1. Put all your cards on the table
If you don’t already know your spouse’s financial status, or you haven’t shared your own, it’s well past time to have the money talk.
You need to know your respective salaries, savings and debt. Avoid hiding anything. Trust is the basis of marriage.
Even if you’re aware of your spouse’s debts — including student loans, credit card bills, car payments and more — you need to stop and think about the impact of that debt on your future plans.
Now that you’re married, your spouse’s creditworthiness plays a major role in your collective ability to borrow. If one spouse’s credit is good but the other’s is less-than-stellar, joint mortgage approval may prove difficult, if not impossible.
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Lenders fixate on the lowest credit score in a married couple, the credit bureau Experian reports, instead of using the higher score or an average. Even if a loan is approved, expect to pay higher interest rates.
You may need to look at ways to improve the poor credit score of one spouse before you start looking for loans. Start by visiting the Government of Canada website to find out where you can get a free copy of your credit report. If everything looks right, you’ll have to start tackling the tougher strategies — as a team.
2. Get specific about your financial goals
Newly married couples might assume they share the same financial goals. Without an in-depth discussion, you don’t know that for certain — and even small differences can cause big disagreements.
For example, you both agree you want to buy a home. But what’s the time frame? Is a single-family home a must, or will a townhouse or condo fit the bill initially? Do you stay in your current area or relocate somewhere more affordable?
Discuss both short-term and long-term financial goals. Perhaps one partner’s assumptions were incorrect. Maybe there are deal breakers you never talked about before.
No matter. Marriage is the art of compromise. Only by engaging in honest discussions about your goals will you come to a satisfactory decision.
3. Double your emergency fund
You never know what life will throw at you, but you’re in it together. Now that there’s twice the chance of a job loss, sudden illness or other disaster affecting your balance sheet, you need to make sure you’re using both your incomes to prepare.
That’s why reinforcing (or establishing) an emergency fund is one of the most critical money moves. As a general rule, put away enough money to pay for three to six months worth of living expenses.
The Consumer Financial Protection Bureau recommends setting up a dedicated fund with your bank or credit union. Emergency funds belong in the safest of investment vehicles, such as high-interest savings accounts. Stocks, mutual funds and ETFs are fine for long-term investing, but they aren’t stable enough for this purpose.
Whether you choose to maintain separate funds or combine them is up to you. Some advisers tell couples to merge their finances completely. Others prefer a “yours, mine and our” approach. There is no right answer for every couple.
4. Lock down life insurance
When you’re single, life insurance is seldom a priority. Once you’re wed, it rises to the top of the to-do list.
Sufficient coverage will make sure that anyone relying on your income won’t struggle to pay the bills if you die unexpectedly.
Buying a home or having a child — goals for many newlyweds — are common catalysts for purchasing a policy. That said, locking in life insurance when recently married is another one of those wise money moves. Rates are more affordable for young people without serious health issues.
How much coverage you’ll need depends on several factors, including each spouse’s current and projected income. If there’s a primary breadwinner, that person requires more coverage. However, a lower-earning or nonworking spouse still needs coverage. Should the worst happen, their life insurance can pay for expenses such as child care.
5. Don't forget the tax implications
Unlike in many other countries, in Canada, couples don't file taxes jointly. So who claims which tax credit is important, as it can make a big difference in your tax return.
You can potentially claim a spousal tax benefit if your spouse or common-law partner earns less money than you do.
You can pool your medical costs together, and you will likely get more back if the lower-earning spouse claims those costs. The same is true with child care expenses.
Also, remember that in Canada, you are considered common law if you have been living together for more than a year. Canada Revenue Agency generally knows, from tax records and correspondence, whether a couple is common-law married, whether or not you declare it.
— With a file from Daniel Tencer
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