A few weeks ago I shared 7 ways to save money on your wedding. My wedding day was the best day of my life. In fact, I was on a wedding high for about a week afterwards. But reality soon kicked in and before you knew it we had to start “adulting” and make some very important financial decisions. The first thing we had to do was merge our finances. We both had separate bank accounts, separate credit cards, debt, and our own bills to pay. Where to even begin?! When it comes to merging you finances with your significant other here are the steps we took and recommend.
#1. Yours, Mine, Ours
When I was single, my finances belonged to me and me only, which made budgeting easy. However, now that we are married things are a little different. I have always had the philosophy that as a married couple my salary doesn’t belong to just me and my husband’s salary doesn’t belong to just him. Because we are one unit our money belongs to us. We don’t have separate bills that each of us are responsible for, instead we do things together. This approach may not work for everyone but the point is, the first step to merging your finances is to decide how you want to allocate your double income.
#2. Budget, Budget, Budget
I can’t emphasize the importance of a budget enough. It is essential that you have an understanding of what’s going in, what’s coming out, and how much cash you need to pay your bills. Determine your expenses and allocate the appropriate amount of funds. As we quickly learned, our budget differed greatly from the time we were both single (and students) to being married with a double income. For me this was especially important because previously to getting married I had no debt of any kind but when I got married I not only inherited my husband’s income but I also inherited his student debt.
#3. Determine Your Financial Objectives
Now that you are married, it’s important to collectively decide what your financial goals and objectives are. Do you want to buy a house? Do you have debt you want to pay off? Have you thought about retirement? When do you want to retire? What kind of retirement do you want to have? How much do you need to retire? And when do you start saving for retirement? Have you thought about saving for your children’s education? All of these questions may seem overwhelming and some far off into the future, but they are an essential aspect of your financial future and financial stability. Speaking to a Financial Advisor is one of the easiest ways to get started. They can help you determine which savings accounts best fit your needs and goals. The best thing you can do for your future self is start financial planning right now.
#4. Open a Joint Bank Account
When we first merged our finances, one of the first things we did was open bank accounts at the same institution. It made paying bills and transferring money A LOT easier. My husband closed his accounts at the institution where he was banking and opened an account at my bank. We then opened a joint account where our pay cheques would be deposited into. Our bills would get paid from that account and the extra money would get allocated into our individual accounts for our savings.
#5. Get a Joint Credit Card
This was by far one of the best things we did. When we had two separate credit cards it made our monthly bank reconciliations very tedious to track. Not only do we maximize the points that we earn with a joint credit card but it makes tracking our weekly expenses much easier. We use our joint credit card to pay for our living expenses (e.g. groceries) of which hubby then tracks in an excel spread sheet and reconciles every month to ensure we are staying on budget. We also recommend paying your credit card off as soon as a purchase has been made to ensure you don’t spend what you don’t have.
#6. Inform the Canadian Revenue Agency
A common mistakes many new couple make is failing to inform the Canadian Revenue Agency of their new marital or common law status. This has often resulted in couples receiving tax credits that have to be re-evaluated because of their new marital status. Informing the CRA of your new marital status prior to filing your taxes will help prevent any issues and hassle such as this. Informing the CRA of your new relationship status is also beneficial as once the CRA recognizes your new relationship status there are a number of benefits for couples such as being able to contribute to your spouse’s RRSPs of which the contributing spouse can receive a tax deduction.
#7. Tax Deductions
When it comes to tax time, there are a number of tax credits such as those for charitable donations that can be claimed by either spouse so you can maximize the money you get back on tax return. Of course there are certain rules that apply, but being an informed tax payer can help you plan your affairs in an orderly manner. Talk to your accountant about which tax credits may apply to your new marital status.
So while being newly weds can be a very exciting time, if you were like me, it’s easy to get swept away in that first year and forget your financial obligations. Luckily I had an accountant to keep me on track and we want to help you do the same. Do something today that your future self will thank you for.
The Accountant’s Wife