Congratulations! You have met the love of your life and have decided to be married. Marriage is an extremely exciting time in a couple’s life in which everything seems to happen at once, the rush of decisions that must be made are often overwhelming—especially for younger couples.

Although the foundation of any marriage is love, financial issues can cause stress that could lead to future marital problems. No matter what stage of life you are in, it is important to solidify the financial decisions surrounding marriage, so you can focus on what is most important, each other. Below is a comprehensive guide to help prepare you for the important decisions ahead—starting at your engagement and continuing beyond your wedding to future financial planning as a couple.

 
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Before the Wedding:

  • Engagement rings: $3,000 - $5,000.

  • Wedding bands: $2,00 (total)

  • Marriage license: $93.50

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the wedding

Average total cost of wedding is $33,391. Listed below are average cost of individual aspects of the wedding. These, of course, are just averages some cost far more while some cost far less. While planning the wedding it is important to think about how much specific things will cost in determining you overall budget for the wedding. This allows you to decide where to focus most of your spending on and what you could either do without or try and do yourself to cut down on cost.

  • Reception Venue: $15,000

  • Ceremony Site: $2,300

  • Transportation: $830

  • Photographer: $2,600

  • Videographer: $1,900

  • Wedding Planner: $2,000

  • Officiant: $285

  • Wedding Dress: $1,500

  • Grooms Attire: $285

  • Hair & Makeup: $950

  • Reception Band: $4,000

  • Reception D.J: $1,200

  • Rehearsal Dinner: $1,300

  • Wedding Cake: $550

  • Catering (per person): $70

  • Flowers & Decorations: $2,380

  • Invitations: $400

  • Favors: $250

  • Honeymoon: $4,000

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Other possible costs:

  • Engagement Parties

  • Bachelor / Bachelorette Parties

  • Additional cost for destination weddings

  • Pre-nuptial agreement cost


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Bank Accounts

Ok, now the wedding has passed and you both are ready to start your new life together. Besides the cost of changing you name which could be anywhere between $100 -$500 there are several important financial decisions that you should be considering.

Joint or Separate Bank Accounts:

This is often one of the first decisions that couples will have to make when it comes to their finances. This can be awkward, especially if one person wants a joint account and the other would like to keep their accounts separate, but it is a conversation that must be had. Some couples decide to keep their own separate bank accounts, but then have one joint to pay for their expenses or have a joint account for a specific savings goal, such as travel.

Spending Habits:

Often opposites do attract, spenders often end of with savers and vice versa. Some people are inherently more cautious with their money and follow a strict budget while the other just goes with the flow. While dating these tendencies could be overlooked, but when two people get married and their finances become intertwined this can lead to issues in the future. Talking about each other spending or budgeting habits in the beginning and coming up with a compromise that both spouses can agree with can prevent future problems.

Role Assignment:

One strategy could be for one spouse typically the saver and budgeter to oversee paying all the bills and setting aside money for emergencies and retirement. While the other can oversee the account that pays for the new car or the next vacation.

Set Financial Goals:

Financial goals are most easily attained when started early and consistently worked towards. Talking with each other about what is most important to the other partner will increase your probability of success, some typical goals to consider:

  • Saving for a new home

  • Early retirement

  • Travel

Update Beneficiaries:

Each partner should go through each of their accounts such as and bank accounts (if kept separate), retirement/brokerage accounts, life insurance or any other account and add their spouse as the beneficiary.

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Insurance

Life

Death is a subject no one wants to talk about, but if left alone could cause catastrophic damage in the future. Most young people don’t have life insurance and if they have no dependents aren’t in a rush to get any. Newlyweds should consider getting term life insurance, for protection against an early death. No one wants to leave their spouse with having to pay for a mortgage or other debts on one income.

Disability

Disability insurance is income protection and if offered by and employer most people should consider, this need is magnified when someone is married, and life is built around 2 incomes.

Health

It is important to review health insurance policies to determine if both spouses need to continue their coverage. It is sometimes more cost effective for the spouse with better health coverage to add the other as well as a dependent rather than have 2 coverages.

