Love and marriage may go together like a horse and carriage, but taking a smart approach to money can help make the ride much smoother. Matrimony creates the potential for both great opportunities and difficult problems, depending on the approach taken. Here are three money-management tips that married couples should consider:
1. Balance and clarify your goals. Many couples have a tendency to tiptoe around financial issues because of the great potential for conflict. Yet, if you openly communicate about where you’d like to go, you’re more likely to get there.
Each spouse needs to talk about his or her individual financial goals and financial wishes for the marriage. Where do you share goals? Where do you differ? Ultimately, you want to balance your goals to put your household in the most secure, advantageous position while allowing each spouse a reasonable opportunity to pursue individual objectives.
2. Find ways to save. It’s a familiar refrain: He wants to save, she wants to save, yet, together, they just can’t do it. Granted, saving money isn’t easy — but, in today’s unpredictable economy, a healthy savings account is an absolute necessity to financial security. And, indeed, saving should play a prominent role in your monthly budget (which, in and of itself, is also a financial necessity).
How can you better ensure a percentage of your income gets earmarked “savings,” not “disposable”? Review your expenses regularly and take turns paying bills, so both parties have a clear grasp of how much money is available. In addition, require consensus on big-ticket purchases, such as vehicles and home electronics. Impulse buys can be devastating.
3. Understand the “marriage penalty.” Many people assume that, by getting married, they’ll save on federal income taxes — and sometimes that’s the case. Yet many taxpayers are subjected to the “marriage penalty,” a disparity under which married couples pay more in taxes than single filers.
One place the marriage penalty rears its ugly head is in the tax brackets. When one spouse doesn’t earn significantly more than the other, a married couple may be pushed into a higher tax bracket than if they could file as singles. This is because the thresholds for married filers to become subject to the 28%, 33% and 35% tax rates are less than double those for single filers.
And you can’t avoid the penalty by filing separately — these rates’ thresholds for separate filers are half those of joint filers, and thus also lower than those for single filers. So smart tax planning for married couples is especially important.
Posted by Bauerle and Company 3 months ago
