Mr. and Mrs. Finances For Newlyweds
Let's see, you've got the wedding chapel and the caterer booked, the dress selected, the cake designed, the wedding invitations mailed, vows written, finances talked about—oops, didn't do the last item?
Frequently lost amid the romance, jitters and flurry of pre-wedding activities is a heart-to-heart review of the personal finances of the soon-to-be Mr. and Mrs. It doesn't sound romantic, of course, it takes time, and for some, it's a touchy subject they don't want to discuss until after they're married. But if you can't talk about finances before the wedding, are you any more likely afterwards? Money conflicts are a leading cause of marital strife and divorce. A frank discussion of finances before you say “I do” will go a long way in helping you stay “I do.”
One of the first steps is often one of the most difficult: laying your financial cards on the table. Among young couples, this often involves the subject of debt, particularly college loans and credit cards. Each person should get a copy of his or her credit report to see if it's accurate and then share it with the other person.
Say one of you has a lot of debt and the other has none, or even has accumulated assets. Is the debt a result of necessary borrowing such as for college or medical expenses, or is it debt accumulated by frivolous spending, poor money management or perhaps worse, something like gambling? The latter reasons could suggest a serious and continuing source of conflict in a marriage.
Will the person who is not in debt—in fact, has assets—help pay for some of the debts, or will each party keep their finances separate, at least until the debtor has things under control? One person's poor credit rating could harm the credit rating for the other person once they marry. Some experts even recommend postponing a wedding until you clean up some of the serious debt problems.
Or the relationship may involve an opposite issue—a lopsided amount of wealth, which is especially common in remarriages. This not only needs to be openly discussed (it may even have been kept secret up to now), but will likely require special pre-wedding planning such as a prenuptial agreement.
Beyond simply laying out your finances for the person you're going to marry, it's wise to discuss your views on money and investing. Are you a spender, a saver, a hoarder? Does the thought of investing in the stock market—especially these days—make your stomach turn over, or excite you? Will one of you handle day-to-day finances, such as paying the bills and balancing the checkbook?
If you have different attitudes and habits in managing money, how might you accommodate those different views during marriage? For example, you might agree on some investing strategies for your retirement and other goals, but reserve a small percentage for each of you to invest as you like. The same approach can work for spending. Maintain a joint household checking account for household bills, but keep separate accounts for spending as you wish.
Discuss your financial goals and dreams. Retirement may be a long way off, but what if one of you plans to retire at age 50 and the other figures on working to age 70? Do you both want to buy a home and have children? What issues might be associated with raising children—allowances, private schooling, and childcare? What are your respective philosophies on how much each child should pay toward their education? Financial issues, especially estate planning, can be very complicated and potentially explosive where there are children from a previous marriage. The last thing you want is “surprises” after you tie the knot.
Just as couples frequently receive counseling from a minister or priest before marrying, couples should consider talking with a financial planner. Not only can the planner help the couple discuss financial issues in a conducive setting, the planner can offer advice on such issues as the commingling of finances where debt or lopsided wealth is involved.
Contrary to common opinion, talking over one's financial circumstances, and perhaps financial differences, usually doesn't doom the wedding. Indeed, money is an intimate topic in this country—often more intimate —and talking about your future finances may actually deepen, not divide, your relationship.
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