Talk About Money Before Saying “I Do”
What does an outdoor country club, a lakefront residence, and a rustic castle all have in common? They each make for a picturesque wedding venue and you may just find yourself as a guest at one of these places this summer. With wedding season upon us, it is important to pause and think about the financial implications of saying, “I do.”
A 2016 Harris Poll for the National Endowment for Financial Education confirmed that one in three spouses are guilty of financial infidelity – lying to their partner about what they earn, concealing or understating costs or debt that is ignored or hidden.
When two people decide to spend the rest of their lives together and share their visions and goals, wouldn’t it make sense to also talk about the finances? With money being cited as one of the leading drivers of divorce nowadays, it seems wise to have an open discussion about money matters well in advance of tying the knot.
Here are some tips that can help ease you into these conversations with your significant other:
Who You Are Today, Financially Speaking
If you’re planning to spend your life with this person, you should be transparent with one another. It’s important to know where each of you stand financially in order to plan for the future. Items that can be discussed are things such as FICO scores, sources of debt, the number of credit cards, or assets. Feel free to bring up anything else that you may view as relevant, i.e. impacting you financially.
What Are Your Financial Goals
The easiest place to start from is a discussion on saving. How much do you think you could put away each paycheck or each month for a rainy day fund? Then, consider your spending habits. If you both have a goal of purchasing a home or paying for your wedding, then it may make sense to discuss ways to tweak your spending in order to set aside more funds. Topics such as investing and retirement also come into play here. And, if you’re planning on having children down the line, it would be good to talk about their educational goals, extracurricular activities, and potential daycare costs may be incurred. Another important topic here could be how to approach a situation in which a family member asked for financial assistance. Would you both answer this question in the same way?
Joint or Separate (or Both) Bank Accounts
While getting married combines your lives, you will both still need to decide how to combine your lives financially. Traditionally, all money goes into one account; however, there is an increasing trend towards couples pulling away from this practice. Nowadays, it is not uncommon for each of you to have your own account and maintain a joint account for your shared expenses, i.e. mortgages/rent, food costs, etc. The key is to choose what works best for you and your partner. There is no right or wrong way to approach this. While it goes without saying, should you decide to keep entirely separate accounts, maintaining transparency around them will lead to the least disruptive situation.
Past Financial Mistakes
Rule number one: do not lie. Trust is vital to your relationship and therefore you both deserve to have complete honesty with one another about any prior blunders. When you’re discussing your finances, it’s important to bring up anything that could be relevant to you and your future. Covering up something will only lead to complications later. After all, the truth will eventually make its way out.
It’s important to construct a budget and decide who will be in charge of monitoring things such as bills. If you want to tackle it together as a team, try to keep a joint calendar where you can update one another and provide real-time feedback. If one of you is better organized, perhaps it may make sense to place that individual in charge; however, the other person should not wash his or her hands of any responsibility. This is your life together and you should each be willing to monitor it. It would also be helpful to set aside a time each week where you could review your financial activity to ensure you are on the same page and go over items such as investment returns.
When it comes to relationships, communication and trust are both key. And, at some point, you will definitely need to talk about money. So, once you have found “the one,” take some time to discuss finances and figure out what will work best for the two of you. Remember that every couple is unique and what works for others may not work for you. While this may not be romantic, it will pay dividends for your married life!