  • HSAs (for more info refer to our section on HSAs): Consider contributing to an HSA if you are both covered under a HDHP. Also, if either spouse already has an HSA make sure you are still eligible if one decides to join the others health plan.

  • FSAs (for more info refer to our section on FSAs): You may want to consider contributing to an FSA or and FSA for dependent care. This can be used either in lieu of the child tax credit or in conjunction.

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estate planning needs

Living Wills

Drafting of a will is a task that no one likes to do, like purchasing life insurance, but it is important for each spouse to have. This will ensure that if something were to happen to either spouse their assets and belongings go where they would like them to.

Guardianship

This is for couples that have children, if something were to happen to both spouses it is important that a proper guardian be assigned for the surviving children.

Trust

There are many benefits of setting up a trust for future asset transfer, which you may want to consider. These are often looked at as options only for the ultra-wealthy but can be useful to middle class households as well. Some things to consider when thinking about setting up a trust:

  • Avoid Probate: Probate can be a long process, which could leave you surviving loved ones without their inheritance in a very stressful time in their life. Setting up a trust will go around this process, giving access to these funds more quickly and efficiently. This will also save in attorney fees as well.

  • Protection of Assets: Setting up a trust can give your family greater legal protection from anyone that may be unhappy about how your assets are distributed.

  • Flexible Distribution: The grantor (person that establishes trust) can give conditions for how they would like funds distributed. This is often used when passing money down to children, stipulations can be put in place about what the money can be used for.

  • Tax Advantages: Funds distributed from the trust’s principal balance are not taxable to the beneficiary.

  • Protection from Creditors: Some trust can protect the assets from creditors, whether creditors intend to collect from the grantor or the beneficiary.

  • Fees: One of the main drawbacks from setting up a trust is the fees that can be associated with the process. This is especially true for the attorney fees.

Power of Attorney

There can be either medical POA or financial POA, this person is someone you can trust to make decisions on your behalf when you are no longer able.

Health Care Proxy

This document will allow each spouse to make medical decisions on the other behalf if the other is not able to do so. This can also be set up for children as well if something were to happen to both parents. See our healthcare topics for more information about medical coverage options.

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529 Plans

529 plans are a great way to save for a child’s education. Parents may want to consider setting up a plan as early as possible to take advantage of years of compounding. Like a retirement account that are tax advantages associated with 529 plans. Also, for soon to be parents or for couples planning on having a child in the near future, a 529 plan can be set up before the baby is born. This is done by a parent opening an account and naming themselves as the beneficiary and then when the child is born transferring it to the child.

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Tax Implications

Typically couples that file Married Filing Jointly will receive better tax benefits, but in some situations, it may be better to file Married Filing Separately. It is important to weigh both options to see what a better fit for your situation is.

Itemizing Deductions

If you are Married Filing Separate, you are not allowed to take the standard deduction, you must itemize your deductions as well. However, if you both decide to take the standard deduction you will only be allowed to claim half of the amount you would be allowed if you both filed Married Filing Jointly. Additionally, you are not allowed to take the Child Dependent Care Tax Credit in this situation.

Tax on Net Investment Income

Additionally, keep in mind the tax associated with the Affordable Care Act (ACA), on Net Investment Income Tax (NIIT). The tax is levied on the lesser of your Net Investment Income or the amount over your Modified Adjusted Gross Income (MAGI) for those filing single of $200,000, $125,000 for Married Filing Separate (MFS), and $250,000 for Married Filing Joint (MFJ).  

Ways to Decrease NIIT

  • Apply tax harvesting strategies — sell stocks that have decreased in value to offset gains from appreciated stocks.

  • For those of you that plan to give yearly donations, consider donating appreciated stocks in lieu of cash.

  • One other option includes using what is known as a 1031 exchange, which allows you to delay tax liability on the sale of an investment, if you use the funds from that sale to repurchase a similar investment.

Marriage Penalty Tax

One of the biggest tax qualms that newlywed couples tend to have to deal with is what is known as the Marriage Penalty. This penalty plays out when couples end up paying a higher tax bill married rather than if they were still single, due to their combined income levels. This is a breakdown of the current tax brackets.

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