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For richer or poorer: a financial plan for newlyweds

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You’ve unpacked the wedding gifts, written the thank-you notes. But before you settle into married life, take some time to discuss your finances.

By now, you and your spouse should already know about each other’s assets, debt and spending habits. (If you don’t, then start talking.)

Full disclosure: I recently got hitched, so financial planning has become a topic of great interest in my household. My husband and I are thankfully on the same page about saving and investing. Still, it’s an adjustment to go from thinking in terms of my finances to our finances. I reached out to a few experts for advice that should help other couples make this transition. Here’s what they had to say:

Budget: Make a list of your monthly income and expenses, said Joe Sullender, senior vice president and investment officer at Wells Fargo Advisors. Figure out which expenses are a must, such as rent/mortgage, utilities, joint cash reserve, and which are extras, like your monthly manicures.

“Make sure that you have a surplus every month, that you’re not spending more than what is coming in,” Sullender said. “If you have credit card debt, come up with a joint plan to pay that off; then you can discuss your long-term plans.”

Anna Behnam, a financial adviser at Ameriprise, advises her clients to discuss their financial goals early on and map out the best way to get there. That might mean cutting back on things you did when you were single, like dining out several nights a week or buying lunch every day.

“Getting over the single life and moving into the emotional readiness of a joint life is probably the biggest hurdle,” Behnam said. “Put together a couple’s budget, try it out for six months and then revisit the plan.”

Bank accounts: There are a few ways to approach this one. You can combine all of your accounts, keep them all separate or opt for a combination of the two.

Combining them can make it easier to manage your money, but that might entail more negotiation on how every dime is spent. Keeping everything separate may give both of you more autonomy, but it also means keeping track of more accounts. Behnam advises her clients to set up a joint account for shared household expenses and savings goals, while maintaining separate accounts for personal spending.

“At a minimum, have a joint house account, which makes it easier than trying to figure out what half the mortgage is and half the electric bill is,” she said. “You want it to be joint with rights of survivorship, which means that if anything happens to either of you the other one has full rights to the party.”

Credit cards: If you and your spouse have multiple credit cards, make a list of which cards have the best terms — cash back or travel points and no annual fees — and close the rest once you’ve paid off the balance, Behnam said.

“If your husband only has one credit card, leave it open because you want to show that he has experience with credit,” she said. “If you have X number of credit cards that add up to $50,000 worth of credit, in a way a lender has to assume that you’re going to spend that amount. And then they’ll wonder whether you can still afford to repay the loan if you take out all of that credit. If you don’t need all of that credit, close some of those accounts.”

Be careful here. Canceling cards can hurt your credit score if doing so raises your balance in relation to your overall available credit, said Anthony A. Sprauve, FICO’s director of public relations. You can offset the effect by asking for an increase of the credit limit on the cards you want to keep, but do it before you cancel anything.

Also, be mindful of canceling your older cards because once the credit card company stops reporting on the closed account, it could hurt your score as the length of your credit history accounts for 15 percent of your score.

Opening joint credit cards is also tricky. Both of you are responsible for the full balance of the account, so “bad behavior by either spouse will hurt both FICO scores,” Sprauve said.

He added, “Being an authorized user on someone else’s credit card account has minimal impact – positive or negative – on your FICO Score and vice versa.”

Taxes: One of the first things you should do after getting married is adjust the withholding allowances you claim on your W-4 form. Allowances are used to help your employer calculate the amount of income tax to withhold from your paycheck based on income, deductions and marital status.

If your spouse isn’t working, for instance, you can add an allowance. Visit the Internal Revenue Service Web site to figure out how many allowances you’re due. If both of you are working, add up all of the allowances you’re entitled to, then divide the total between you and your spouse. Use the W-4 instructions to make sure you are not over- or under-withholding.

“The more withholding allowance you have, the less is taken out of your pay,” said Jackie Perlman, principal tax research analyst at the Tax Institute at H&R Block Retirement.

When it comes to filing your taxes, couples have the choice of “married filing jointly” or “married filing separately.” Consult an accountant or use an online calculator to figure out which status will result in the lowest taxes.

The more divergent your income (you make $90,000 and your spouse makes $40,000), the more likely that filing jointly will push the higher earner into a lower tax bracket. But if your incomes are about the same and both high, combining them could result in paying more taxes.

Keep in mind that filing separately as a married couple has limitations, Perlman said. If you itemize deductions, your spouse cannot claim the standard deduction, so you both would have to itemize or use the standard deduction. You two would also be ineligible for many tax credits, including education tax credits, student tax deductions and the earned income credit.

Another disadvantage to filing separately is that you and your spouse will be ineligible for the premium tax credit, a refundable tax credit designed to help low or moderate income people buy health insurance through the exchanges established in the Affordable Care Act. (There are exceptions for victims of domestic abuse.)

Perlman said there are some compelling reasons for couples to file separately, especially when one person has fallen behind in student loan payments, owes back taxes or child support. Joint filers are liable for each others debts and could have both of their wages garnished regardless of who owes the money.

“If you want to keep your refund protected, file an injured spouse form where you’re telling the IRS upfront not to come after you for what your husband did,” Perlman said.

Retirement: Behnam has her married clients figure out how much they need to save on a monthly basis for retirement. If the couple has individual 401k plans through employers who match their contributions, she encourages them to fund those plans first. Any money that is left after that should go into a joint retirement account, preferably a Roth IRA because of the tax break on the money withdrawn from the account during retirement, she said.

Only one spouse can lay claim to an individual retirement account, though you can both contribute. Roth IRAs comes with income and contribution restrictions. A married couple filing their taxes jointly can earn no more than $181,000 to fully contribute to a Roth IRA, while the cap for a couple filing separately is $10,000 per person. If you’re under age 50, you and your spouse can each contribute $5,500 a year to the joint retirement account.

Insurance: When it comes to health insurance, you and your spouse should do a cost-benefit analysis of your individual plans and the family plans offered by your employer, Behnam said. Keeping your individual plans may save you more money than signing up for a family plan, but more often than not joint health insurance is the best way to go.

If you both have cars, consider consolidating your auto policies. Many large insurers, including Nationwide, AllState and Geico, offer multi-car discounts. Depending on the insurer, you could also bundle your auto and homeowners or renters insurance. Nationwide recommends that couples take account of all of their possessions  – jewelry, computers, smartphones and wedding gifts – that need to be covered under one homeowners or renters policy.

Many employers offer some life and disability insurance with basic coverage, which is a good floor for couples starting out. Financial advisers recommend taking out an additional policy or increasing your existing one, when you and your spouse are ready to have children.