Wedding season is on, perhaps even more robust than usual following a year of social distancing that forced many couples to delay wedding ceremonies. If a wedding is in your near future, you likely have your big day planned. But have you taken the time to plan out how you and your soon-to-be spouse will approach joint management of your finances?
To avoid marital money issues, now is the time to determine how you and your future spouse will approach money management as a couple. Like it or not, divorce is a reality that many married couples eventually face and arguments over money are the second leading cause for failed marriages.
Getting married and living together means collective expenses, from rent or mortgage payments, to utilities, grocery bills, insurance payments, credit card debt and many other unforeseen expenses. Add children into the equation and finances become even more complicated. While it may be uncomfortable to discuss finances with your fiancé, doing so is a necessity for a healthy relationship.
Following are things to consider when mapping out how you will handle your finances as a married couple:
Full disclosure is important. You and your partner should sit down and discuss everything from what kind of savings and assets each of you are bringing into your marriage, to any debt you have from student loans, credit card bills or car payments. Failing to disclose significant debt to your partner can lead to resentment down the road, as any debt or negative credit rating held by one partner can have a detrimental impact on mortgage rates and other loans taken out together.
A sit-down with a financial planner may sound intimidating, but meeting with an unbiased third party to determine your best route for managing your collective finances can be a good idea, plus it can make these conversations matter-of-fact and less uncomfortable.
Determine whether you plan to maintain separate finances, hold assets jointly or take a hybrid approach. Then map out how this will work. If both partners are working, and the plan is to keep your finances at least semi-separate, consider what would be a fair split of your joint expenses, especially if one person makes more than the other. Similarly, determine how much you’re looking to save together as a couple for long-term or big expenses, which may range from a home purchase to retirement. Also determine how much of your incomes will be kept for yourselves to do with as you please.
While couples traditionally shared all of their finances, that isn’t always the case anymore. People get married later in life and come into relationships having already amassed significant assets of their own. Consider whether or not you want a prenuptial agreement to protect the assets each of you bring into your marriage in case things don’t work out for the long term.
Identify both your short- and long-term goals as a couple and then set a budget that will help you work toward meeting those goals. Having a budget in black and white from the outset can make it easier to address conversations about finances. It’s also important to determine who will handle managing your day-to-day finances as a couple, such as paying the bills and tracking your budget and financial goals. Dividing up those responsibilities in advance can help to avoid misunderstandings, headaches and arguments down the road.