When You Say “I Do”
As we head into wedding season, couples around the country are busy making final preparations for their big day. Still, most will neglect to address a significant issue that could have long-standing repercussions in their marriage - the "money talk." Having a serious talk about money matters with your spouse-to-be is essential, financial experts and marriage counselors agree. But the majority of couples put it off or avoid the subject altogether.
"So much of marriage stress is created unnecessarily because of a reluctance to discuss money," said Barry Paperno, consumer education manager for FICO, the credit scoring company. "Knowing and understanding each other's financial histories, spending patterns and current credit status, is going to determine much about your future together."
Considering that money is among the leading causes of marital discord and divorce, preparing for the financial aspects of your union could be well worth the time and effort. If you’re already married and finances cause tension in your relationship, this article may help start the dialogue that brings about a workable solution.
Talking about Money Issues
- Start with some personal reflection. How was money discussed and handled in your family? Many of our financial habits and attitudes about spending and saving are shaped in childhood. What was beneficial and what would you like to do differently in your marriage?
- Take a “financial compatibility” quiz online (www.debtsmart.com or www.calcpa.org). Use the exercise not to argue, but to identify potential hotspots you will need to work on.
- Be open about your financial situation. Before the merge, it’s important to fully disclose your current financial standing: how much you earn, the balances of your checking and savings accounts, retirement savings, and any other investments. Then, be forthright about any financial obligations and debts. Order copies of your credit reports and review them together. If the reports uncover any issues, work to find solutions that boost your credit scores.
- Set goals for your partnership. Define your short and long-term financial priorities. Do you want to buy or renovate a home? Pay off debts? Build your retirement savings? Visit an exotic location? Create a plan to achieve these goals and revisit it at least once a year.
- Create a household budget together. Consider using an online budgeting tool (like mint.com) to simplify the process. Once you enter your joint monthly income and subtract your fixed monthly expenses, you need to agree upon how you will divvy up the remaining funds. Decide how much to allocate for the extras (like dining out, entertainment, and clothing) and set a limit on what each spouse can spend freely without informing the other.
- Decide how you will merge funds. Will you have joint or separate accounts? Some couples find it is easier to pool all funds. Some like to manage a joint account with each spouse contributing a set amount to cover shared household expenses, and separate accounts for small, personal purchases.
- Appoint a money manager. Defer to one another’s financial strengths. Decide who will take charge of the day-to-day financial activities, like paying bills and monitoring accounts, and who will manage the savings, investments and tax returns.
- Conduct a financial review. Report in regularly on your financial status. This is especially important if one partner handles all the money matters. Both spouses need to be kept in the loop on the state of your financial union.
- Retain credit in each spouse’s name. Maintaining your credit files individually is in the best interest of both partners should your path together end unexpectedly.
- Vow to resolve any financial conflicts. Even if you begin on the same page financially, at some point, you may butt heads over money matters. Communicate your feelings openly and work to find a compromise. If you reach an impasse, consider seeking mediation.
Following these tips will help you develop healthy habits, communicate effectively about money matters and enhance your marital bond as you work together toward reaching your financial goals.
Need investment advice? Give Texans Financial a call at 972.348.2023.
As featured in Currents / eCurrents Spring 2012 edition
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