Financial strategies to help couples: A guide

If you’re soon-to-be-married, newly-wed or have been married for a while, here’s something to think about: According to the data, financial issues are a leading predictor of divorce.¹ It’s estimated that financial problems contribute to 20-40% of all divorces, with approximately 41% of divorced GenXers and 29% of divorced Baby Boomers saying that financial disagreements led to the dissolution of their marriages.¹ What kinds of issues in particular? Tellingly, 42% of couples report that credit card debt played a role in their decision to divorce.²

Fortunately, there is a flip side to these disheartening statistics: financial road mapping can help couples build a more stable and harmonious life together. Whether you're just starting a life together or have been together for years, managing your finances as a team can significantly impact your overall well-being and ability to meet future goals. By working together — engaging in open communication about goals, budgeting, saving, investing, and managing debt — couples can strengthen their relationship, reduce financial stress, and pave the way for a more confident and prosperous future. This article can show you how with tips and insights on financial strategies for couples, including:

• How to discuss finances and money management

• Key money management issues for couples

• Unique issues for those marrying later in life

• Whether to consider a prenup

How to prepare for “the talk”

Regular financial conversations are essential to building trust, avoiding conflict, and ensuring both partners are on the same page. And yet, no matter how long they've been with each other, many couples — if not most — find money and finances to be among the most challenging subjects to address together. Even those couples who communicate freely, openly, and honestly about other issues can become closed, guarded, and defensive when the conversation turns to the nuts and bolts of handling money. Which is why financial advisors and marriage counselors alike often recommend preparing in advance by doing these things:

1. Acknowledge that money discussions often carry emotional baggage, and approach them with empathy and patience.

2. Remember that partners may have different financial habits, spending habits and values shaped by their upbringing and life experiences.

3. Establish that open and honest communication will be the foundation for your conversations.

4. Create a “safe space” where both partners can express their financial goals, fears, and expectations without judgment.

5. Take time to learn about each other's financial histories and attitudes, which can provide valuable insights into your financial compatibility and establish a foundation of trust and transparency.

6. Commit to working as a team to establish goals and create a budget that aligns with your shared vision for the future.

Money is an emotional subject. Using open communication, empathy, and collaboration to work out your financial differences will not only improve your money management but can also strengthen the emotional bond in your marriage.

The 5 key financial issues for Couples

Basic money management strategies for couples can be organized into five areas. Effective planning for couples means approaching these topics collaboratively, with open communication and shared decision-making to build financial harmony and confidence. By planning as a couple, addressing issues honestly, and reaching a working consensus early in your married life, you can reduce the chances of misunderstandings and disagreements that put some 20-40% of marriages in peril. (If you are marrying later in life — and your finances are more complex — there are additional things to consider, which we'll address in the next section.)

1. Discuss current finances and how to handle financial matters moving forward.

Before a married couple can establish long-term financial goals and develop a strategy for achieving them, it is important that they address the basics, including their current financial status.

• Each person should provide a comprehensive accounting of their present financial situation. An honest inventory including salary, other income sources, savings, investment accounts, retirement savings, life insurance policies, and outstanding debts and obligations — including student loans, auto loans, credit card debt and child support payments — will help you accurately assess where you currently stand and start to discuss where you are going as a couple.

• You should decide how you will divvy up financial responsibilities moving forward. Sometimes, one spouse may naturally take on more responsibility due to knowledge or interest. Alternately, each of you take on an equal share — which doesn’t necessarily mean you’ll be doing the same things: for example, one partner could handle daily budgeting and tax preparation, while the other takes care of savings and investments.

• Next, you should get down to "brass tacks," including how you will split household and other expenses, and whether you will comingle finances or keep them separate. Consider whether to use a joint account or maintain individual accounts, as part of a hybrid approach. Each option has its own advantages in terms of tracking expenses, facilitating shared savings, and maintaining financial independence, so discuss what will work best for your relationship.

