Getting married? Here are 6 money conversations you should have first
Part of our major and unexpected life events series
Planning to tie the knot? Take time to wrap up the details of your financial future, too. Discussing these 6 hot topics about your money and goals can help you build a happier life together.
1. Your attitudes toward money
Some people see savings accounts as security blankets; others see them as ways to pay for trips to Tahiti. If you and your significant other view money differently, make sure your financial plans respect both of your financial needs and preferences.
2. How you plan for the unexpected
What happens if life throws you a curveball? Only 39% of Americans could cover a $1,000 setback using their savings.1 You and your partner should have plans in place for things like:
- One of you loses a job, or wants to go back to school.
- One of you wants to leave a current job to spend more time with family.
- One of you wants to take a job somewhere else.
- One of you can’t work and earn an income due to a disabling illness or injury.
3. Your comfort level with debt
Have an honest discussion about the money you owe. “Marrying someone with excessive debt can have serious repercussions,” says financial advisor Harry James of Lockton Financial Advisors based in Kansas City, Missouri.
James notes that a partner's credit issues may make it tougher to qualify for a mortgage or other loan. It can also prevent you from contributing enough to your savings and retirement accounts.
If debt is an issue, make it a priority to pay your bills, starting with the ones that charge the highest interest rate.
4. How you feel about combining bank accounts
Some couples merge their finances completely when they marry, while others prefer to keep them separate. If you plan to maintain your own accounts, consider the following approaches:
- Open a joint checking account to cover shared costs, with each person depositing a fixed amount each month.
- Split bill-paying responsibility based on each partner's income.
5. What you consider a realistic budget
Excessive spending can wreak financial and emotional havoc on a marriage. Avoid it by creating a monthly spending plan and updating it together regularly. A smart budget should:
- help you save for retirement by paying yourself first,
- include short- and long-term goals,
- allocate funds for housing, transportation, debt repayment, and miscellaneous items in amounts that are agreeable to both of you, and
- allow both of you some independent spending.
6. Your thoughts on estate planning
Now is the time to decide where and to whom your assets would go, should something happen to you or your partner.
- Review the beneficiary designations of all your accounts, including 401(k) plans.
- Create a will if you don't have one. If you do, update it.
- Determine how much each of you depends on the other's income. Consider disability insurance to help protect your income from a disabling illness or injury and life insurance to help replace that amount when you die.
- If one or both of you own a business, put plans in place to protect what you’ve built.
Money discussions aren’t always easy. But they’re an important part of building a future, together.
- A financial professional can help you navigate your options and help you figure out the best solutions for your partnership. Talk to friends and family for recommendations of trusted professionals or find one near you.
- Learn 7 rules of engagement for talking to loved ones about money.
1 Bankrate’s Financial Security Index, 2018