Finance Issues Each Couple Ought to Talk about Earlier than Marriage

 

It’s always a bit of a mystery to us
what couples’ priorities are when it comes to planning for the future. Marriage
can be a tough choice, and many people choose to get married without
considering all the aspects of their financial lives. But as this article
points out, that doesn’t have to be the case. 

If you do want to work manually
through your finances (and most people do) then you need to know how long your
spouse plans on working and how much retirement savings they have before
marriage. That way, you can plan accordingly. That’s not up for debate—it has
to be done!

Before
you merge your finances, understand each other’s past

• Discuss your childhoods and how
  your respective families approached money.
• Explore how much you learned about
  money as a child.
• Discuss if your attitudes toward
  money match, and how you feel about each other’s financial past.

Decide
how you’ll handle debt as a couple

When it comes to money in marriage, the
experts agree: No secrets. If you’re going into a marriage, your partner needs
to know how much you owe and what you’re already doing about it. Discuss how
long it will take to pay off your debt—and how you’ll stick to paying off that
debt as a couple. 

This is especially important if one spouse has more (or less)
money than the other or if one spouse has student loans and the other doesn’t.
It’s also important for setting up joint expenses like a mortgage or rent, car
payments, and insurance policies together.

It’s also a good idea to work out any
premarital debt before getting married so that you can start fresh with no red
flags on your credit report. You may want to set up something like a budgeting
app like You Need A Budget, which allows both people in a relationship equal access
to the budget so they can know where every dollar is going at all times in
order to keep spending aligned with goals and values before tying the knot.

Establishing
ground rules for spending can prevent problems down the road

It’s important to talk about money in
your relationship and set a few ground rules for spending. Here are some
guidelines:

• Let each other know when you’re
  planning to buy more expensive items—anything over $50. You don’t have to
  ask permission before making the purchase, but it’s respectful to give
  your partner a heads-up.

• Establish a limit for how much one
  person can spend on something without checking with the other first. If
  one of you is extremely budget-conscious while the other tends toward more
  reckless spending, it may make sense to keep your individual expenses
  separate (more on that later). 

  But if you aren’t sure what that limit
  should be, consider using 50 percent of the total household income as a
  guideline for how much each of you is allowed to spend at one time. So if your
  combined monthly income is $5,000, either of you should cap spending at
  $2,500 unless it’s a necessity like rent or food or something else both
  partners agree upon.

• Keep a shared account for expenses
  that are mutually beneficial like groceries and rent, and maintain
  separate accounts for personal spending.

  Even though this may seem like an
  unnecessary step since many couples already share most expenses anyway,
  keeping these accounts separate can help prevent resentment down the road
  because each partner has their own space where they can spend money
  however they want without having to explain themselves every time they go
  shopping or out with friends.

Identify
how you’ll deal with unexpected expenses before they arise

Before you start your life together,
it’s important to take the time to learn about how your partner makes financial
decisions and to come up with a plan for how you will deal with unexpected
expenses that arise.

Here are some things to consider:

• What is your position on getting a
  life insurance policy? If you have children or plan on having children in
  the future, taking out a policy could be worth it. However, in the case of
  childless couples, this is an expense that gets very little
  return—especially if both members of the couple work full-time.
  
  
  
  
  
  
  

• Talk about how each of you deals
  with emergencies and unexpected expenses when they arise. Do they tend to
  panic? Get angry? Calmly sit down and make a spreadsheet budgeting out
  their finances for the next few months? Understanding how your partner
  reacts to emergencies can help you prepare for anything that comes up in
  the future.

• Make a list of potential
  emergencies and discuss what steps you would take if any of those were to
  happen (job loss, illness). It may seem like an unpleasant exercise, but
  discussing worst-case scenarios beforehand can do wonders for helping
  couples avoid conflict when something does happen unexpectedly.

Decide
who will handle your shared finances

The simplest approach to managing your
finances is combining them. But it may not be the best option for you and your
partner. Some couples choose to keep their finances separate, even for their
shared expenses. To know what’s best for you, consider the pros and cons of
combining your finances:

Pros:

• Easier to budget together so that
  all bills are paid on time
• You can build a safety net by
  pooling your resources and contributing equally

Cons:

• If one spouse spends too much
  without the other’s knowledge, both could end up in debt
• If one spouse doesn’t have enough
  income or has bad credit, it could bring down the other’s credit score as
  well

Set
up a budget, and then stick to it

Setting up and maintaining a budget is
one of the most important things you can do for yourself, your partner, and
your family. You may have heard of a few different types: envelopes, or the
50/20/30 method. There are many other ways to set up a budget, but the first
step is finding what works best for you and your partner.

Once you decide on a budget that works
for both of you, it’s important to stick to it! It can be difficult at first,
but as long as you maintain that discipline, you will see results quickly. The
most helpful way we’ve found to maintain discipline is with online resources
like Mint or YNAB (You Need A Budget).

Start
talking about retirement early on in your marriage

• You both need to talk about how
  much you’ll need to retire. Once you do that, you can start planning for
  it.

• Each of you will have different
  approaches to saving and investing. Talk about that too.

• Find a good investment advisor who
  is a certified financial planner to help you with your money decisions.

• Once you are married, whether one
  of you has more money or not, figure out how much money each of you can
  afford to spend on stuff like going out or buying new clothes or bags, etc.

Communicating
and planning are key to having a healthy relationship with money

One of the most important (and often
overlooked) keys to success is to communicate openly and honestly. Doing so
doesn’t mean you need to share absolutely everything—your bank account
password, for example. It does mean that things like your monthly income and
debt should be on the table.

Many couples start thinking about their
finances once they begin planning a wedding, but financial expert and author
Dawn Graham suggests starting much sooner than that—especially if you have a
prenup in mind.

“Marriage is not just about love,” she says.
“It’s also a business transaction.” Getting ahead of those details early
on can save you from many headaches down the road, especially when it comes
time to file taxes and plan your estate.

When it comes to planning, it’s better
to do it too soon rather than too late: 36 percent of Americans have no idea
how much money they’ll need in retirement, according to a 2018 survey by
Charles Schwab, even though two-thirds of them are aiming for early
retirement (before age 60). |

And although there are plenty of calculators out
there that can help you figure out exactly how much money you’ll need at different
stages of your life (and which will let you know if your goals are unrealistic
or not), the best rule of thumb is: Save as much as possible!

 

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