June - the most popular month for weddings - is around the corner. That means many couples about to take the plunge are spending much of their time shopping for the perfect gown, flowers and reception location.
Unfortunately, most couples are so busy planning their wedding that they don't take time to discuss how they will manage their finances after they walk down the aisle. Getting adjusted to married life can be a challenge in itself. Mounting bills from wedding expenses and the cost of setting up a household can add to the stress. Here's a checklist to help you think about financial matters before and after marriage:
Joint checking accounts, individual accounts or a combination. If you are a newly married couple, you may want to establish a joint checking account. A joint account forces you to be accountable to each other about where your money is going. Keeping separate accounts can encourage unnecessary spending under the radar of your partner.
Savings goals. How much of your income do you plan to save and how will you do it? A rule of thumb is to save 10 percent of your gross income through automatic monthly withdrawals deposited into an investment account. In addition, you should have a minimum of three months of savings within reach for emergency expenses.
Retirement plans. If both of you have a 401(k) plan offered by your employer, at a minimum, invest in each plan up to the level where you get each employer's full matching contribution. You should also have a savings plan outside of your 401(k) so that you have access to funds without penalty. If you aren't eligible to contribute to a 401(k), invest in a Roth Individual Retirement Account, which allows tax-free withdrawals at retirement if you follow the rules.
Employer benefits. Examine the health, dental and other benefits each of your employers provides. Compare deductibles, co-payments, benefits provided and monthly costs. If you don't have children, you still should purchase life insurance to replace your salary if you die. If you do have children, a general rule is to purchase enough life insurance to cover eight times your combined annual salaries.
Investment accounts. This can be a sensitive subject for many people who've accumulated wealth on their own and now are faced with sharing it with their spouse. Depending on the significance of your wealth, you would be wise to explore financial- and estate-planning matters both before and after marriage.
Investment personality. Your investment portfolio should reflect how much risk each of you is willing to take in achieving your joint goals. Do you feel comfortable investing in stocks or would you prefer more conservative investments such as bonds or CDs? These are questions you should ask each other and then talk to a financial consultant who can recommend securities that match your objectives, time frame and risk tolerance.
Budget expectations. Do you both agree on how much should be spent on discretionary expenses such as clothes, dining out and home-improvement projects? The best way is to agree on a monthly amount for every expense that is not fixed (i.e. mortgage payment) and stick to that amount. This can prevent a lot of disagreements down the road when you discover your spouse has spent money on something you think is unnecessary.
Steve Zeller is a financial consultant with A.G. Edwards & Sons., Inc .