Making Dollars and Sense of "I do"
Congratulations on your upcoming wedding! It's an exciting time, one full of joyful anticipation for that walk down the aisle and into your new life together. As you start planning for the big day, you'll be faced with decisions about music, venues, food, bridesmaid dresses, tuxedos, flowers, the wedding gown and transportation—the list is long and it can be expensive.
- Discuss with your partner the kind of wedding you really want to have.
Weddings range from extravagant affairs with hundreds of guests and a sit-down dinner to small intimate receptions for immediate family and close friends. You may find that you both prefer an event on a smaller, more intimate scale. Try to clarify your vision before you and your budget get swept up in the excitement.
- Determine where the money for the wedding will come from.
Some parents have set aside funds for their children, but in many cases these days, the bride and groom will need to cover the costs on their own.
- Sit down together and create a realistic budget.
It's important that you don't underestimate the costs, so do some research to find out how much you should budget for the type of venue you have in mind, the wedding gown, photography, music, food and all the other expenses involved.
- Remember down payments and deposits are often required when you're making a booking.
Make sure that you ask about this when meeting with suppliers so that you can arrange to have the funds readily available when needed.
- Know your timeline and how much you should be putting away.
Starting your life together under the weight of wedding debt can be challenging. When choosing the date, try and give yourselves enough time to save for the big day. Because the time horizon is relatively short, you should consider investing in short- term deposits or GICs rather than more volatile investments.
Before you tie the knot, it's a good idea to understand how you and your intended view money matters. The fact is that money is often a source of tension and stress for couples, especially when one person is a spender and the other is a saver. As with any other aspect of marriage, openness and honesty is the key. When it comes to your finances, you both need to lay it all on the table–your debts, your investment successes and those penny stocks you bought that turned out to be worthless. You also need to talk about your short-term and long-term goals and objectives to make sure you're both heading in the same direction. By getting to know how each of you thinks about money and talking about your goals as a couple, you can start your marriage off on the right foot.
This is an age-old debate. Should married couples keep their money together or separate? These days, many couples find a balance of both works well for their marriage. Whether you and your partner think you'll be all together, all separate or somewhere in the middle, these points can help you fine-tune your approach to ensure that, together, you come out on top.
|Chequing accounts||Consider keeping a joint chequing account for shared expenses such as rent, mortgage payments, utilities and groceries. Since you may need to maintain a minimum balance in order to minimize fees and service charges, using only one account can save you money.|
|Credit cards and utility accounts||It's important for each spouse to establish a credit history in his or her own name. This can be done by taking on the responsibility for paying a utility bill, or each spouse can maintain his or her own credit card. Consider using a no-fee credit card to avoid additional expense.|
|Savings accounts||Some savings accounts have tiered interest payments–the higher the balance, the higher the rate of return. By pooling your savings, you'll have a bigger balance and benefit from a higher interest rate.|
|Investment accounts||For tax planning purposes, longer-term investment accounts are best kept separate, particularly if one partner earns much more than the other. If the lower income earner invests his or her own funds, the income earned will be taxed at a lower rate.|
|RRSPs||There's no such thing as a joint RRSP–you each will establish separate accounts in your own names. However, in order to keep taxes low in retirement, you should aim to have your incomes relatively equal at that time. Here's one way of doing that–if you're the spouse who is likely to have the higher retirement income, you can make your contributions into a spousal RRSP for your partner. That way, you get the benefit of the tax deduction, while your spouse will pay the tax on the RRSP income in retirement.|
It's time to start married life. As the months and years go by, you'll have lots of decisions to make–about where to live, if and when to start a family, vacations and holidays, when and how you'll retire. Understanding how to handle your finances starting now, will set the stage so you can meet the important goals you'll set for your future.
Here are a few areas for couples to consider:
|Creating a budget||It's important that you get on the same page when it comes to spending and saving. Take some time to discuss your short- and long-term objectives so you can work effectively towards common goals.|
|Day-to-day money management||Who will be responsible for paying bills, managing chequing and savings accounts, and balancing the budget? This can be a shared responsibility or the more financially savvy partner can take it on. If that happens to be you, just make sure to keep your partner in the loop.|
|Blending investment styles||Undoubtedly, you'll have some long-term goals such as retirement to work towards. With goals such as these, a variety of investment approaches can be used. You and your new spouse may have very different ideas about the strategies you want to put into place. Learning about investing together can be fun and can help you to develop an approach you'll both be happy with.|
|Wills and powers of attorney||If you had a will in place before you got married, it may no longer be valid. Meet with your lawyer to make sure these documents reflect your current situation.|
|Beneficiary designations||Review the beneficiary designations on your insurance policies, RRSPs, TFSAs, pension documents and group benefits plans.|
|Employee benefit programs||If both of you are employed, it's a good idea to review your benefits coverage together to avoid unnecessary duplication of coverage.|
An upcoming wedding and the start of a new life together is an exciting time. It's easy to put money matters on the back burner while you're sampling cake and sizing up his-and-her closets. Ballooning wedding costs and differing financial styles can put a damper on your new life once the honeymoon is over. But they don't have to. Click the Major Purchase Calculator for a simple way to assess if you're saving enough to achieve your goal on time.
Let's talk. Call a BMO Financial Planner* today at1-888-389-8030
* BMO financial planner refers to Financial Planners, Investment and Retirement Planning that are representatives of BMO Investments Inc., a financial services firm and separate entity from Bank of Montreal. BMO financial planner also refers to Private Wealth Planners, BMO Harris Private Banking that are representatives of BMO Trust Company, a financial services firm and separate entity from Bank of Montreal.