The Financial Guide for Newlyweds (in BC)
Getting married is fantastic and overwhelming. There are so many emotions and there are a lot of moving parts and changes.
My wife and I got married in December of 2018, and while the day was smooth and nothing felt too overwhelming, there were a lot of things we had to do AFTER the wedding.
This guide covers the essentials in terms of legal, tax, and financial planning matters. It’s for you if you are about to get married or recently got married.
Table of Contents
Emergency Contact Changes
Prior to marriage, a parent or other family member was likely your emergency contact. Make sure to list your spouse as an emergency contact wherever you have one listed.
You must update your marital status with the CRA before the end of the month following your wedding. You can use your CRA My Account to update your status online or call 1-800-387-1193.
Marriage in Canada has many tax benefits. You will be able to coordinate tax credits and deductions when you file taxes, and care should be taken to ensure it is done effectively. Seek professional accounting services if needed.
On registered investment accounts and insurance policies, it is important to update your beneficiaries to include your spouse.
With registered investments, if an early death were to occur, there are significant tax advantages of having a spouse listed as beneficiary. Make sure to add your spouse as beneficiary to all your:
- Workplace savings plans
In addition, for TFSAs, designate your spouse as “successor holder” so that the TFSA would roll completely over to them. You can do all of this through the institution that holds your investments or your workplace HR department.
For insurance policies, make sure to add your spouse as beneficiary on any existing:
- Life insurance
- Critical illness insurance
- Disability insurance
- Health and dental insurance
Group benefits through workplaces and associations can provide critical coverage. Employers often provide:
- Extended health and dental coverage
- Health spending accounts
- Group savings plans
- Life insurance
- Disability insurance
Know what your coverage is through both spouses and how the plan(s) can be coordinated together. If there are gaps in your coverage, or you lack coverage, you can get the coverage you are looking for through independent policies.
When you have dependents (including partner, children, older parents, etc.), suitable life insurance coverage is prudent as your death would now dramatically impact their life, financially and otherwise.
You can determine suitable coverage for yourself using our Insurance Checkup. Then, compare quotes from multiple insurance companies to find the best rate.
Employment Insurance (EI) provides short-term coverage for employees. EI is up to 55% of average earnings, to a $562 weekly maximum. There is no universal long-term coverage, and down the road EI coverage alone will likely be insufficient coverage.
Long-term disability coverage may or may not be provided through work benefits. Without work coverage, you can buy individual disability insurance.
According to Statistics Canada, 1 in 3 Canadians will be out of work for 90 days or more due to a disability. The average of those long-term disabilities is over 2 years. Disability insurance coverage should be a priority!
Identify your top financial goals as a couple. Goals should be agreed-upon, clear, and have a set time. Having written goals is proven to increase the likelihood you’ll achieve them.
- Build up emergency fund to $10,000 in 1 year.
- Pay off credit card debt of $5,500 with extra monthly payments of $300 over the next 18 months.
- Replace car with a new one next year (approximately $24,000)
- Buy a home in the next 5 years, with a down-payment of 10% (approximately $50,000)
- Go on a vacation to Montréal in 9 months, costing $4,000
Bills, bills, bills… It’s a part of adult life. It’s important to keep track of all of yours bills and to always pay them on time.
- First, make a list of all of the bills you have, from rent and utilities to the cell phones, credit cards, and Netflix
- Next, determine who will pay each. Are they coming from a joint credit card or account, or an individual one? Write beside each bill who will be in charge of paying.
- Lastly, determine if automatic payments are available. Typically, it is simpler and makes it far less likely to miss a bill payment if payments are on auto-pilot. Determine how each bill is payed and write beside each if it will be paid automatically or manually.
Credit is borrowing money, with an arrangement to pay it back in the future. Credit cards allow you to borrow money now and repay it at the end of the month. Loans of all sorts work the same but often over longer periods.
Your use of credit and some bill payments are recorded and summarized in your credit score. Every time you apply for new credit (e.g. new card, loan, or mortgage) your history is looked up. You may not be lent the money you want, or may be charged more, with a poor history of repaying your debts. Consistent and strong use of credit will lead to a healthy credit score.
