In the throes of wedding planning, it’s easy to get lost in the minutia of picking table linens, rehearsal venues and the perfect song for your first dance as husband and wife.
But if you want your marriage to last, you should also make time for an open and honest heart to heart over your financial future together.
“Money is one of the top reasons why couples divorce and I think it’s often because people don’t know how to talk about it,” says Cathy Norris, a certified financial planner with Ameriprise Financial Services in Safety Harbor, Fla. “Depending on how their own parents handled finances, some individuals might not be forthcoming or feel that they can be open with their spouse.”
Whether it’s your first trip down the aisle or a repeat performance, the following nine questions will help prevent some of the biggest money missteps that can derail an otherwise healthy marriage.
Is There Any Debt?
Level with each other about any debt you carry, be it credit card balances, student loans or car loans.
Leave nothing undisclosed.
That’s important, says Dana Vince, a marriage counselor with Healing Hearts Counseling in Knoxville, Tenn., because it affects your monthly cash flow, the time it will take you to reach your financial goals and how much money you’ll have left over for all those vacations you’ll want to take before you have children (if that’s on the agenda).
“I’ve come across many couples who keep that [debt] from one another because of guilt or shame, but it has the potential to cause resentment later on because the person making more money might feel it’s up to them to pay down that debt,” she says.
Perhaps you'll agree to apply combined disposable income towards paying it off, or you decide it’s fair to let the person who incurred the debt to pay it off.
Will Pre Marital Assets Be Joint?
You should also, of course, disclose your assets you.
Chances you’ve accumulated significant savings in your retirement and investment accounts, and potentially a little real estate.
Will pre-marital assets remain separate or be combined?
“Couples who are in love sometimes do things out of the feeling that everything should be joint,” says John Johansen, a matrimonial forensic accountant and financial planner with The Planning Group for Professionals in New York City. “If they have a brokerage account or own real estate, they might want to add their spouse as a joint tenant, but that’s not necessarily a good thing long term.”
In the event the marriage doesn’t make it, it’s best to keep pre-marital assets separate and co-mingle any new assets accumulated as a couple, says Johansen.
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You may also wish to keep separate any inheritance or monetary gifts you receive during your marriage, he says.
“It doesn’t mean that you’re planning for divorce,” says Johansen. “It’s about full disclosure and honesty, which is what you want in a healthy marriage."
Will You have Children?
You’ve no doubt discussed parenthood, maybe even identified names for the children, but don’t forget to discuss what will happen to your cash flow.
Children are expensive and are likely to dominate your disposable income and eat into your nest egg, especially if one of you stops working to raise them.
That needs to be planned for so you don’t spend more on a house, car or other fixed expenses than you can afford on one income.
“Couples don’t always think about that because it seems so far down the road, but you should come to some agreement over what will happen when kids come into the picture,” says Vince.
Who Will Pay The Bills?
In most marriages, the job of paying monthly bills falls to one person, usually the person with better fiscal discipline.
While that makes sense logistically, Vince says both parties should still participate in creating a monthly budget, and both should know how to pay the bills, if necessary.
If you’re equally adept at money management, consider having one party handle the monthly bills, and the other long-term finances, such as retirement and college savings.
Will You Keep Separate Accounts?
Just because you’re sharing a roof, of course, does not mean you have to merge your bank accounts.
Learn your fiancé's expectations and suggest a system that works for you.
While it may seem easier to simply combine accounts, many marriage counselors recommend keeping a joint account for shared expenses, such as housing, utilities and groceries, and separate ones for fun money—the “you, me we” system of banking.
Thus you can splurge now and then on frivolous things that need not be justified to your spouse, and no one is forced to “ask permission.”
If you opt for a single account, of course, you can still build in flexibility by agreeing to a threshold (say, $200) for expenses that require spousal approval prior to purchase.
Keeping Score, Assessing Risk
What's Your Score?
There is also the matter of credit history.
Your credit score, which tells lenders how likely you are to pay back the money you borrow based on prior payment patterns, is important because it dictates whether you will qualify for things like car and home loans and the interest rates you'll pay.
By law, you are each entitled to a free copy of your credit report once every 12 months from the three nationwide consumer reporting agencies, Equifax , Experian and TransUnion.
“You might discover that your fiancé has a lower score due to a health issue that maybe wasn’t shared yet, or ability to keep on top of their finances,” says Norris.
If one of you has a shoddy payment history, the other may decide to keep their finances separate to avoid inheriting their partner’s credit problems.
Who's A Saver Or Spender?
You may already know the answer to this question, having observed you future spouse, but ask him or her for a spending philosophy.
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If a saver, ask why that’s important to them.
Perhaps her parents were always in debt and she wants to avoid the same fate.
Or maybe he sacrificed luxuries for many years, by putting himself through college and saving for a house, and now want to indulge in a less conservative lifestyle.
Be prepared, of course, to discuss your own financial philosophy as well, which will help you better appreciate the boundaries you bring to your marriage.
What's Your Risk Tolerance?
The old adage that opposites attract is as true with personality types as it is with investment styles.
Rare is the couple that agrees entirely on asset allocation for retirement accounts.
Those on the conservative side might prefer dividend-paying, blue-chip stocks that typically produce a steady return, but slow growth.
Aggressive investors, meanwhile, might be willing to roll the dice on start-ups, tech firms and energy stocks that are more volatile, but hold the potential for hefty returns.
Find out the risk tolerance of your other half, be honest your own, and develop a plan for investing joint assets.
“There’s typically one person who ends up taking on that responsibility [of investment planning], but they might invest more aggressively than the other person is comfortable with,” says Norris. “Or, they might be too conservative so the other spouse ends up squirreling money away secretly to go off and blow it on gambling.”
What Are Your Goals?
You should also share your financial priorities, and set goals to achieve them.
Do you wish to purchase a home, retire by 55, buy a boat?
For any agreed goals, you should start saving a percentage of your monthly income in a separate account.
You can also agree to funnel any “new money” (year-end bonuses, for instance) into the account for a fixed period of time to help you get there faster.
If your goals diverge, however, it’s time to start compromising.
Ask your soon-to-be spouse to rank his priorities in order of importance and you do the same.
Next, decide which are attainable, which need to be downsized and which should be cast aside.
All of this, this does not guarantee that you will avoid arguing over money matters altogether. Most couples do.
They will, however, head off some potential problems.
And above all else, they’ll help to establish the foundation of mutual trust necessary for your relationship to thrive.