first few months together? Does one of you feel more comfortable managing bills and financial matters? Regardless of how you assign the tasks, it is important for both partners to understand financial decisions and communicate with each other.
- Do you have a will? Will you be updating your beneficiaries?
It is important to have a will that is updated and reflects your newly married life. Do not forget to update beneficiaries for your bank accounts, insurance policies, and investments. This process can be more complex for later-in-life marriages, and regardless of age, it is good to have the conversation early. A good estate-planning attorney helps clarify these conversations and set your plan in motion.
Starting a Family
Having children marks one of the most significant financial changes in our lives. According to a recent report by online parenting network BabyCenter, the average cost of raising a child in the U.S. is $227,000—and that excludes college tuition!2
To ensure that you are prepared, here are a few questions to help you think through the coming challenges:
- Should you buy life insurance?
Now that you have a dependent, you likely need life insurance to provide for your child if you are not around. How much is appropriate? We feel that 7-10 times your annual salary is a good rule of thumb to follow, however, your situation is unique to you, and we also recommend connecting with a Fee-only Financial Planner. Fee-only Planners do not get a commission from selling you insurance or investments, so you will get objective advice about what is best for your family.
- Will your health insurance meet your new needs?
Your health insurance might have sufficed before, but will it meet the needs of a growing family? We recommend reviewing policies and benefits to understand your options.
- Are all family documents updated?
A change in family headcount calls for a review of life insurance policies, wills (including guardianship) and retirement plans. Therefore, if you have not set these items up yet, now is the time. Also, whom should you name to be your child's guardian if the unthinkable happened to you and your child's other parent? You should make every effort to protect your child in case something happens to you.
- What is the best way to save for your child's education?
There are several different tax-advantaged options for saving for your child’s education, including Coverdell ESAs and 529 plans. We recommend checking out www.savingforcollege.com for great resources, and a Fee-only Financial Planner is an invaluable asset in helping you reach these big financial goals.
- Do you know what your biggest asset is?
For most young married couples, by far their biggest asset is the ability to earn income. Consider the following info-graphic about insuring your biggest asset: