Close to 4 million people will get engaged on Valentine’s Day. Whether you are on the giving or receiving end of the ring, wedding planning can envelop you before you know it. But before going head-over-heels with the ceremony, make time for some heart-to-heart talks about finances. Understanding you and your future spouse’s thoughts and attitudes on money, and starting to set some systems and guidelines, will play a major role in a successful marriage.
- identify and work out differences in attitudes toward money
- agree up-front how you will handle household finances
- discuss the lifestyle you envision
- learn to create and use a simple budget – together
- decide how family will impact finances
- share private information – until it’s time
- assume your credit reports and scores will merge once you marry
- let debt be a deal-breaker
The way your parents and grandparents handled finances, and the values they instilled in you, can impact your own savings and spending habits. Make sure you understand each other’s attitudes on money. Are you frugal? Is your husband-to-be a saver? How are you both planning for retirement? These and many other questions are important to discuss and work through. It’s possible to find middle ground.
While there is no right or wrong way, both people need to determine who’ll do what. Tasks like budgeting and paying bills take time and require responsibility. Decide on joint vs. separate checking accounts. Many couples maintaining three accounts: a joint account and one for each partner. This allows the couple to pay household bills from the joint account, and keep individual funds as well. For couples that are both working, paychecks can be deposited into individual checking accounts, and based on what each spouse makes a certain percentage of each check can be moved into the joint account each month (based on a household budget). If only one spouse works, the system can work backward by depositing the wage earner’s paycheck into the joint account first, then transferring money into each individual account.
Where do you plan to live? What kind of home do you hope to own? Where and how often will you vacation? How much will you need to earn in order to accomplish these and other lifestyle goals? Working out these goals and realities may mean some compromising. Now is the time to start working them out.
The key is to start with your goals. Discuss and come to agreement on the kind of retirement you see, types of vacations to take, and specific items to purchase (car, home, golf clubs, clothes). Agree, too, on how you’ll allocate your time, at least overall. If one person has her heart set on training for Ironman triathlons, the time involved can impact everything from sleep to nights out with her spouse to ability to earn money.
Once you agree on goals, write them down and build a budget around those goals. In doing so, you’ll need to adjust some priorities and make compromises. Against the reality of a budget, it becomes easier to do. Whatever compromises are on the horizon, you’ll be spending smartly and getting where you want to go.
Every couple must decide if they will become parents, and if so, how they will handle child rearing and care. Will one parent stay home? What changes will you need to make to live on one income? Many couples overlook the impact of leaving work on Social Security income, health insurance costs, and other financial factors. Consider not only the income, but the value of benefits and the psychological impact of returning to the workforce when deciding which parent will leave the workforce to care for children or others.
And that time is likely now. Engaged couples should agree on basic guidelines to safeguard sensitive financial information. For example, engaged couples may want to start to set up systems to store and safeguard information like an ATM PIN or other passwords. Post-it notes don’t count; a safe system is required.
If you haven’t already, now is the time to learn about each other’s credit history and scores. Even when married, each spouse needs to check his or her own credit reports, and review and correct errors on their own reports. (A credit score actually involves three scores from the three major credit reporting agencies – Equifax, Experian and TransUnion. All three are required to provide a credit report. Both individuals should access their credit reports – free once a year at www.annualcreditreport.com). Credit scores will greatly affect your joint ability to buy a home or even rent a place. If one of you has poor credit, do some reading to learn how to improve the situation. It may even be beneficial to talk to a financial planner.
Engaged couples need to be honest about the amount of debt they will bring into the marriage. If your partner’s debt seems high, find out why. Is she still paying off student loans? Has he been racking up credit card charges? Take time to understand each other’s situation. Equally important, agree on the steps to pay down any debt. Discuss whether you will each continue to be responsible for paying off your individual debt or if you will share that responsibility once married.
When surveyed, close to 80 percent of people report that they have lied to their spouse about spending money. Make the commitment now to not be one of those couples. Set ground rules for talking about money and finances, create and use a simple budget together, and reviewing your finances together on a monthly basis.
When it comes to finances, marriage is for richer or for poorer. But making the effort to understand and discuss each other’s finances before walking down the aisle will play a major role in a long, happy marriage. Before saying “I do,” take time to follow a few key dos and don’ts. Your happily ever after chances will skyrocket.