The Financial Side of Valentine's Day
With Valentine’s Day just around the corner, it’s that time of the year again when we should be thinking of that someone special in our lives. Maybe you’re planning a romantic candle lit dinner or maybe you’re just hoping for a nice, relaxing night in. One thing we can guarantee? You're probably not talking about finances. It's not too often financial planning plays a role in Valentine's Day, but being financially supportive of your significant other is just as important.
In the spirit of the month of love, we're sharing our tips on how you can work with your significant other to manage your finances - and in what areas you can benefit - to actually be better off than you would individually on your own.
Ready to move in?
First and foremost, the easiest thing all couples can do to help improve their finances if they believe they’re at the right stage is to move in together.
Not only is this what many view as a natural next step in seeing if individuals can live with each other, it provides the benefits of lower expenses. By combining your incomes to have a rent a single unit couples can often find that their split of the monthly rent would be lower than what it would be if they were each living on their own. Furthermore with one more person available to spread chores and meal-prepping duties with, it’s much more likely that the two of you will be able to stick to dining in to save even more money given that there’s the proper motivation to do so that is.
Tying the Knot
Okay, let's start by saying we are not recommending you get married for financial reasons! But, marriage does open up a whole new world of financial benefits that go far beyond the reduced expenses we just touched on. Though it isn’t guaranteed in all cases, filing taxes as a married couple can offer tax benefits for example. High-earning couples with similar incomes may unfortunately face a tax penalty for filing jointly but if one spouse is the sole earner for the family or earns significantly more than the other, the non-working or lower-earning spouse can essentially function as a tax shelter by bringing the two jointly down into a lower tax bracket allowing you to save on paying higher taxes. If you’d like to see specifically what the tax implications would be for your specific situation feel free to check out this calculator from the Tax Policy Center.
Married couples are also exempt from estate and gift taxes meaning you can transfer an unlimited amount of assets to your spouse at any time without the need to pay for any taxes. This means you can completely transition ownership of any property or stocks you own to your spouse and there will be no money lost in the process. This of course is just speaking at a high level. As is the case with most things in finance, there are a lot of intricacies in the weeds and so we recommend you do your due diligence to ensure your transferring assets in the most effective way possible. If you’d like to investigate further whether it would be best to transfer assets outright to your spouse or in a trust, here’s a good guide written by the law firm Morgan and DiSalvo.
Married couples can also create a joint bank account to simplify their financial lives. A combined account will give equal access to funds to both partners while also making expenditures by each transparent to the other allowing effective planning for your joint financial futures. This can help facilitate communication between the couple and as we all know, communication is key in relationships. If one spouse is more financially responsible than the other this could be a great way to ensure the more financially minded spouse can keep both accountable in sticking to a set budget. Furthermore if one spouse has a lower credit score than the other, the two can apply for a joint credit card and over time the good spending habits of you two as a couple will help bring up the credit score of the individual with the lower one.
Buying a Home
Joint finances can also open up options when it comes time to actually buy a home. Similarly to the income tax advantages, this is not something that is completely guaranteed but as a married couple you have the option to consider whether a joint or single application would result in a better mortgage. Both individuals’ scores, incomes and debt loads will be taken into consideration as part of the mortgage application process but you can very easily check out a mortgage calculator like this one to see how you and your spouse would be better off. Even better if you two have gone through the efforts of getting a joint credit card and improving your credit scores, this can be an even greater benefit.
Applying as a married couple can also allow you to save on other expenses like insurance. For whatever reason insurance companies view couples as a safer bet than individuals. Whether this is fair or logical is up for debate but the matter of the fact is that this is simply the reality we live in. Keeping this in mind, couples can leverage this reality to help them save on their monthly expenses and better build their wealth. So if you’re in a situation where you’ve been recently married or are looking to get married soon, it could be beneficial to reach out to your respective insurance agents and see how the two of you could combine your insurance under a single plan. Ideally you’d be able to combine all of your insurances such as home, auto and health for even better rates.
The Advantages for Social Security
Social security is another area where marriage can offer some advantages. While this isn’t something young couples will be able to take advantage of any time soon, when couples reach an age where it’s appropriate for them to claim social security benefits, a spouse who has not paid into social security can still claim benefits so long as their spouse has paid into it themselves. As it stands today, most married couples can claim either their own social security benefits or the benefits of their spouses for up to 50% of their partners allotment, and the benefits continue even after retirement or in the case of disability or death.
Now last but not least, another benefit to married couples can be found in health insurance. Within the first 60 days of marriage or when it comes time to update your benefits at work, you have the option to one spouse to another’s health insurance plan. This can be especially useful if the health insurance provided by one employer is significantly better than the other. For example perhaps one has greater coverage or lower copays with no other trade-offs. Situations like these would be illogical to pass up on. Disability, Medicare and veteran benefits can be transferred to a spouse as well. Our recommendation would be to compare the two insurance plans carefully and choose the option that best suits your personal needs.
Thanks for sticking with us until the end of this article. If you found this post helpful please like, comment and share with friends and family who you think may also benefit from this information. We're constantly pushing out new content regarding ways consumers can build their credit and wealth while optimizing their path to homeownership. So like always, stay tuned for future updates!