A wedding is a blessed event. Two lives have joined together as one making a commitment to love, honor and cherish each other. They vow to remain committed during sickness and health, whether they are rich or poor. Really? If that is true, why do nearly half of all marriages end in divorce? The number one cause for divorce is financial problems. This is something that could be avoided if the couple took the time to have the money talk before getting married.
Unfortunately, some couples invest more time into planning one day than how they will invest in a financial future together. When couples talk about getting married, the discussion should include each person’s current financial situation and attitude towards money. These five financial topics are a starting point for having an open and honest conversation about money.
1. Short-term and Long-term Financial Goals
Starting a family, buying a home, career plans and retirement have financial implications that couples should discuss. Both partners should make a separate list of short-term and long-term goals. Develop a combined list of goals and discuss the financial preparations required for meeting those goals. Joint goals provide a clear picture of what each person expects and hopes to accomplish. Setting a timetable for reaching each goal will help the couple remain on track.
2. Credit Score and Current Debt Load
A poor credit score can delay attaining some financial goals such as qualifying for a mortgage loan. Poor credit could also be a sign that one person has money management problems. Couples should discuss money habits that can hurt a credit score and work together towards changing those habits. Bad credit can improve by making on-time payments. Discussing financial mistakes with a future spouse can be uncomfortable. However, this is essential for establishing a plan to make improvements.
Each person should know the amount of debt the other brings to the marriage. Getting married could mean one spouse will share the responsibility of the debt. A debt load may include credit cards, student loans and other bills that have accumulated. Having a certain amount of debt is not unusual, but devising a plan for paying the debt off is important. Keeping secrets about debt is not helpful.
3. Budget Principles and Paying Bills
Couples should discuss budgeting principles and compare current budget habits. Differences in financial personalities are revealed. Some couples fear that having a disagreement means the wedding is off. It is important to note that differences will not lead to divorce, but rather how those differences are addressed – or avoided.
If one person spends more than the other, the money savvy partner should manage the household budget and balance the checkbook. Regardless, financial decisions should be made together. A couple should determine what works and stick to it.
Getting married does not mean that finances have to be merged completely. There can be a joint account for shared expenses and a separate account for personal purchases in order to maintain some financial independence. The key is to make sure both partners know about the separate accounts.
Before getting married, the couple should discuss the annual income of each. An income determines the quality of life, where the couple will live and how much money can be saved for short-term and long-term financial goals. The couple should look at pay stubs and bills to determine how they will support each other. It might be necessary to defer getting married until one or both are financially stable.
5. Financial Security Protection
The financial security discussion includes having an emergency fund, insurance policies, and wills and investments. There could be ways to save as a couple on health insurance if the premium is less for one person while maintaining adequate coverage. The same is true for life insurance polices. If one person dies, life insurance should cover the lost income. Wills and investments should be updated to name the future spouse as an heir.
Marriage is both a romantic and financial union. Sharing finances requires compromise and trust, two things that are necessary for having a healthy marriage. Starting a conversation about money might seem difficult, but it is harder once a problem occurs. A divorce proceeding is not the time to begin talking about money.
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