How Will Your Marriage Affect Future Finances? 3 Considerations

It’s easy to go wild with wedding plans when you’re riding the bridal tidal wave. However, it’s just as simple to come back down to earth with a painful crash if you fail to consider the effect of your marriage on your future finances.

Getting hitched involves romance but also forms a legally binding contract with serious ramifications for your economic well-being. Here are three considerations to make during the planning process that will impact you and your spouse’s financial picture.

Till Debt Do Us Part

Over half of all couples incur debt to cover their wedding expenses. Taking out a loan or using credit cards impacts your credit score, which influences your ability to perform other necessary life tasks — like securing housing. However, it’s tricky. Credit bureaus like to see how you manage your accounts, and paying your balance each month can improve your score. Borrowing a little for your wedding is OK if you make a solid plan to quickly repay what you owe.

Borrowing money after you say “I do” may create joint and several liabilities, especially if you live in a community property state. That means creditors can hold you and your spouse liable for the full amount of repayment in the case of divorce.

Be aware that if you have a vast disparity in income, credit or spending styles, you could be left holding the bag for debts your partner incurs. A prenuptial agreement offers some protection but isn’t foolproof.

Establishing a Home, Sweet Home

Once upon a time, adult life followed a predictable progression. First came marriage, then the marital home, followed by a baby or three. However, today’s tumultuous real estate market and burgeoning income inequality have changed the rules somewhat.

For example, the rule of thumb for down payments has long stated that 20% is sufficient to avoid the need for private mortgage insurance, lowering your monthly payment. However, investors have begun to snap up affordable starter homes to build their rental portfolios.

That’s bad news for couples who simply want a place to live without being subject to continual rent increases. Putting down more money upfront increases your chances of a seller accepting your offer.

Still, it’s often tough for first-time buyers to compete against cash offers from investors, especially if their credit is less than perfect. That’s another consideration to remember when deciding how much to spend on your big day. Even timely paid credit cards can drop your score into the 500 to 600 range, below what you need to qualify for most new-home financing.

Recent studies show that you need a combined income of at least $100,000 to afford even a modest starter home. What can you do if you’re among the working class earning $20 an hour?

You may need to get creative. For example, young couples whose families own property might consider moving into an RV on their folks’ lot. You won’t necessarily save money by going mobile, thanks to the maintenance, power and water needs associated with the lifestyle. However, hooking up to shore services on your parent’s property could mean your “lot rent” consists of paying utilities, increasing the amount you can save.

Those who lack parking space may have no choice but to rent. Sharing a space with roommates is one way to save cash, and you can present a united front as a married couple. See if you can find another couple with similar goals and iron out details like a cleaning schedule and quiet times before you move in together to minimize conflict.

And Baby Makes Three

Starting a family is a third consideration to keep in mind when determining how marriage will affect your future finances. It costs nearly a quarter of a million dollars to raise a child from birth to age 18, and chicks don’t always fly the coop immediately upon reaching legal adulthood.

Discussing when and how many children to have is a must before saying “I do.” It’s not an area that lends to easy compromise, and the financial ramifications haunt you for life. About 28% of children in divorced households live below the poverty line and are twice as likely to drop out of high school, affecting their future earning power.

Your desire to have children may even affect your wedding plans, as you should pay down debt and feel financially secure before bringing new life into the world. Running out of diapers the day before payday presents a serious conundrum if you’ve maxed out your credit cards.

Furthermore, tensions over tight finances affect your ability to parent well. Think of stress as a house of cards — each additional stressor you stack on that teetering structure increases the chances of the whole thing collapsing. Creating a stable base before bringing a child into the world frees you to manage the unique pressures of parenting without worrying about keeping a roof over your family’s head.

Do people become excellent parents even when their finances remain shaky? Yes. However, why set yourself up for potential trouble? Come to a mutual agreement with your spouse on what you want your money portrait to look like before tossing your birth control in the trash.

Marriage and Your Future Finances

Marriage is all about love — but it also forms contractual obligations. It’s a decision that greatly impacts your future finances. Understanding the ramifications of your decisions helps you make better choices. It’s possible to finance the wedding of your dreams and achieve the coveted white picket fence, but doing so requires you and your future spouse to work as a team regarding money matters.

Author Bio: Oscar Collins is the editor-in-chief at Modded, where he writes about a broad spectrum of topics. Follow him on Twitter @TModded for frequent updates on his work.

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