Financial Disadvantages of Marriage - Should We Tie the Knot?
Deciding to get married is exciting! Finally, you're ready to move on to the next step with your significant other. While everyone talks about the excitement and benefits of marriage, there are some financial disadvantages of marriage to should consider.
It's not pleasant, but there are important financial aspects of your new life that must be considered to ensure you make the right choice.
Deciding to Get Married- Should Finances Play a Role?
You must make decisions when you're ready to take your relationship to the next level. While the foundation of a marriage is built on love, finances also play a significant role, with critical financial aspects to consider.
While you probably don't want to think of your marriage in numbers or base your decision on money, these factors should play a role as you ask yourself, 'Should we get married?'
8 Financial Disadvantages of Marriage
Before jumping into matrimony headfirst, consider potential financial drawbacks.
1. Income Inequality Complications
If one spouse makes more money than the other, it can be one of the financial difficulties that comes with marriage. This usually happens when there is a significant income gap.
The spouse who makes more money may not be ready to combine assets. This doesn't mean your spouse doesn't want to support you or share money with you. However, a higher-earning spouse may be concerned about the financial security they built if they change marital status.
One of the most significant concerns is divorce. Unmarried couples don't typically owe one another anything legally when they separate. Married folks, however, often split (marital) assets down the middle, potentially leaving the spouse with a higher income without a lot of their own money.
What You Can Do:
One of the best financial protections in a marriage is a prenuptial agreement or even a postnuptial agreement.
Signing a legal contract before marrying regarding certain assets can protect your finances if you divorce. However, some loopholes exist, including if you “comingle” the assets by using them for marital assets throughout the marriage.
2. May Result in Higher Taxes (In Some Cases)
You've likely heard the term 'marriage penalty' before. Unfortunately, it's real and may result in a higher tax bill.
This most commonly affects couples who are both high earners. Because you combine income and file income taxes as married filing jointly or even married filing separately, you may push yourselves into a higher tax bracket and have a higher average tax rate together.
What You Can Do:
As much as the marriage penalty is real, there are real financial advantages, too. This is most prevalent when one spouse is a stay-at-home parent. The unequal income may lower taxes owed by pulling you into a lower tax bracket.
Another way to avoid the higher tax bracket is to take advantage of as many tax deductions as possible. For example, when you share a house and kids, you may be able to take certain deductions (especially if you itemize your deductions), such as the mortgage interest or real estate tax deductions, or to benefit from credits like the child tax credit, creating financial perks for getting married.
3. May Negatively Effect Future Loan Terms (Joint Loans)
Married people often apply for financing together. For example, you may apply for loans together if you decide to buy a house or car.
If one spouse has bad credit or limited credit history, getting approved for loans can be more challenging. Most lenders find each borrower’s credit scores from the different bureaus, average those, and then use the lower number. I
f the spouse with the higher income has a lower credit score, it can complicate things.
What You Can Do:
Credit scores change often, so if you know one partner has bad credit, take steps to improve it as quickly as possible. In the meantime, if the spouse with better credit has adequate income to qualify for the loan alone, consider keeping the spouse with bad credit off the application.
You can refinance most loans, especially car and home loans, later in life if the spouse with lower credit improves their score.
4. May Lose Child Support/Benefits
If you currently receive alimony from a previous marriage, getting married again could cause you to lose the benefits. Alternatively, if you have children and remarry, your ex-spouse may take you back to court to get more support if they feel you can afford to pay more if you're the majority parent.
What You Can Do:
To avoid losing the support you rely on, consider waiting to get married. In most states, alimony is temporary, so if you don't want to lose it, wait until the support expires.
On the other hand, whether you pay or get child support, discuss with your attorney what might happen and the steps you should take to prepare.
5. Wedding Costs
The average cost of a wedding in 2023 may be around $29,000, a high cost that could create more debt for married couples. Of course, you want your wedding to be a day you remember forever; however, it shouldn't drain your bank accounts and put you and your new spouse in debt, behind the 8-ball before you even get started.
What You Can Do:
Be smart when planning your wedding. You don't have to get married at City Hall, but try cutting (cost) corners where possible. For example, consider getting married on a Friday or Sunday rather than a Saturday, cutting the guest list, or serving appetizers and dessert instead of a four-course meal.
6. May Increase Student Loan Payments
If you or your spouse have student loan debt, filing taxes as married filing jointly could increase your income-based repayment amount. If you use the plan to keep your payments affordable, this could be a financial disadvantage.
