By Kim Campbell Thornton
This story originally appeared on LearnVest.
You’ve chosen a beautiful location for the ceremony, planned a killer reception, written your vows. You’re ready to walk down the aisle, right?
Not so fast!
Before you go any further, you and your intended need to sit down and have a serious talk—about finances.
Money—like how much you each have and owe, or where it comes from and how to spend it—is a topic that all too many couples skim over, assuming that financial matters will simply fall into place after the wedding.
“Studies have shown that money issues are typically the number one stress in marriages and relationships,” says Certified Financial Planner™ Nathan Eads of Moller Financial Services in Northfield, Illinois. “If you just ignore [them or keep them hidden, they’re] typically not going to get better, will probably get worse and build up more issues, and will cause problems down the road. I just think getting out there and being honest with anything to do with financial issues is very important.”
Sitting down together to have “the talk” might not be as fun as planning other aspects of a wedding, but it can save you hassles and heartache in the long run. Having compatible financial goals is as important to a successful marriage as passion and personality.
If you don’t have a plan for your money that will allow you as a couple to achieve your dreams, you’re likely to find yourselves at a crossroads each time you have to make a major decision about your future together: home purchases, vacations, child care, college and, eventually, retirement.
In our six-step checklist, we cover the key topics to discuss with your prospective husband or wife before you get married. By bringing finances to the forefront, you can help to eliminate expensive misunderstandings, keep some of those wedding expenses in check and start your new life together on a sound financial footing.
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1. What’s your current level of debt?
You should each sit down and add up everything you owe. That includes credit card balances, mortgages, student loans and car loans, as well as alimony and child support from a previous marriage. Be honest and thorough. The total might seem depressing—or a pleasant surprise—but either way the exercise can be an eye-opener for people who are about to begin a life together.
As you discuss your money histories, ask how your partner feels about debt.
“Some people are comfortable carrying credit card balances,” Eads says. “Others are not, and that can be a big area of stress if it’s something they’re not used to. Debt overall, and feelings for how each has handled money in the past, would be a big issue. I think that typically, even with clients who are established, debt can bring out a lot more stress than a lot of other financial concerns.”
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2. What does your income mean to you?
In other words, is your income a barometer of your sense of self? Some people attach their self-worth to their level of income, feeling better about themselves the more money they make—or feeling worse, if they make less.
Asking this question can elicit a lot of information about how a person views money and its role in a relationship, says Atlanta pastoral counselor Pamela AyoYetunde, Th.D. In her work as a current member of the Financial Therapy Association—and as a former financial adviser—Yetundehas seen firsthand how having different financial beliefs can impact a couple.
For example, she says, if one person makes more money, do they believe that gives them the right to make all the financial decisions in the relationship? If one person makes less, will their opinions about how the couple spends money be valued less?
“Have a conversation about that. It could be that that was how things played out in their family,” Yetunde says. “If equality is valued and what they’re striving for, then it can’t be based on how much people are making, because it’s not likely people are going to be making the same amount of money. The kind of equality that is beneficial in a relationship is one of inherent, not extrinsic, worth.”
3. Are you a saver or a spender?
Going into a marriage, savings and cash flow habits can be even more important than how much money each person has. People tend to fall into one camp or the other, and changing long-established habits can be difficult.
Knowing a partner’s spending habits up front can help you reach an agreement on how to balance two different financial personalities and help you create a workable money plan. “It’s going to take time for a spender to become a saver, and the saver may never become a spender,” Yetunde says.
But learning to live within your means early on in a marriage is key to financial success and worth tackling right off the bat, Eads says.
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4. How will we commingle and spend our money?
One of you may assume you’ll have a joint account and share all your money, while the other has no intention of giving up a separate account. And it’s OK to have both: for example, a joint account out of which you pay most of the bills as a couple, and separate accounts of “fun money” for each person, which you can spend on whatever you want.
This is especially valuable if one person in the relationship is used to having his or her own money, Eads says. A separate checking or savings account for purchases outside the joint budget provides some of the independence that one person may be wanting or hoping for.
Speaking of budgets, it’s important to create one together, Yetunde says, and to agree on how to make purchases that aren’t accounted for in the budget.
“If one person has a greater sense of self based on the amount of money they have, they may think they can spend freely,” she says. “A question [to ask] might be, ‘Do you think it would be wise to have a conversation with me about a purchase you’re going to make outside our budget?’ ”
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5. Are you contributing to a 401(k) or other retirement plan? If so, how much does your company match?
It can be difficult to look ahead to retirement early in a marriage, especially if you’re not making a lot yet, but it’s also the best time to start saving for that distant future.
Equally important: understanding how each person’s retirement plan works.
“I’ve seen cases where one person is a saver and the other is not,” Eads says. “The saver has continued to save in a 401(k) and the other one doesn’t, but when you look at it, the other person’s 401(k) actually offered a better match and was a better plan—and there was no reason not to be taking advantage of that. You want to have an idea of ‘Are we missing out on anything or not doing something that’s beneficial?’ ”
6. What are your/our lifestyle dreams, and how will they affect our income?
Children, buying a home, exotic vacations, early retirement—all of these goals require planning. At the beginning of a marriage, it can be difficult to visualize where your life will take you, but you can still discuss some big-picture plans and how they might affect your income.
For instance, Eads says, when children come along, will one person cut back on work or quit altogether to care for the kids? In that situation, you’d have to think about ways you could adapt to a reduced income, or develop a different stream of income. He also suggests discussing what financial goals are important to you to prioritize in the event that not all can be easily achieved. For example, if your goal is to travel the world, it may make more sense to buy a smaller home or drive cars longer so you can put the money you would have spent on those things toward your adventures.
“At least talk about it beforehand,” Eads says.
Whatever your dreams, be forthcoming about them with your prospective spouse. If you don’t talk about them, you can’t plan for them. This may require talking to a neutral third party who can help navigate sometimes touchy topics or help guide the conversation. This can be a premaritalcounselor, a coach, a mediator, or a financial planner who has experience working with couples.
Money is often a sensitive subject, but being able to talk about it freely is essential to putting your marriage on firm financial footing.
“The most important thing is that couples be able to assess whether the person they are about to marry is honest about how they feel about money in general,” Yetunde says. “Don’t invest in the wedding itself until you’ve worked out your financial issues.”
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LearnVest Planning Services is a registered investment adviser and subsidiary of LearnVest, Inc., that provides financial plans for its clients. Information shown is for illustrative purposes only and is not intended as investment, legal or tax planning advice. Unless specifically identified as such, the individuals interviewed or otherwise listed in this piece are neither clients, employees nor affiliates of LearnVest Planning Services and the views expressed are their own. Please consult a financial adviser, attorney or tax specialist for advice specific to your financial situation. LearnVest Planning Services and any third parties listed, linked to or otherwise appearing in this message are separate and unaffiliated and are not responsible for each other’s products, services or policies. LearnVest, Inc., is wholly owned by NM Planning, LLC, a subsidiary of The Northwestern Mutual Life Insurance Company.
