The wedding is over and you are home from your honeymoon. Newlywed life begins.
For centuries, marriage centered on financial transactions for the betterment of both families involved. Today, thankfully, marriages are about falling in love with the person you choose. This change means financial planning has become the responsibility of the couple. If you haven’t already had the truthful conversation about money, now is the time. Talking about money is hard for most couples. It means you need to expose the good and maybe not-so-good about yourself or the person you are with. It may show your vulnerabilities and weaknesses, like Prada purses and swanky evenings out with your girlfriends, or show your strengths like a solid RSP account, where you’ve been putting away your corporate bonuses. BMO Wealth Planning Group recently conducted a survey noting that 98% of couples think it’s important to be on the same page about investment goals and financial planning, however, less than 50% of engaged couples had detailed conversations about finances. Hopefully you did talk about finance before you got married and hopefully you are on the same page. Afterall, it’s definitely better to know isn’t it?
When my husband and I decided to get married, the first thing I did was open up a new spreadsheet. I know, romantic! This facilitated the conversation that should happen at the beginning of all relationships. You need to disclose all savings and debt so you can build a comprehensive financial plan. If you are bringing debt into a marriage, you must deal with it first, in order to build wealth. We determined our current financial status, forecasted for buying property, furnishings and our short-term goals.
If you are planning on buying a home, you can utilize up to $25,000 each of your RSPs towards the down payment for first-time homebuyers. That means $50,000 of your own money can be used towards the purchase of your first home at 0% interest. You will then have 15 years to pay yourself back. As newlyweds, when starting your long-term strategy for retirement and investing goals, you should look at your marginal tax rate now that your combined income has increased. If you have a combined tax rate of 31% or higher, you may find RSPs a better option for savings and below 31%, TFSAs could be a better savings tool. Being honest with your current situation provides you with a clear view of the road ahead.
Yellow Brick Road
You need to know where you are, to know where you are going. Tracking is a good place to start and can be weekly, biweekly, or monthly as you require. Regularly reviewing your finances together helps build the foundation of stability and security in your marriage. The spreadsheet is still the staple tool for finances in my marriage and we look forward to our bi-weekly Finance Fridays. Remember, couples that review their finances together, stay together.
Ying & Yang
The concept of ying and yang is about contrary forces being interconnected and interdependent. Now that you are married, you have the benefits of diversity and teaming to leverage your mutual strengths. Do what you do best; maybe you are more detailed so you can make sure the bills are paid on time, or if you prefer the holistic view then you can help determine which financial path is best travelled like focusing on savings or utilizing other products to meet your goals such as life insurance. By sharing the responsibility, ensure that your aspirations for the future will materialize.
We have all grown up with the vision of our futures in our minds along with the things we want to do and whom we want to be. Being aware of your reality and leveraging financial tools will help to make those aspirations happen. Determine your major life events and how realistic they are; how soon will you purchase a property, when do you plan on having children, when do you want to retire? Once you set a few key goals you can build your financial strategy and figure out what tools you could use to maximize your return. Maybe you and your spouse would like to have children; you could use RESPs for their education and receive tax deductions and contributions from the Government of Canada to boot (PS did I say I love free money!).
While it’s nice to feel like a princess for the day not many of us have the wealth of nobles and royals. As a newlywed you have many opportunities to build wealth and achieve modern millionaire status. This is possible. Define your short and long term goals, understand what your major purchases and life events might be, and prepare your family for the unexpected. The exciting journey of a new life with the real ability to make it what you want is now. The end goal of good financial planning is to protect your family’s wealth and assets while enjoying the pleasures life offers.