First of all, let me be among the first to congratulate you! Marriage is a beautiful thing and I hope you enjoy all the benefits it has to offer. My role as a financial advisor is to ensure the financial well-being of my clients. However, statistically speaking, “money problems” are among the top ten reasons for divorce. Therefore, you might also call me a kind of marriage counsellor. Who knew right?! Allow me to share some premarital counselling (financial) tips with you.
Let’s be honest, people don’t get married with the intention of getting divorced. The decision to marry is more than just an important decision; it’s a long term commitment. I want you to briefly think about other long term purchases you may have had to make in your life, let’s say, buying a house for example. A house may appear pretty both on the outside and inside; it may even be reasonably priced, but if you intend to raise children in that house you’re going to have to find out how safe the neighborhood is, the quality of the schools around and even check to see if there are any nice parks/fields close by. You’re going to have to research something other than the house itself. Do you see what I mean?
Finances are something that must be discussed BEFORE marriage takes place. Failure to perform this crucial step is exactly like moving into a home without performing a thorough research on everything pertaining to the house. Here are a few financial tips I’d like to share with you:
To Whom Do You Owe Money?
Yep, the “D” word, DEBT. Interestingly enough, debt is a little like religion – some people believe in it, while others don’t and those who do believe in it have different views about it. It’s important for couples to disclose all of their debts and their personal views about it. Trust me on this, you can learn a LOT about an individual based on their views of the debts they owe. I once met a young man who believed his debt would eventually “disappear” if he kept ignoring it – true story. Imagine being married to this guy!!
Talk About Your Financial Goals
Let’s return to our “buying a house” example. Let’s say a couple decides to buy a nice home. The husband is planning to remodel the house and flip it in hopes of obtaining a substantial profit. His wife is thinking they are buying the home to start a family and stay long term. One purchase, but two totally different goals and potential outcomes…and probably a big argument waiting to happen. This is why it’s vitally important to discuss your financial goals together and see how these goals can be achieved. Together.
Joint or Separate…Accounts
There’s no right or wrong answer here folks. This is a matter of preference. I’ve seen some couples have joint accounts for specific purposes like paying bills and saving for particular goals like a college education, down payments or vacations. While other couples opt to keep their own individual accounts while delegating particular bills. I personally often recommend joint accounts to pay all their bills and plan their future. It encourages transparency, accountability (those who know me know I’m very big on this) and eliminates duplication. Many couples cringe at the thought of a joint account because they believe it takes away from their “independence”. There are however ways around this concern. One of such is to include in your monthly budget “blow money”. It is an allowance each spouse takes to use on whatever they feel like without having to account on how it’s spent. This method creates a unified front in tackling both your goals together. Having worked with hundreds of couples on cash flow planning and combining accounts, many have found it astonishing how much was filtered away in each of their individual accounts which they could not account for previously.
Besides the above mentioned benefit, it forces couples to deal with bad habits and have serious conversations about money that would otherwise have been swept under the rug. For separate accounts to work, it takes extreme discipline, openness and focus on the part of each spouse which is much easier said than done.
Set Financial Boundaries
In other words, establish a budget. More importantly, stick to it. A budget is not a template! It should be a living and breathing document. You both should commit to sitting down at the end of every month to plan for the next month. The last thing you want to do is blur the line between the money that you earn and the money that you borrow. People who don’t set clear financial boundaries typically end up racking up credit card debt without realizing it. Why “waste” money paying the bank interest when you could have invested that same money on a beautiful date night with your partner? Furthermore, having a budget allows you to knock off your goals much faster than you can imagine.
The Stuff Newly Weds Hate Discussing…
Life insurance and estate planning…the fun stuff! Healthy marriages are found among couples who consistently consider their partner’s needs and do their best to meet those needs. When both partners are looking out for each other, it’s simply beautiful. Estate planning is a way of “looking out” for your partner and your children – it’s anticipating what their needs will be if something unfortunate happens to you and it’s your way of meeting their needs ahead of time. It could be a potentially difficult discussion, but if you think about it – it’s one way to display love and help you sleep better at night.
This list isn’t by any means exhaustive, but it is sure to get your marriage started on the right financial foot.