It is crucial for all couples to have a candid conversation about personal finances before tying the knot. Couples must be clear about their current, financial situation, attitudes toward spending and saving, and financial goals.
The reason why?
Being in the dark with your own money is hard enough, but if the two of you have no idea what’s going on, problems get a lot worse a lot faster. Money fights are one of the leading causes of divorce, but it doesn’t have to happen to you!
Having an open dialogue about money topics before tying the knot is one way to help make sure you’re on the same page with your partner not just about your wedding plans but also your post-wedding financial life.
Money Before Marriage (How to Talk Money With Your Partner)
Below are some topics to help get the conversation started:
1.Discuss Your Financial Personality
Each individual has a unique relationship with money. Now is the time to be honest about your buying behavior so it doesn’t come as a surprise later. Are you a spender or a saver? Are you an impulsive buyer? What types of things do you like to buy? Do you like to shop for clothing or dine out often? Whatever your relationship is with money, make sure that you and your fiance come to an agreement on how to handle finances in the future.
2. Calculate Your Net Worth Individually and as a Couple
Share information about full-time, part-time, or supplemental income, monthly expenses, as well as existing loan and credit card debt.
3. Map Out Short and Long-Term Financial Goals
Have you truly shared your short and long-term financial goals? Does your future spouse want to retire in his/ her fifties? Does he or she want a second house on the beach? What about retirement savings plans, insurance policies, or investment accounts? If you plan to have kids, do you want to start a college savings fund? It is important to talk about long-term goals now to make any necessary short-term sacrifices.
4. Pay Off Credit Card Debt and Eliminate Redundant Expenses
Develop a plan to pay off all credit card debt. Credit cards can be the most expensive debt and have a significant impact on loan interest rates. Find ways to pay off credit cards quickly by doubling payments or pay them off in full; never pay just the minimum. Also, identify areas where bills unnecessarily overlap to decrease expenses.
5. Create a Comprehensive Budget
Take a realistic look at your new monthly expenses as a married couple. Keep in mind that certain bills will increase: groceries, gasoline, or even dry cleaning. Set an amount of money that you want to be put into savings each month for a joint emergency fund or a down payment on a house. Consider setting aside a small amount of money per week that each spouse can spend at his or her discretion.
6. Share Your Credit Reports and Credit Scores
Before you make any major purchases, it’s crucial for couples to go over their credit reports together. Carefully review the reports and correct any erroneous listings. Be sure to examine your payment history and debt-to-income ratio since lenders use this information when assessing loan applications.
Remember, your spouse’s past credit history has no impact on your credit reports or scores. This information does not merge. Only when you open a joint account or add your spouse to an existing account will any information be shared on both of your credit reports.
7. Merging Accounts
Discuss the pros and cons of maintaining separate or joint accounts. If your fiance has poor credit, maintain separate accounts for the time being, but work with him or her to pay down debt and repair his or her credit. If you both have good credit, consider opening joint accounts for household expenses and savings, but possibly maintaining a separate account for personal spending money.
If you co-sign for a loan or credit card, both you and your spouse are 100 percent responsible for the balance until it’s paid in full. Sometimes things can go wrong in relationships and as a co-signer, you are accepting 100 percent responsibility regardless of your relationship status.