With June being the most popular month for weddings and as my wife and I reflect on our recent 10th anniversary, I thought it would be a good time to write about some important items to do before getting married and to also provide some communication concepts to use during marriage.
According to the National Foundation for Credit Counseling, 47% of Americans surveyed said that disagreements about money are a major point of stress in their relationships. Often times, one spouse will be more of a saver and the other a spender. In my case, I often want to save and my wife has a tendency to spend. That dynamic can work fine as long as you are respectful of each other’s opinions, mutually agree to follow a long term plan, and are willing to make the effort to communicate and compromise with one another. Here are a few tips:
1. Discuss your past experiences with money. How was money handled while you were growing up? Are you inclined to follow the same approach or determined to do something different? What is your worst memory around money? What is your best memory? What are the best lessons you have learned about money? Would you describe yourself as a saver or a spender? Why is money important to you? What are your values around money? By discussing the past, you will have a better understanding of each other’s perspective and an appreciation for their feelings around money in the future.
2. Take a current assessment of where each of you stand financially. While everyone is happily in love, this is a good time to lay all of the cards out on the table and look at each of your assets (e.g. inherited house) and liabilities (e.g. student loans) objectively. Discuss how those will be handled during the marriage. Should they remain as separate property or become part of the marital estate? With any outstanding liabilities, will you pay them off from each person’s respective earnings or tackle them together with your combined income? If there are significant amounts, seek legal guidance to make an informed decision.
3. Set guidelines on how to communicate and manage money going forward. It’s important to discuss expensive items with each other before purchasing them. These would be purchases that are outside of your normal expenses. According to a 2014 Experian Credit Score Marriage Survey Report, the average dollar amount spent before discussing it with their spouse is $396 for women and $1,231 for men. Proactively agreeing to discuss purchases above a minimum amount will help curtail any unpleasant surprises. What number feels right for you? For my wife and I, we make it a point to discuss anything over $200. If you can’t come to an agreement on an item, consider a waiting period before making a hasty decision or setting up a challenge to achieve before “earning” the purchase. You should also designate who is responsible for paying the bills and who is responsible for long term investing. Sometimes this is the same person and other times the responsibilities are divided up. In either case, it is critical that a regular update is given to the other spouse so that everyone knows exactly where you stand. Tuning out and leaving it to your spouse sets you up for an overwhelming amount of anxiety if you suddenly get stuck with all of the responsibility should something unfortunate happen to your spouse.
4. Put goals for your future together in writing, make a plan to achieve them over a realistic timeline, and revisit them on a regular basis. Life gets busy and it’s easy to get caught up in the day to day and lose sight of the long term goals you want to achieve. Schedule a monthly family meeting to review these items at a time when you are well rested and in a good mood.
5. Seek professional guidance. A Certified Financial Planner™ professional can help you with many other important things to discuss and address for your financial well-being, such as: establishing an emergency fund, creating a financial plan, setting up a savings strategy, reviewing health benefits, life & disability insurance, updating beneficiaries, and assisting with setting up estate documents. Setting realistic expectations between opposing spouses is often an overlooked benefit to having a financial planner. Wanting to buy a house in one year may be a desire, but just not realistic. A competent financial planner can help you manage expectations.
Getting married is an exciting time in one’s life, it’s also a financial responsibility to yourself and each other. While planning for your wedding and honeymoon, be sure to take the time to discuss finances and make a plan that will help guide you through the rest of your life.