Look up your credit score for free in Canada through CreditKarma.ca and Borrowell.com (we are unaffiliated in any way). Alternatively, some banks also offer to show you your credit score for free. Scores range from 300-900. If your score is below 650, you should seriously begin to look at ways to make improvements. 700 and over is healthier territory.
Because you will typically make major purchases and take on debt together as a married couple, your partner’s score absolutely matters to you. If the two of you have had different histories with debt and that’s reflected with very different credit scores, approach the topic with care and use the strengths of one partner to pull both of you up.
When it comes to credit card use, make sure to always pay your balance when it is due. In emergencies, at the very least make the minimum payment. For a healthier score, it is also recommended to keep your card balance (your “utilization”) below 30%. If credit card companies see you always using up to your max, they will perceive you as higher risk and you’ll have a lower credit score.
Your Emergency Fund
Life has a knack of throwing curve balls, from appliance breakdowns to car troubles to job losses. First and foremost with your savings, you should establish an emergency fund.
Set aside money in a high-interest savings account representing 3-6 months of needs. This could be $5,000 or it could be $30,000. It depends on your regular spending and how much cushion you feel you need. If you spend from it, make it a priority to build it back up to full. This will allow you to meet emergencies when they come, without having to take on debt or worse, not be able to pay for them at all.
Paying Off High Interest Debt
About half of Canadians carry credit card debt month-to-month. With interest rates around 20%, paying this down must be a priority. It’s great to have savings, but if they are making you 0.7% in a bank account or 3% from a term deposit, and in the background your debt is costing you 20%, that makes no sense! And no cents!
Over and above your emergency fund, if you are carrying debt with a high interest rate (typically over 7%) your savings should go towards paying this down first. You are “saving” because you are reducing and eliminating those interest rate charges and building your wealth as a result.
A mortgage with a rate of 4% is not high interest debt. While carrying a mortgage, you can look at long-term savings and investments. Further, that mortgage is on a house, not consumer debt, which can be a great long-term investment!
Savings and Investments
Savings should always take advantage of higher interest rates than a chequing account that offers a fraction of a percent. Only use personal chequing accounts for everyday spending.
Everything else should be, at a minimum, in a high-interest savings account gaining over 1%.
With money that is being saved for 3 or more years, you should consider investing in public markets (stocks and bonds). While investing comes with its risks, the longer the time-period you have, the more risk you can tolerate as there is time to regain any potential losses. The trade-off is much higher long-term returns. It is reasonable to expect to earn 5-8% from investments on average each year. Seek professional advice if needed.
Buying a House
If it is a goal of yours to buy a house, now is the time to start thinking about what that will look like. Plans should be set in place, even if the goal is 8 years away, and together you can work towards achieving it!
TFSAs should be used to save up for a down-payment, but RRSPs may also be beneficial. Specifically, up to $35,000 can be withdrawn from both spouses’ RRSPs to be put towards the purchase of a first home. Depending on your time-frame, you may also be able to take advantage of higher investment returns through investing within your TFSAs and RRSPs.
A successful relationship between two unique adults requires open communication. You’ll have your differences and you’ll have your similarities.
We end this guide with our series of money questions. We suggest you take some time and discuss each of the following together.
- What role does money play in our life? What is its purpose?
- What are your two strongest memories of money as a child?
- Will money responsibilities be split half-and-half? Or more to one person?
- Will we have totally joint banking, some level of separate accounts, or completely separate finances?
- What is our emergency plan for if one of us loses our jobs?
- What dollar amount is big enough that we need to agree on it before a purchase?
- If applicable: how will we be financially supporting our child(ren) for the periods:
- Grade school?
- Are you currently providing financial support to parents or anyone else?
- Are you currently receiving financial support from parents or anyone else?
- What might supporting elderly parents look like financially?
- What might supporting family/friends in need look like financially?
- What will our charitable donations look like?
- Do I have any weaknesses when it comes to saving/spending money? Food, toys, gifts, missed bills, etc.?
- When and how do we regularly talk about money going forward?
You’re now an expert on all of this, right? Well we hope you’re off to a good start, and we wish your marriage the very best of success!
If you have any questions, big or small, feel free to email us .