Marriage for love?
Some people marry for love, some marry for money, and others marry because “it’s the right thing to do.” No matter the underlying reason for marriage, finances should always be a topic of discussion before tying the knot.
Start with yourself
Before you start any discussions with your soon-to-be-spouse, you need to take a look at your own personal financial situation. Sit down and ask yourself the same financial questions you would likely discuss.
Am I financially stable? Savings? Checking? Investments?
Do I have an emergency fund in case of unforeseen expenses? This should be 3-6 months of expenses.
How much do I bring home every month?
What are my spending habits? Am I a frugal, extravagant, or average spender?
Do I have any outstanding debts? Car loans, student loans, loan sharks? How much does that take away every month?
How is your credit score? If you don’t know, maybe it’s time to find out. After all, it’s your combined credit scores that will affect your interest rates in the future.
What are my financial goals? Short-term, intermediate-term, and long-term?
What is my investment strategy and risk tolerance?
Questions such as these allow you to better understand your own financial situation and position and figure out what you bring to the table. After all, it’s a discussion about mutual finances and the combined finances and goals of the partners in life.
Marriage is all about compromises (happy wife = happy life).. or so I’ve been told. Start thinking about things you are willing to compromise with in terms of your finances (decreased spending on electronics, getting a minivan for those future children, etc) because those are the types of things that will come up sooner or later in your marriage.
It’s almost like you are going into a business negotiation. Go prepared!
Ask your future spouse-to-be
Now that you’ve taken a look at your own personal finances, the next or concurrent step (maybe you should ask him/her to do the same when you look at your own finances) is to ask your future partner to take a look at his/her own personal finances in preparation for a discussion about future money habits and financial goals.
This way, they can also prepare both mentally and strategically for a very important discussion that sets a foundation for your financial future. Nothing is worse than having something this important sprung on you when you’re not prepared for something like this. Plus, you want to be sure that this sets a strong foundation and not a passive-aggressive balsa wood frame.
Once you’ve both gotten everything in order, set a date to talk about this and be sure to come open-minded.
Have “The Talk”
This shouldn’t really be a bad or ominous discussion. It should be an open-minded discussion between two partners about where they want their financial future to be and where they think it should be headed.
It is a way for you to brainstorm ideas and come to a consensus and compromise as to the best and most effective and equal (between the two of you) way to attain your combined financial goals. After all, two heads are better than one.
In addition to the “individual” finances that you should discuss as a financial family unit, there are several other things that need to be addressed once those finances are merged.
Are you going to consolidate all your accounts into one or two joint savings/checking accounts? Or are you going to have one joint account for bills and joint expenses and still continue to have separate accounts for discretionary spending?
Having separate accounts isn’t necessarily a bad thing. I’m almost 99.99% positive that all couples have some type of individual account. I can’t very well say 100% since I don’t know anybody.
Having separate accounts allows for separation of responsibility. A joint account to pay off bills and other joint expenses allows for joint ownership in both the money going into the account as well as the expenses incurred to be deducted from the account. Both parties are responsible for the balance of that account.
Your individual account may be there for a personal financial goal or for some spending money on a night out with the boys or a girls night out. Any large (monetary value is determined on a personal basis) should probably be discussed between both parties. The exception is a gift to the other party.
This way, you don’t have to feel guilty about spending $50 on a night hanging out with your friends and have to always be held accountable with your partner.
What about your financial goals? Do they align with each other? If not, how can you make a compromise and still make it all work?
What about your investing risk tolerance? Do you have the same tolerance? Will some convincing need to be done in order to obtain the best risk/reward ratio for your investments?
What about the future? A new house? Kids? A dog? All of these things will incur some sort of increased spending and increase your debt burden. It is good to come to a mutual understanding regarding big life events such as these with your partner before the time actually comes and it turns out you have completely different wishes.
Marriage and Money = Business
Marriage is essentially a business deal between two people who may or may not be romantically and/or emotionally involved. I say this because some people really do make marriage a business deal for tax purposes or whatever else.
The point is, before you jump into marriage head first, make sure you get your finances in order and have that financial talk to make sure that you are both on the same page.
You don’t want your finances to be in complete ruin when two people are messing around with the finances at the same time in completely different directions. It’s like having two heads that don’t talk to each other.
Fortunately for me, my wife and I are pretty much on the same page in terms of financial goals and spending habits. The only thing she doesn’t like is my higher-than-her risk of investing style of speculative high growth stocks. For that, I simply do that type of investing in my own personal Roth IRA.
Congratulations in your upcoming marriage and I hope this helped in setting a strong foundation for your joint financial future! 🙂