Money and Marriage – Advice for Entering Married Life on the Best Financial foot
Money and marriage – advice for entering married life on the best financial foot
Along with buying your first property, paying for a wedding can be one of the most expensive things you are likely to do in life. In fact, recent research shows that the average cost of a British wedding is now £26,989 [i] (and rising).
As a result, many newlyweds start their marriage in debt[ii], putting a slight dampener on the new marital bliss. Pension and savings specialists Standard Life have provided some tips on how to combat this potentially stressful situation so you can enter married life on the best financial foot.
1. Make a budget and stick to it
It’s vital that you don’t underestimate what your wedding will eventually cost. So why not use one of the many online budgeting tools to help you plan your wedding, then set a budget and stick to it, working out where you can cut back from the outset. It’s the only way to keep your wedding finances on the straight and narrow.
Invariably, one partner has a better financial brain than the other, but that shouldn’t let the other half off the hook. You’ll have a much better chance of creating a successful budget for not just your wedding, but your life together if you’re able to discuss and plan it together.
If you decide that there’s no other way, and you really do need more money than you will have available, then it makes sense to put a structured repayment plan in place rather running up an unauthorised overdraft or credit card debt. And be realistic about meeting these repayments once you are married, particularly if you’re moving home and could have other new commitments to pay for too.
1. Tackle debt before tying the knot
Once you’re married, it’s not your money, it’s “our money”, so debt can be a big issue. As with all financial issues, good communication is vital to a successful outcome, so it makes sense to discuss any debts together and decide how you’re going to tackle things.
List the debts, create a plan for repaying it as quickly as possible and incorporate that plan into your budget.
1. What’s the rush? Why not maximise your savings before the wedding
Many couples actively choose to have a long engagement, which gives them time to save for their big day and to start off on the right foot. Setting up a specific savings account and contributing to it monthly is a good way to stay on track.
If you’re planning really well ahead and have more time to save, say five years or more, then you could consider investing in an ISA, rather than relying on the low level of interest currently being provided by most savings accounts, which is often lower than inflation which means your money is losing value in real terms.
You can currently invest up to a maximum of £20,000 a year in stocks and shares through an ISA. You can choose to do so by investing a lump sum and/or by arranging regular savings. This type of ISA also allows you to choose where your money is invested, and as long as you don’t go over your annual allowance, you can usually make contributions and withdrawals as often as you like. It also means that, providing you are willing to take some level of risk, your investment can grow tax-free over time.
1. Back from the honeymoon
Once you’ve built up good savings habits for your wedding, remember to keep them going once you’re married if you can, topping up your savings and investments to invest for your future together.
If you have taken out a loan for your wedding and/or have several debts to clear, then have a look to see what your most expensive debts are and look at how you can manage them. aim to clear the most expensive ones first.
Generally, it’s fine to start saving if you’re able to keep up with mortgage or rent payments, pay off your bills each month and don’t have other commitments that are costing you more in interest. It’s always good to build up an emergency saving buffer of at least 3-6 months of income in case of any emergencies – for example, to cover regular outgoings if one of you is out of work for a while.
1. Planning a lifetime together
The earlier you start saving and planning your finances for your future, the greater the opportunity you’re giving any investments you make to grow. That’s because as your investments grow, the money they earn you can become compounded, with growth on top of growth. That’s why, if you aren’t already investing in a pension, it’s a good time to consider starting.
Investments can go up as well as down and you may get back more than you put in.
When you invest in a pension, the government gives you tax back, making saving for retirement more affordable. Every £100 saved will cost a basic rate taxpayer £80, a higher rate taxpayer £60, and a top rate taxpayer £55, subject to annual limits.
If you are auto-enrolled into your employer's workplace pension, you will get tax back on what you pay into your plan and you will also get a contribution from your employer. If you choose to opt out of the plan, then you may lose this employer top-up.
If you’re already investing in a pension, why not sit down together and review how much you’re investing and if you can make any increases. You could have a chat about where and when you hope to retire with your partner too. It might be a long way off, but it’s always good to see if your thoughts are aligned.
It’s also important to consider things like life insurance and to write a will to help ensure you and all your loved ones are still looked after if one of you is no longer around.
1. Financial benefits of marriage
There are a few areas of finance that can become joint once you’re married. When applying for a joint mortgage or loan as a married couple, the debt and credit history of your partner will have an impact. It’s important to bear that in mind.
Once married, it’s also the case that if one of you earns more than the other, then you may be able to make the most of tax benefits through the Marriage Tax Allowance, which could allow you to transfer up to £1,150 of your personal tax allowance to your partner[iii].
[i] According to 2017 data from
BrideBook.co.uk: https://www.dropbox.com/s/u57pwy5iekeblpo/The%20UK_Wedding_Report_2017-TWIAandBridebook.co.uk.pdf?dl=0
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