Newlyweds Guide for Combining Finances

Getting married is a significant milestone that marks the beginning of a lifelong partnership, filled with shared responsibilities and dreams. Among the many decisions couples face—where to live, family planning, and lifestyle choices—money and financial planning play a critical role in this new chapter. Managing finances together not only impacts your present but sets the foundation for your future.

Start on the Same Page

One of the most important early steps for newlyweds is having open, honest, and judgment-free conversations about money. Even if you discussed finances before the wedding, it’s worth revisiting these discussions as you transition into married life. Money can be a sensitive subject, often influenced by how each partner was raised and their previous financial experiences.

For example, one partner might have grown up in a household that saved diligently and avoided debt, while the other may have been more comfortable with credit and impulse spending. These deeply ingrained money mindsets can lead to conflict if not addressed early on. Taking time to share your experiences, fears, and goals regarding money can build trust and help prevent misunderstandings.

When discussing these issues with Arrow clients that are newly married, I often find there are differing expectations about how surplus money should be allocated each month. Some people default to spending the excess and others to saving, and there can be a lot of conflict on this issue. The best result is to have a plan to make sure that there is a clear path to meeting goals and spending, with some compromise and flexibility.

Imagine you’re planning a weekend getaway. One spouse might prioritize booking the best hotel, while the other prefers a bargain option and saving for future vacations. These small differences in spending habits can create tension, but with open communication, compromises can be reached. If the conversation becomes stressful, don’t hesitate to take a break and revisit it later. Many couples find it helpful to discuss their spending with a financial planner or another 3rd party, someone who can guide you through these discussions, helping you align financial goals and values.

Joint, Separate, or Both?

One of the first practical decisions you’ll face is whether to combine your finances into joint accounts, keep separate accounts, or opt for a mix of both. Decades ago, joint accounts were the norm, but today, many couples prefer maintaining some financial independence while also sharing household expenses.

For instance, a couple might choose to keep individual checking accounts for personal spending but open a joint account to cover rent, utilities, and groceries. This approach can ensure transparency and shared responsibility while allowing each partner to retain some autonomy over their personal finances.

To avoid confusion, it’s important to decide in advance how much each person will contribute to the joint account. For example, if one partner earns significantly more, they might contribute a larger share of the household expenses. Setting up automatic transfers can simplify this process and prevent disagreements over who pays for what.

Credit management is another key consideration. If one partner has a stronger credit score, it may make sense to add the other to a credit card to build credit together. This can also be beneficial if you’re using a rewards card to maximize benefits. However, opening a new joint credit card could impact both spouses’ credit scores, so weigh the pros and cons carefully.

Budgeting for Saving and Spending

Creating a budget is an essential part of managing your shared finances. One effective method is the 50/30/20 rule, where 50% of your income goes toward needs (like housing, utilities, and groceries), 30% toward wants (dining out, entertainment, and hobbies), and 20% is set aside for savings.

But budgeting isn’t one-size-fits-all. You can adjust these percentages based on your specific goals. For example, if you’re saving for a house, you might allocate more toward savings and less toward discretionary spending. The key is to be clear on what fits into each category. One partner might think a new car lease is a "need," while the other feels it’s a luxury. These are the kinds of discussions that can prevent tension later.

A real-world example: one newlywed couple wanted to save for a down payment on a home but struggled with differing priorities. While one partner preferred dining out regularly, the other was focused on aggressively saving. They compromised by setting a monthly dining budget that satisfied both, ensuring they were still on track with their home savings goal.

Automating payments for bills and savings can make the process smoother and eliminate potential disagreements over who’s responsible for what. It also frees up more time for discussing bigger-picture goals—whether that’s buying a house, starting a business, or planning dream vacations together. Regularly reviewing your budget, at least monthly or quarterly, will help keep you on track and adjust as necessary.

Tax Planning for Two

Filing taxes as a married couple often brings financial advantages, especially if there’s a significant income disparity between partners. When you file jointly, your combined income may place you in a lower tax bracket than the higher earner would be in if filing alone. For example, a single person earning $200,000 a year would be in the 32% marginal tax bracket, but drop to the 24% bracket if they were married and their spouse had low enough income to keep their household income under the 24% limit.

Additionally, the standard deduction is higher for married couples, which can reduce your overall tax liability.

If you own a home with your spouse, you may be able to pay considerable less capital gains tax when selling a home. The personal residence exemption, which excludes a portion of the capital gain from the sale of a primary residence, is $500,000 for married couples, compared to $250,000 for single homeowners.

Retirement savings options also expand for married couples. A spousal IRA allows a non-working spouse to contribute up to $7,000 to an IRA, providing an extra opportunity for tax-deferred savings. For couples where one or both partners have workplace retirement plans, the income thresholds for deducting traditional IRA contributions are higher when filing jointly.

Couples with lower incomes may also  benefit from the earned income tax credit (EITC), which is designed to help low- to moderate-income workers. In some situations, joining finances can allow a couple to qualify for the EITC, especially if a nonworking parent files jointly with a low-earning spouse.