Long-term relationships are about more than love and fidelity — they’re also a financial commitment. Often, when couples move in together or get married, they combine most or all of their money, which has a huge impact on the big financial picture.
In relationships where finances get some version of the “yours, mine and ours” treatment, there are three big changes that come with tying the knot.
If you’ve enjoyed an adult life with little or no debt to your name, you should relish it. It may not last after you get married. Deciding to combine finances may mean combining debt responsibilities, so make sure you know what you’re getting into — no one wants to be blindsided by massive student loan debt. It happens, and it’s not pretty.
And while even if you’re not going to be held responsible for debt your spouse brings into the marriage, it may limit your financial future together. For example, when you try to qualify for a mortgage, your debt obligations are a large part of the approval process and could limit your borrowing ability.
This one’s a little tricky: Some couples benefit from filing jointly (called the marriage bonus), while others pay more in taxes than they would if they were still single (aka the marriage penalty). There are marriage penalty calculators available from a variety of sources that can help you figure out how your change in marital status impacts what you owe to the IRS, so you’re not caught off-guard. A huge tax bill is hardly the sort of gift people want to receive during their first year of wedded bliss.
There are nine community property states, meaning that any property acquired during the marriage is owned jointly by each spouse in those states. (They are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. Alaska gives couples the chance to opt in to community property, as well.) For the most part, community property does not apply to anything acquired before the union, and there are certain exemptions to community property laws.
If you’re trying to keep things separate — which some couples do — it can be especially challenging in community property states. Laws vary from state to state, so it helps to research the topic in advance.
There’s no right or wrong way to go about making finances work within your marriage (unless you don’t talk about it at all, because that tends to be problematic). You should also know that even once you’re married, your credit files remain separate. You may start to share some tradelines once you take on a mortgage or another loan together, but your student loans won’t just start showing up on your spouse’s credit report after the wedding. You should continue to monitor your credit individually to make sure you’re both in good standing, so when it comes time to apply for credit together, you know what you’re dealing with. You can easily do that by using free tools on Credit.com, which give you two of your credit scores every 30 days.
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