Second Marriage Financial Planning: Seven Steps to Success
Second marriages often bring with them a renewed optimism for the future. After all, you’re getting a second chance at a “happily ever after” and this time you have the benefit of more life experience and wisdom.
You likely also have a significantly more complex financial life than you did going into your first marriage. This means you and your partner must be thoughtful and savvy about how you will manage your finances. Use the seven steps below to help you navigate the process and ensure you remain on strong financial footing as you enter this new phase of life together.
1. Be Open and Honest
The healthiest relationships are those based on transparent communication on both sides. To make a solid start together – and to avoid any surprises down the road – you should each disclose where you stand financially. This means sharing details on assets, debts, credit history, and any financial support you provide or receive based on a prior divorce decree.
2. Decide Whether Your Will Merge Finances
While there is no right or wrong answer here, all new couples must have the “yours, mine and ours” discussion. Some couples merge all of their expenses, cash, and debts, while others keep everything separate. Many choose to keep most things separate but set up a joint checking account for joint household expenses. Regardless of which will work best for you, it’s important to discuss things upfront and set expectations and ground rules that work for both spouses.
3. Discuss Family Obligations
Since you will each bring personal financial goals and obligations into the marriage, be sure you understand one another’s plans. For instance, your spouse may intend to fund his or her children’s college educations, while you might feel strongly about helping to support your aging parents. Decisions like this can be helpful in determining to what extent you will combine finances or divvy up expenses.
4. Revisit Your Estate Plan
Estate planning is important for everyone, but it can be particularly crucial for blended families. If you and your spouse are bringing significant assets into the marriage and either or both of you have children from previous relationships, you’ll need to take extra care in ensuring your wishes will be met. This is because probate laws aren’t usually written with blended families in mind, meaning you and your spouse may have considerations that aren’t adequately addressed. Having your own up-to-date estate plan will make sure your assets are divided exactly as you intend.
5. Update Paperwork
If you are changing your name or updating accounts you plan to hold jointly, you’ll need to dot all your I’s and cross all your T’s. Notify the Social Security Administration and any financial institutions of name changes, update all your car titles, mortgages, and financial accounts, and update beneficiary information for insurance and retirement accounts.
6. Consider a Contingency Plan
At such a hopeful and exciting point in life, no one wants to think about the possibility of the marriage ending. However, as you well know, sometimes things happen that we never see coming. Talk together about the potential benefits of a prenuptial agreement that would spell out which assets remain separate and which are shared, in the event you part ways at some point in the future.
7. Start Dreaming Together
Since you and your partner each had a previous spouse, you likely also had retirement savings plans that were designed with particular goals in mind. Now, you get the chance to plan for your new life together, determine your individual and joint goals, and develop a plan to achieve them. A financial advisor can be a great resource for you during this process by reviewing where you are and where you want to be, and by suggesting savvy ways to reach your short- and long-term goals.
Embarking on a second marriage is a hopeful and exciting time. Use this helpful checklist to start your new adventure on a firm financial footing, avoid bumps in the road, and live the life you’re dreaming of – together.
