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Financial tips for newlyweds
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April 26, 1999: 2:20 p.m. ET
'One bank account or two?' is just one of many issues new couples must face
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NEW YORK (CNNfn) - It seemed like a match made in heaven.
Or at least it was, until the subject of money came up. Then came the fights, the haggling and the guilt of bouncing one too many checks.
For many of the thousands of couples getting married each year, finance can represent one of the biggest stumbling blocks in their relationship.
"There are two things people argue about in a marriage: money and sex. And people argue a lot more about money than sex," said Nancy E. Frank, a fee-only certified financial planner.
Coming clean
Most financial experts agree, it's never too soon to start talking money. Frank recommends spouses-to-be set aside an afternoon, preferably sometime before the wedding, to "come clean" financially.
"It's important that couples get a sense of each other's spending styles and how they were raised to spend money … before they get married," Frank said.
Gather all your financial records, including tax returns, bank statements and investment receipts, and get ready to reveal all.
You'll want to discuss not just your debts and assets, but your financial goals and priorities. Do you prefer fancy dinners over regular weekends away? Do you consider new clothes frivolous, but he thinks a loaded sports car every two years is OK? Were you hoping for a three-bedroom house, or is a 2-room apartment more your style?
While opening up about money won't immediately resolve financial issues, it will eliminate the taboo that often is associated with the topic. The discussion also should help you understand each other's lifestyle priorities and assist you in establishing common financial goals.
It also will tell you what you're jointly up against financially. One of you may have accumulated thousands of dollars in credit card debt, while the other recently inherited funds from a distant relative.
These disparities will need to be dealt with and you will have to discuss how you want to approach them. Will you help your spouse pay off his or her debt, for example, or will that responsibility be taken on alone?
No matter what the situation, honesty is key.
"Debt surprises are not healthy for a new marriage," Harvie Roe, president of AmeriTrust Investment Advisors, said. "Both people should know the consequences before the marriage."
If serious credit problems exist, special security deposits may be required or the spouse with the good credit may need to keep his or her credit cards separate until the problems have been corrected.
If money is causing problems in the relationship before the marriage, it may be a good idea to see a counselor, as well as a professional financial planner. One or both may be able to help structure a framework in which financial positions can be communicated in a less adversarial way.
Early mistakes
One of the most common financial mistakes newlyweds make is accumulating too much debt in the first year of marriage.
The temptations of throwing an elaborate wedding or taking an exotic honeymoon put many couples in the red before they even cross the threshold. Amid the euphoria of building a new life together, splurging tends to run rampant, as the costs of new furniture, romantic dinners and weekends away add up.
New couples "have to fight immediate gratification or their debt will exceed their abilities and this will affect their marriage," Roe said.
Instead of charging excessively on high-rate credit cards, couples should sit down and discuss what perks are reasonable. They also should begin a long-term savings plan.
"Newlyweds should get in the habit early in committing to retirement plans, especially those with matching features," Roe said. "Roth IRAs are a great vehicle for the newlyweds to start saving for the long term. They should understand the power of compounding and how their savings relates to their goals of buying a house or a newer car."
One account or two?
"One bank account or two?" is a question that has sparked many a marital controversies and even among experts, opinions vary greatly.
Generally, whether or not you combine your checking accounts, or any other assets for that matter, is primarily a matter of personal preference and will have little impact on your financial position. However, there some considerations to keep in mind.
For one, if both parties are going to be regularly withdrawing money from the account, it may be difficult to keep track of the balance, making bounced checks and associated fees more likely. You'll have to make sure you check in with each other regularly about spending or you may want to put one person in charge of the bills who also doles out a cash "allowance" to the other. In many marriages, one spouse naturally assumes that role, simply because he or she is better at numbers or is more frugal.
"I believe one checking account is sufficient, but (spouses) should work together in making a budget and reconciling the budget to their spending each month," Roe said. "If that does not occur, problems will surface."
Some couples simply find one account impractical, and may instead opt for two, or even three, checking accounts: his, hers and theirs.
