As you and your new spouse embark on a life together, you’re probably relieved to finally be finished with the stress of planning a wedding and honeymoon – not to mention covering the associated expenses. Though you’re likely looking forward to a few months of frugality, unexpected costs can ambush you as newlyweds if you’re not prepared:
The Marriage Tax Penalty
Depending on your income and filing status, marriage might mean a bigger tax bill from Uncle Sam. The marriage tax penalty occurs when your joint income as newlyweds pushes you into a higher tax bracket than what you’d experience as single filers. This particularly applies to spouses who are high earners and bring in similar salaries; however, low-income couples can also be hit with the marriage tax penalty in the form of phased eligibility for the Earned Income Tax Credit or Child Tax Credit.
Life and Disability Insurance
Life insurance probably wasn’t a priority when you were single, but responsibilities change for many newlyweds. If one spouse suddenly died or became disabled, the other might have serious difficulty making ends meet. Most financial experts recommend purchasing a term life insurance policy when you’re young and healthy, while it’s easier to qualify; disability coverage could replace between 50 percent and 70 percent of your current income in the event one spouse becomes disabled.
Planning to move into a new home soon? You’ve likely weighed your potential mortgage payments against your income and determined they’re affordable, but have you considered the unexpected costs of home maintenance? Freddie Mac estimates that homeowners spend anywhere from 1 percent to 4 percent of their home’s value on annual maintenance, which could add $4,000 in yearly expenses on a $100,000 property.
Shocking Spending Habits
Most newlyweds end up adjusting their spending habits after pooling their finances. Luxuries you indulged in as a single person may be deemed too exorbitant by a thriftier spouse. If one person spends $150 each month on beauty treatments or the newest tech gadget, such behavior may not sit well with a partner who’d rather focus on saving for retirement. Talk honestly about what’s important to each of you and create a joint budget both of you can live with.
Preparing for unexpected costs like these isn’t likely what you thought about when envisioning your wedding and resulting marriage. But learning to handle money wisely as a couple can help you avoid conflicts and build the foundation for a stable future – financial and otherwise.