Planning your wedding can occupy much of your time and attention and cause a lot of added stress. I got married last weekend and am breathing a sigh of relief that the planning for our big day has come to an end and everything went smoothly. But what about planning for our married financial life? As perfect as you want your special day to be, these financial decisions will impact the rest of your lives more than the color of your table linens or wine that is served. And I thought choosing the perfect first dance song and coordinating accommodations for out-of-town guests was stressful! Now we need to talk about budgets, debt, and pre-nups!
How to Start the Conversation:
The most important thing to remember when starting to discuss finances with your future spouse is to be honest. Share everything - every account, credit card debt, student loan, etc. Put everything on the table so there aren’t any surprises and you have all the information you need to begin putting together a complete financial plan.
Share your concerns when it comes to money. Is there a disparity in your income levels? Are you worried about not being able to contribute as much as your spouse? Do you have an expensive hobby that you don’t want your spouse to fund? What about debt? Discuss any and all concerns up front in order to work toward a solution that you both can be happy with.
Try to understand your spouse’s views on money and look at things from their perspective. You can gain a lot of insight into a person’s money outlook by looking at their childhood and parent’s financial situation. Were their parents savers or spenders? What did they value? How did they spend their money? Did they struggle financially or live comfortably? Did your spouse fund college themselves or did their family help? These kinds of questions can help you understand where your partner is coming from.
What are your Goals as a Couple?
Discuss your plans for your lives together and begin defining some goals. What are your career plans? Where do you want to live? Do you plan to buy or rent? Do you want children? If so, when and how many? Do you want to fund all or part of their college education? Having these conversations will steer you in the right direction to defining some concrete goals. Once you have these defined, you can begin creating an actionable plan to achieve them.
Should We Combine Everything Right Away?
Not necessarily. Every couple should do what is right for them. There are several options.
Combine Everything –
With this method you don’t have to worry about divvying up expenses because you are paying them with your combined income. Also, you are fully working as a team to reach your goals and pay down debt. Although communication is key no matter how you choose to handle your finances, this method probably requires the most communication. It’s important that you are both on the same page with your spending habits and financial goals. Also, be sure to discuss your feelings about making personal purchases that aren’t for the benefit of the couple. Are you ok with your spouse using combined money to go on a guys’/girls’ trip or to buy that expensive item they’ve been wanting? Keep in mind if you and your spouse are considering going this route you are combining everything – even debt. How do you feel about helping to pay down your spouse’s student loan or credit card debt from before you met? Every financial decision is impacting your spouse directly in this scenario and it’s important to make sure you’re both on the same page.
Keep Everything Separate-
One advantage of keeping your finances separate is that you won’t feel the need to plead your case every time you want to make a larger purchase. You will have more independence when it comes to spending but, it may be harder to keep a finger on expenses and budgeting as a couple. You will need to decide who is paying for what and make sure that both parties are content with that arrangement and it is equitable. It may take more recordkeeping to keep track of who owes whom what and more moving money between accounts. This method may also make saving and working toward your financial goals as a couple feel a little disjointed. Having separate accounts can make it easier to not discuss money as often as a couple with combined finances. Remember, even though you have chosen to keep your finances separate, you are still making decisions that affect you and your long term goals as a couple and should be communicating often.
A Little of Both –
For some couples, the best option is a blend of the two. Couples may choose to have a joint checking account for paying bills and recurring expenses, a joint emergency fund, and other various joint accounts for long-term goals such as saving for a home or children. In addition to their joint accounts, they may also each have their own accounts for personal spending. This option doesn’t involve quite as much recordkeeping and allows for some independence while also working as a team toward your long-term goals and future as a couple.
Do We Need a Pre-Nup?
Although it can be uncomfortable to discuss, having the conversation about a pre-nuptial agreement is an important one. No one wants to discuss the potential end of a marriage before it’s even begun but best to be prepared. This can be done as a post-nuptial agreement, after you are married, but it can be easy to put off. It’s better to have the discussion and get it out of the way in the beginning.
What About Insurance?
Which one of you has better employer-sponsored health insurance? Are you eligible to be covered under their plan? Also, get quotes on combined home and auto insurance. Combining policies can often result in discounts. It’s important to re-evaluate all of your insurance coverage once you are married, especially life insurance. Many young married couples/families are underinsured when it comes to life insurance. You now have a spouse and potential children that will be depending on your support. Make sure you have adequate coverage if something were to happen to you or your spouse. Would your spouse have enough money to cover your lost income and living expenses for your family if something were to happen to you? Be sure to consider your salary, debt, living expenses, level of savings, and future goals when determining how much life insurance to purchase. A financial planner can help determine what type of policy and how much coverage you need.
Other Important Considerations:
Don’t forget to update your beneficiaries on existing retirement accounts and insurance policies. Also, after you have completed the process of changing your name, make sure to update your account registrations and titling.
Although planning for your wedding day often takes priority, financial planning for your marriage should not be neglected. Seeking the expertise of a financial planner can be a valuable resource in this process. Start the conversation, be honest, discuss your concerns, get a clear direction of where you want to go as a couple, and a plan for how you plan to get there.