• Finally, you should commit to having regular discussions about money, lifestyle, and spending. Make it a point to periodically review your overall financial life together, including goals, account details, and asset allocations, to ensure you are making informed financial decisions and staying on the same page as a couple. Circumstances and needs are sure to change — for better or worse — throughout the course of a marriage. But whatever issues you face, regular communication will leave you better prepared to address the changes and handle the challenges together.

2. Establish shared financial goals

While it’s impossible to anticipate all the changes and challenges that lie ahead, you should work together to develop a vision of your future life goals and, by extension, future financial goals. With an idea of where you want to be tomorrow, you’ll be better prepared to make decisions about budgeting, saving and investing today. Here are three tips that can simplify what is often a complex conversation and negotiation:

• Discuss individual goals: Begin by talking about each person's individual financial goals. These might include paying off student loans, buying a sailboat, engaging in a costly hobby, getting a cosmetic procedure, or starting a small business. Understanding each other's personal aspirations is essential.

• Identify shared goals: After discussing individual goals, identify the financial goals you want to achieve as a couple. These might include putting a down payment on a house, starting a family, becoming world travelers, or retiring early. Once you've identified and agreed on your shared goals, prioritize them.

3. Create a budget

You’ve determined where you are. You’ve discussed where you’re going. The next step is to bridge the gap between them — by developing a monthly budget that allows you to meet your expenses today while saving enough to reach your goals tomorrow. Here are the key steps:

• Calculate your combined monthly after-tax income.

• Calculate essential expenses, which should comprise approximately 50% of after-tax income. Essential expenses include living expenses like rent, utilities, groceries, insurance, and necessary bills like car payments. If they exceed 50%, try to make some adjustments to your spending habits.

• Set aside 30% of after-tax income for discretionary spending, which covers non-essential expenses such as dining out, streaming services, gym memberships, entertainment tickets, and vacations. If 30% won’t cover them, think about what you might cut out.

• If possible, allocate at least 20% of after-tax income towards savings and debt repayment. This includes emergency funds, retirement contributions, loan repayments and saving for long-term goals such as starting a family or buying a house.

• Keep records to help you stay within the allotted percentages.

• Regularly review your budget and adjust it as necessary, especially if there is a significant change in your income or circumstances.

It’s important to note that the percentages used above are part of a general guideline called the 50/30/20 rule. In this rule, ‘needs’ include living expenses, while ‘wants’ are considered discretionary spending. The numbers can be modified to fit your specific circumstances, or you can consider another budgeting strategy. Whatever you decide is right for you, the keys to success are making a budget — and sticking to it.

4. Start building your savings and investments

One of the best ways for couples to boost their financial stability and confidence is to start saving and investing for the future. Most financial advisors would urge beginning as soon as possible, even if you can only afford to set aside a small fraction of your combined income. Try to have at least two different savings “buckets”:

• Short-term: You can begin by setting up a dedicated savings account specifically for an emergency fund and other short-term goals, such as a summer vacation. These accounts are low-risk and easily accessible, allowing you to deposit and withdraw money as needed. Building an emergency fund can help lessen stress during unexpected situations, such as job loss or medical emergencies.

• Long-term: Although retirement will be a long way off for young, recently married couples, it's never too soon to start saving and taking efficiency of the tax benefits available from most retirement savings vehicles. If at all possible, couples should try to take advantage of tax-efficient accounts such as Individual Retirement Accounts (IRAs), Roth IRAs and 401(k) plans at work, which may also offer employer matching contributions. These accounts help money grow faster by providing benefits that may include tax deductions on contributions, tax-efficient growth, or tax-efficient withdrawals, depending on the type of account.

For those with ambitious long-term financial goals, the next step will be to learn how to invest. While traditional savings accounts and money market funds are great savings vehicles for short-term goals such as an emergency fund or a summer getaway, long-term goals like a home purchase may require couples to invest in higher-yielding vehicles such as stocks, bonds, mutual funds, or exchange-traded funds (ETFs). But a higher yield means higher risk, so you'll want to take some time to learn the ropes before you begin. It’s important to assess your risk tolerance to ensure your investment strategy aligns with your comfort level and long-term objectives.

