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Understand the costs of marriage and make a plan

(Special) – Spring and summer are very popular seasons for weddings in Canada. According to a reader survey by Weddingbells 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.

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-to-be and develop a financial plan for their big day and their future together.

Unfortunately many couples, but more particularly young, optimistic and enthusiastic newlyweds, enter their life together with high expectations but without a realistic budget and financial plan.

The first step is to understand the true cost of a wedding. Weddings can be very expensive events these days, averaging around $30,000 including the honeymoon.

“Determine what is really important about the wedding and focus on the things that make it special for you,” says Audrey McFarlane, a financial adviser with Edward Jones. “People never consider the power of compounding. A difference of a few thousand dollars in the cost of a wedding, when compounded over 30 or 40 years, can add up to a lot of money in retirement. So focus on what’s really important and be modest.”

McFarlane 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. “Make a budget on what you can afford, think about what you are doing and be realistic,” McFarlane suggests.

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.

After the big day, couples should sit down as soon as possible with an adviser and prepare a plan outlining who owns what, incomes, expenses, their long- and short-term plans for the future and even discuss wills and power of attorneys in the event the unexpected should happen.

McFarlane recommends couples go through a step-by-step process which includes developing strategies to address their short- and long-term goals, understanding their cash flow, income, fixed and variable expenses, taxes, employer benefits and how they are going to start putting money aside for their retirement.

“Saving money for retirement is not a luxury: it should be considered a fixed cost,” McFarlane says. “Track every penny you spend for a month and see where you are throwing away your money. Is it on coffee every morning or dinners out? Give yourself some indulgences but be conscious of where you are spending your money and set limits.”

Younger newlyweds may be 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.

Money can be a major cause of stress and discord in a marriage, so communicating with each other about finances is vitally important. “It’s good to remember that you can have it all, but you can’t have it all at once,” McFarland says.

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.

Talbot Boggs , The Canadian Press