"I just think (multiple accounts) give everyone their own sense of freedom and independence," personal financial adviser Dean Cherpitel said. "They feel like they are both contributing. They both have a little bit of mad money and they don't have to get approval for every nickel and dime they are spending."
If you opt for multiple accounts, you should make it clear how much each of you will contribute to the joint account each month and what expenses that account will be used for.
Combining assets
When it comes to your other assets, especially retirement funds and other long-term investments, it may be to the couple's advantage to do some commingling.
At minimum, you will want to ensure that your long-term investments do not overlap significantly and that your combined retirement funds are properly diversified. If you are both heavily invested in high risk international overseas funds, for instance, one of you may want to shift 401k contributions to a less aggressive set of stocks to balance out the risk.
Bear in mind that any time you combine assets, those assets become part of the marital income and may be interpreted as a "gift to the marriage" in the event of a divorce. That means your spouse could have equal dibs on the funds in the event the marriage doesn't work out.
Preparing for the worst
While divorce may be the furthest thing from your mind, protecting the assets simply makes sense in some cases. With more than half of marriages ending in divorce, the chances of the relationship falling apart are, unfortunately, very real.
If one spouse is bringing significantly more assets into the marriage than the other, it may be wise to keep those assets separate and well documented. If you and your spouse later part ways, it will be easier to reclaim those assets as your own.
However, because money and trust are closely linked for many people, maintaining separate assets may be too much a psychological strain for some couples. If you are unable to trust a spouse with separate assets, that option may not be right for you.
"It's definitely a case by case thing," said Cicily Maton, a certified financial planner. "For the most part, there's nothing wrong with commingling, as long as spouses doing the commingling realize they are not going to get back the assets they came into the marriage with. On the other hand, it can add tension to the marriage if one spouse keeps assets separate."
Evaluating benefits
Aside from your assets, you will want evaluate each other's employee benefits and decide which ones best match your joint needs.
If you both work for large corporations, for example, it may be cheaper for each of you to maintain your current health benefits, as employee plan rates are almost always cheaper than dependent rates. However, if one spouse is self-employed, he or she may benefit from the advantages of the other's corporate plan.
You'll also want to assess each other's 401k plans to see whose company offers better contribution matches or even better-performing funds.
When death does you part
The last thing most newly married couples want to think about is death. But most personal finance experts agree that planning for life after the death of a loved one is one of the most important steps newlyweds should take.
The cost of a funeral -- as well as other legal and personal expenses that arise when a loved one dies -- can be quite high. And the cost of making up for a lost salary can even be higher, if you are forced to maintain a jointly established lifestyle alone.
First of all, make sure you have named your spouse as your primary beneficiary on all your bank accounts, insurance policies and investment funds. This step is easily overlooked in the paperwork deluge that often coincides with marriage.
Life insurance should be another consideration. While marriage alone is not a reason to get life insurance, there are certain circumstances under which it may be a good idea. If the couple has bought a home, for example, life insurance will help the surviving spouse continue mortgage payments. In addition, if one spouse contributes significantly more income to the relationship, life insurance may give the lesser-earning spouse a financial boost while he or she gets back on track.
The term life insurance offered by most companies should suffice for these circumstances until you decide to have children or take on other major added expenses.
No matter what your financial situation, setting up a simple will upon marriage is also generally recommended. A will can prevent legal complications should an untimely death occur and make any financial transitions more clear.
A power of attorney and a health care directive or living will are also good ideas. A power of attorney allows your spouse to make decisions for you in your absence. If, for example, one spouse is out of town on business when an offer comes up on the house you wanted to buy, a power of attorney allows the other spouse to sign an agreement in his or her absence. You can get either a permanent power of attorney, which gives you those rights full-time, or a "springing" power of attorney, which only takes effect after a doctor declares you or your spouse mentally incompetent.
Putting a living will or some sort of health care directive into place upon marriage will help inform your spouse of your wishes in case you ever fall seriously ill. By laying out your wishes in advance, fewer legal problems are likely to ensue if you should die before your spouse does.
Although making some of these decisions early on in a marriage can be difficult, the heartache spared in the long run will make your efforts well worth your while. 
-- by staff writer Nicole Jacoby
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