Getting married? Get a financial plan

Spring and summer are very popular seasons for weddings in this country. According to Weddings Magazine, 67 per cent of weddings take place between June and September. The most popular month to tie the knot is August with 23 per cent of weddings taking place in that month.

Weddings can be very expensive events these days. The average cost of a wedding including a honeymoon is around $30,000. In some cultures which place a heavy importance on the event, the costs can escalate to as much as $100,000.

Marriage is a big, expensive step in life that requires a lot of planning. Regardless of whether you are tying the knot for the first time or getting re-married later in life, everyone entering into marriage should sit down with their spouse and develop a financial plan for their big day and their future together.

Unfortunately many couples, but more particularly young, optimistic and enthusiastic young newlyweds, enter their life together on financially different pages.

“We see this all the time,” says Nathan Osterhout, a financial adviser with Edward Jones in Edmonton. “A wedding can cost a lot of money and unless both parties are on the same page, they can end up starting their relationship together under stress. We would urge couples to start the process as soon as possible in their relationship.”

Osterhout recommends couples sit down and write out a budget for the wedding, itemizing costs for all items, where the money is going and who is going to be responsible for what.

Once the big day is over and they are wed, he recommends couples sit down with an adviser and prepare a plan outlining who owns what, incomes, expenses, their plans for the future and even discuss wills and power of attorneys in the event the unexpected should happen.

Once your marital status changes you should advise the Canada Revenue Agency right away and update all your personal information including name, address and marital status because it can impact government assistance programs such as the GST/HST tax credit. If you have been receiving GST refund payments you may not qualify for them after marriage depending on your new family income.

More mature people or those getting re-married should go through the same process. Their situations likely may be more complicated because they could involve ex-spouses, children and retirement plants.

“Sit down and itemize things like cash flows, net worth, risk management and retirement statements,” says Osterhout. “A lot of people go through life thinking they’re fine until an illness, accident or job loss occurs and then they realize they’re not as OK as they thought. All of this can be taken care of in the planning process.”

Osterhout believes it’s imperative that both partners in the relationship be involved in the planning process and have input into the many financial decisions they might have to make.

For example, should you have joint or separate bank accounts and/or credit cards? Should you buy a house first or contribute to your RRSPs and/or Tax Free Savings Accounts? If a house is your primary goal, can you use our RRSP to borrow money under the Home Buyers Plan for a down payment?

Younger newlyweds are less likely than older couples to think about and plan for retirement. If you haven’t started saving for retirement, consider opening an RRSP account for each of you so you can take advantage of the tax reductions?

Married and common-law couples are allowed to contribute to each other’s RRSP accounts and can transfer income from the higher-income spouse to the lower income spouse if the higher income spouse has enough contribution room.

The advantage of this strategy is that the higher-income spouse gets a tax reduction for that year. When the lower-income spouse retires and starts withdrawing money from the RRSP he or she likely will be in a lower tax bracket and the money will be taxed at a lower rate.

It’s important for couples to start communicating with each other about finances early in the relationship to avoid problems later and to take full advantage of any tax benefits available to you.

Talbot Boggs is a Toronto-based business communications professional who has worked with national news organizations, magazines and corporations in the finance, retail, manufacturing and other industrial sectors.

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