Newlywed Finances

28 June 2005

by Sarah Modlock

Once you have dusted off the confetti and unpacked the presents you can get on with the bliss of being newly wed. Married people, men in particular, live longer and enjoy better health than their divorced, widowed or never-married peers according to studies. The only blot on the landscape could be arguments about finances. Marriage experts Relate say that money is at the heart of nearly half of all marital rows and second only to infidelity as a main cause of divorce. And it is not necessarily the large costs which couples fall out over, but the smaller day-to-day payments.

Whether or not you have already been living together it is worth reviewing your post-nuptial finances. The government may have stripped away the financial benefits of being married and brides no longer come with a dowry but even changing your surname can create an admin headache.

If you do not already have one, sit down and work out a budget. Keep it simple, with one column to list your incoming funds and another for your outgoing costs. Include everything from your mortgage and bills through to your commuting costs and gym membership.

Money marriage

Although not as fashionable as they were in the last Century, almost half of all couples open joint accounts. On the plus side, they are seen as a statement of commitment and trust, particularly if one partner earns more than the other. They are also a practical approach to shared expenses such as bills and mortgage payments.

But a joint account can also create problems if you do not stop to consider the approach you each have to spending. Imagine the cashpoint rejecting your card because your other half has frittered away your hard earned cash on new golf clubs or designer handbags. A compromise is to each have a personal account as well as your joint account.

There is a darker side to joint account problems though. As well as enjoying shared cash, you also share responsibility for any debt. Brian Capon of the British Bankers Association says there needs to be greater awareness of the potential problems of pooling financial arrangements: 'Regardless of which party has written a cheque or authorised a transaction, both parties will be fully liable for the amount of any overdraft created.' Joint signatory accounts ensure that withdrawals above a specified amount can be made only if both signatures are present.

If one or both of you have debts then aim to pay them off as quickly as possible or at least consolidate them so that you minimise the amount of interest payable.  

Savings, investments and tax

Once the day-to-day finances are sorted out, couples should look at maximising savings.

Redundancy and unemployment remain an unhappy reality. Financial experts recommend a cash safety net of at least three months' salary held in an account which can be accessed easily. It may sound boring but is essential if you suddenly need to shell out for life's little treats such as a new boiler or car repairs.

If one of you is a lower rate tax payer then savings in their name will also attract less tax. Individual Savings Accounts (ISAs) provide returns free of tax and everyone has a 'use it or lose it' ISA allowance of £7,000 in the current financial year.

For longer term investments, consider ‘equity-based products' which invest in stocks and shares. These investments - which include some ISAs, unit trusts and investment trusts - always carry some risk but over the long term have the potential to give you a higher return. Take advice before you part with your cash.

There are some tax benefits which are enjoyed by married couples. Any property left by one spouse to his/her widow(er) is not subject to inheritance tax no matter how big the estate. Also capital gains tax is not payable when a husband gives/sells any asset to his wife (and vice versa) providing it is within the anuual CGT limit (currently £8,500 per person).

Life assurance and pensions

As a singleton, there is not much requirement for life cover. But couples should consider protecting each other and any children. You can buy life assurance as a joint policy. If one of you dies, the other will receive a payout, typically to cover the mortgage. But very often, after this the policy will be void and the surviving partner may be too old to buy life cover again or find it is far more expensive. Many couples opt to buy life cover as separate policies. This costs slightly more than a joint policy, but could deliver greater protection in the long run.  

Make sure you both have an adequate pension. If you are living on two incomes now you will find it difficult to rely on one pension in retirement.
Start by finding out what your employer offers as company schemes nearly always offer the best value. If there is no company scheme, or you are self-employed, take advice about starting a personal pension now - the longer you leave it the more it will cost.

Eight financial action points for newlyweds

1. Review wills - any existing will is nullified by marriage, unless it is made in anticipation of marriage.

2. Find an independent financial adviser (IFA) who help you plan and invest in the way that is best for your future. Click on www.unbiased.com or call 0800 085 3250 for professionals in your area.

3. Gather all financial and other important documents together and keep them in a safe place where both partners know where they are.

4. Women changing their names will need to write with a copy of their marriage certificate to relevant bodies and organisations. Don't forget: electoral roll, bank and building societies, driving licence and car registration, passport, insurance policies, pensions plans, registrars for shares, credit card companies and employer.

5. Increase home contents insurance to cover wedding rings and presents.

6. Look at protecting each of you, your children and home against unemployment, serious illness and death of the other. Start by finding out what benefits are offered by your employers.

7. Send off for both partners' credit reference files from the three main agencies and give yourselves a credit health check.

8 . Review your budget at least once or twice a year. After all, now you're married you won't be having sex any more so what else will you do with your time.