Fortunately, there are many ways to learn about investing. Books and podcasts, online courses from platforms that can all help you get up to speed on key concepts and investments. If you and your partner need some help navigating the many different types of investment vehicles, you might want to think about consulting with a financial advisor.

5. Consider insurance, tax, and estate planning issues

It’s important to address the “odds and ends” that sometimes get overlooked or put on the back burner for another day. These include:

• Insurance: Recently married couples should update their health insurance, life insurance, and disability insurance policies to reflect their new marital status and ensure adequate coverage for both partners. Also, consider whether it makes financial sense to combine policies and coverage or maintain separate ones.

• Taxes: As you get married, you should update your tax withholding and filing status. This process includes submitting new Form W-4s and Employee's Withholding Allowance Certificates featuring your new marital status and number of W-2 withholding allowances.

• Basic estate planning: Even young couples should create or update their wills and designate beneficiaries (typically one's spouse) for life insurance policies, investment accounts, retirement plans, and other key assets. Consider this an ongoing process, because it’s important to review estate planning documents and beneficiary designations from time to time to keep them up to date and ensure they reflect your current intentions and circumstances. You should also establish powers of attorney to give each partner decision-making authority in case of incapacitation. These steps not only provide confidence but also demonstrate a commitment to protecting each other's financial interests in the event of unforeseen circumstances.

Special considerations for those marrying later in life

Completing the five steps outlined above can help married couples create a strong foundation on which to build their financial futures. But what if you're marrying — or remarrying — later in life, after having children, accumulating significant assets, or even having an estate plan in place? This introduces more complex financial considerations that need to be addressed, and you should consider enlisting the help of an experienced financial professional or tax advisor. Subjects to address may include:

• Prenuptial agreements: In some cases, couples may consider prenuptial agreements to define the distribution of assets and financial responsibilities in the event of divorce or death. These agreements can help clarify financial expectations and protect individual assets.

• Blended family dynamics: Couples in later-life marriages often have children from a previous marriage or relationship. Careful planning is essential to ensure that the financial well-being and inheritance expectations of all family members are addressed equitably, and to manage any ongoing obligations to former spouses or children.

• Existing estate plans: When each partner already has an estate plan in place, it's critical to review and possibly update these documents to reflect the new marital status. This may include adjusting beneficiaries, updating wills, trusts, and power of attorney designations.

• Asset protection: As individuals accumulate wealth over time, they may have complex asset portfolios, including investments, real estate, and retirement accounts. Financial strategies should focus on preserving and managing these assets efficiently, with considerations for potential tax implications and protecting the interests of both spouses and their families.

• Long-term care and healthcare costs: Later in life, healthcare and long-term care become more significant financial concerns. Couples should discuss and plan for potential medical expenses and long-term care needs, including the role of insurance and how these costs may impact their assets.

• Retirement planning: Marriage later in life may necessitate adjustments to retirement plans, including retirement age, savings goals, and strategies for managing retirement accounts. Couples should align their retirement goals and consider factors like Social Security benefits.

• Debt disclosure: It is important for one or both spouses to be transparent about existing debts and to review each partner’s credit history. This is especially crucial when planning for major purchases like a home, as credit history can impact mortgage qualification and interest rates.

Addressing these considerations together in a frank and forthright manner can help ensure that you, your partner, and your respective families are financially protected as you embark on a new journey together. Managing finances effectively in these more complex scenarios can help build a confident and harmonious future.

Guardian can help

Getting comfortable with discussing money is one of the first steps in a couple’s financial journey. If you need additional guidance moving forward, a Guardian financial advisor can help you through the process and create a plan you can both embrace. To find one near you, just fill in your zip code and click below.

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