“Finances have long been a trouble area in marriage,” says Julie Murphy Casserly, author of The Emotion Behind Money, “and the current economic crisis is stretching even more people to the emotional breaking point.”
In fact, in a pioneering survey conducted last year, one in three respondents admitted to lying to their spouses about money, leading to arguments, distrust, separation and divorce. Experts agree that preventative action can save marriages. Before you walk down the aisle, take the time to understand your partner’s financial upbringing and philosophy, get up to speed on their past and present holdings, and lay the foundation for a transparent, co-managed financial future.
Together with your partner, complete the following financial checklist before you say “I do.”
Discuss childhood influences.
“You have to understand your partner’s money triggers, which goes back to childhood,” says Linda Descano, the chief executive and president of Citi’s Women & Co. In order to understand your partner’s money outlook—and your financial compatibility—you first need to understand how it was formed. Talk about parents’ saving, spending and communication habits and how they may have shaped your behavior. It’s equally important to discuss your emotional connection to money, says Descano. Does it offer you a sense of self worth? Are you crippled by financial fears? Put it all on the table.
Learn your partner’s financial past and present.
“The first time I married we didn’t talk honestly and consistently, and it was a messy divorce,” says Descano. “This time, when he proposed he had a W2 and a net worth statement.” She learned her lesson. Whatever you or your partner’s skeletons may be, it’s better to know. Descano advises reviewing all major debts like education, business or home loans and significant credit card balances. Pull up credit scores from a site like annualcreditreport.com, and ask if they’ve filed for bankruptcy. Otherwise, you’ll likely be caught off guard when you attempt to complete a large purchase together.
Decide on joint or separate accounts.
One of the biggest and most practical questions new couples face is whether to separate or combine finances. Decide whether joint or separate accounts or combination or the two will best suit your needs. “Many couples find that if the husband and wife both work, it can make a lot of sense to keep separate budgets so that each has their own ‘buckets’ of discretionary income,” says Robert Stammers, director of Investor Education at CFA Institute. Dual-earners may keep a joint account for household spending or shared savings goals. If all accounts are joined, Stammers says it’s especially important that they get and remain on the same financial page.
Outline income and spending patterns.
Do you work off a budget? Are you an impulse spender or a penny pincher? Is your income subject to fluctuation, and do you expect to receive any bonuses? These are all important questions to ask in order to plan out how you will tackle day-to-day finances as a married couple. Also, when one partner earns significantly more than the other, says Descano, consider contributing based on a percentage of earnings rather than in equal amounts.
Divvy up financial roles.
Just like deciding who will take out the trash and who will do the dishes, couples must decide on each other’s financial roles. Will one person be in charge of the routine tasks—bill-paying, keeping up with accounts, statement filing—and the other leading longer term investments? Will you do some of each, or everything together? Depending on the complexity of your assets or goals and the variance in your investment styles, you should also consider seeing a financial advisor.
Be certain your assets are protected.
Prenuptial agreements may not be romantic, but they could save your financial future. Prenups are generally useful when one or both partners have substantial premarital assets, an expected inheritance, family wealth or a business. “This is important to discuss prior to marriage because it is a touchy subject,” notes Murphy Casserly, “and when better to discuss than when you still like each other?”
Set joint financial goals.
“In a partnership, deciding on and planning for financial goals should be done together,” advises Stammers. Do you hope to own or upgrade your home and in what timeframe? Do you want to set money aside to travel? Would you like to save enough to retire early? Not only will you discover what’s deeply important to your partner, but you’ll give yourself ample time to plan ahead. Consider that a monthly contribution of just $100 each to a savings account—before interest—will reach $24,000 in 10 years.
Consider the tax implications.
Descano suggests speaking with an accountant to understand the implications of marriage on your taxes, which will depend on how you decide to combine your finances, the influx of assets your partner brings and how you decide to file.
Safeguard your future.
“If you have people who depend on you financially, or if you have assets in common, you need a will,” says Stammers. In order to be prepared for the worst-case scenario, you may want to visit an attorney. In addition to safe-guarding loved ones and property, consider also who you’d like to make medical decisions for you, and prepare for financial blows by starting an emergency fund and researching life insurance.
Be clear about family and career plans.
“If you have family obligations or specific career plans, there are costs and timelines that need to be discussed,” says Descano. Crucial questions to ask: If and when you have children, will you be a dual- or single-earner family? Do you expect to have an older parent living with you? In terms of career, do you expect to go back to school, need flexibility to relocate or plan on starting a business? These may change your financial goals or organizing systems, but you’ll have a better idea of where you’re headed—together.
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Readers: Did I leave anything out? What do you wish you'd talked about before tying the knot?