What You Can Do:
If either person has student loan payments on an income-based repayment plan, consider filing taxes separately until you pay the loan in full. If there aren't any other financial benefits for filing separately, consider going on a fixed payment plan to avoid the increased payment due to the new income.
7. May Increase Car Insurance Payments
Before getting married, know your spouse's habits, that includes driving habits. When you marry, your insurance company assumes you share cars and will add your spouse to your insurance plan.
This is fine if you have similar driving habits and history. However, if the other spouse has a habit of speeding, getting tickets, or getting into accidents, it could increase your risk together, leaving you with higher insurance premiums.
What You Can Do:
If your spouse has poor driving habits, consider keeping your partner off your insurance. It won't affect anything if you carry separate insurance policies and don't drive each other's vehicles.
When enough time has passed after the last violation or claim, you may try going on the same insurance policy again for lower premiums.
8. Future Children Costs
Thanks to inflation, the average cost of raising a child has increased to $300,000 from birth to age 18. That's a lot of money!
This is just an average, too. Many factors could make that number much higher, depending on your children's health, lifestyle, and other choices.
What You Can Do:
You probably don't want to base your decision to have kids on money, but it's essential to be aware of the financial implications. Before jumping in and having kids, save, budget, and make sure you're ready. Have an emergency fund saved, know your budget, and have a plan for what would happen if one partner couldn't work.
Think of all the scenarios, crunch the numbers, and prepare yourself as best as possible.
How to Handle Money Issues Before Getting Married
The best time to handle money issues is before getting married. This doesn't mean you can't discuss and work through financial concerns while married, but most couples agree it's much easier to fix issues before tying the knot.
Discuss a Prenup
Before getting married, consider a prenuptial agreement. This ensures that if you divorce, both sides will be treated fairly (based on what the prenuptial agreement dictates), and any assets you bring to the marriage will be protected. However, as some circumstances can change that asset protection, discuss all possibilities with your attorney so you know how to best protect yourself.
Set Goals
Before you get married, consider talking to your soon-to-be spouse about your goals. Talk about what each spouse prioritizes and what you want to accomplish. For example, are you focused on financial independence, getting out of debt, buying a house, or something else?
Create goals together while honoring each other's differences. Building wealth together takes some give and take and a lot of open communication.
Tackle Debt
If either spouse brings a lot of debt to the table, create a plan to pay it off in full. Focus on paying more than the minimum monthly payment, and create a strategy to pay your debts down as quickly as possible.
An easy method is to choose one debt to focus on first, making extra payments toward it each month until it's paid off. Then, move on to another debt, using the same strategy until you've gotten out of debt completely.
Establish Financial Communication
Open communication is the key to managing your personal finance situation well. If you and your soon-to-be spouse can't communicate well, consider working with financial pros to help you get on the same page and create a solid financial plan.
FAQs
Does Getting Married Help With Taxes?
Getting married can hurt your tax situation, but sometimes it can improve it. As a married couple, you may be eligible for more tax deductions, lowering your tax bill.
Is It Better to Get Married Later in Life?
Getting married later in life has its pros and cons. For example, you might enter the marriage more financially secure, with retirement savings and little to no debt. But, you might also be so set in your ways that sharing your finances with another person becomes more challenging.
Do You Have to Combine Finances After Marriage?
You aren't required to combine finances after marriage. There aren't any laws stating how married couples must handle their money. You can have separate accounts or combine finances by opening a joint account. The key is to do what you both feel comfortable with that will help you achieve your goals.
Is Marriage Worth It Financially - The Bottom Line
Marriage is about love, togetherness, and family. While money and relationships go hand-in-hand, there are many ways to address your financial concerns before getting married, like meeting with a certified financial planner or therapist.
Want to level up your game around money in your relationship? My free quiz will help you learn your Couple’s Money Personality Type AND how you can grow from there!
Adam Kol is The Couples Financial Coach. He helps couples go from financial overwhelm or fighting to clarity, teamwork, and peace of mind.
Adam is a Certified Financial Therapist-I™, Certified Mediator, and Tax Attorney with a Duke Law degree and a Master's in Tax Law from NYU. He is a husband, dad, and musician, as well.
Adam's wisdom has been shared with The Wall Street Journal, the Baltimore Ravens, CNBC, NewsNation, and more.
