Plan your financial future before you tie the knot

Your engagement is a time to plan your life together as well as your wedding. Once you decide to marry, it’s time to talk about money.

“Today many engaged couples are living together, so they’ve combined their households into one,” says Ellen Bigelow, Bigelow Family Financial. ”Some have already combined their funds, while others may have separate bank accounts. Regardless of the existing setup before you marry, it’s important to discuss and plan your finances, not only for your wedding, but for the next few years.”

According to a 2014 Trend study from The Wedding Report, couples contribute 58 percent of the money spent on wedding products and services, while parents pay 36 percent. The rest of the funds come from other loved ones.

Meet to plan

To begin the discussion with your loved one, talk about your financial situation and your goals. Do you have school loans or credit card debt? If so, share the amounts. What is your income this year?

Next, talk about your spending habits during the past three months. Where do you spend your funds? Perhaps one of you enjoys golf while the other enjoys bicycling. Then you’ll need to budget for your hobbies and interests. Ask yourself if your expenses are within your means.

Bigelow recommends this the 50-30-20 guideline for spending: “Fifty percent goes to have-to expenditures (shelter, food, transportation, et cetera). Twenty percent goes to savings and paying down debt. Thirty percent goes to what we want. For example, some couples think cell phones are a necessity. They are not.”

Combining accounts

Talk about whether you will have a joint account or separate accounts. A third option is to have a joint account for most expenses but separate accounts for fun, also called no-questions-asked money. Also, what is your spending discussion threshold? For example, can you spend up to $100 and not discuss it with your spouse? If not $100, then how much?

Who handles the finances?

Generally one person has more of an aptitude for handling the family finances. Determine who will take on that responsibility, or decide whether you want to share the duties. If you plan to share them, be specific about who does what and when.

Review your financial plan monthly

“The plan is a document that is reviewed regularly to see if you are staying on track,” says Bigelow. Set up a monthly time to discuss your financial plan and then go on a date to celebrate your discussion. “It should be something to celebrate — you are taking responsibility for your financial future — not something to dread,” she says.

The best advice

“I recommend that people in their 20s, or early in their career, talk to an accountant or a financial planner,” says Bigelow. If you start saving money in your 20s, it has more years to grow. Begin saving before you have a mortgage and children. Then meet with your financial adviser annually to see how your financial management is working for you. Make adjustments as needed.

10 tips for planning your finances

1. During your engagement, talk about your short-term and long-term goals, both personal and financial. Discuss how much money you each make.
2. Decide if you will combine your accounts, keep them separate or combine some but not all. Plan to have a combined emergency fund, and decide how much each of you will contribute.
3. Track your combined spending for three months before the wedding, so you will both be aware of your current spending habits.
4. Compute your combined net worth. Bring all your financial documents together, and run the numbers. Are you starting out in the red (owing more than you own)?
5. Discuss attitudes about debt. If one or both of you have debts, plan how to tackle them once you are married. Check your credit reports together at annualcreditreport.com to make sure any errors are cleared up before the wedding.
6. Decide on a dollar threshold for spending discussion. Any outlay over that amount should be discussed as a couple.
7. Who will be the primary money manager in the household?
8. Plan a money date at least monthly to review spending and progress on savings goals. Make it a positive event and not something to be dreaded.
9. Make sure there is room for fun in your spending plan. Don’t let necessary living expenses exceed 50 percent of your income. Plan to save 20 percent and allot the remaining 30 percent for things you want, but don’t need to live.
10. Meet with an accountant or financial planner together to discuss the impact of your newly combined finances on your taxes. If self-employed, do you need to change your estimated taxes or change your withholding allowances with an employer?

10 tips courtesy of Ellen M. Bigelow, ChFC, CASL, Bigelow Family Financial, LLC.

Where does the money come from?

How do couples pay for their weddings?

• 74 percent by using savings.
• 66 percent by using cash on hand.
• 27 percent by using credit cards.