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credit & debt

Marriage and Money 101

See if you're ready to tie the financial knot.

Love and money. Unfortunately, the two don't always go together. But with the wedding season in full swing, many couples will be so consumed with the details of their nuptials that they'll neglect to discuss one of the most important aspects of their new life together: money.

"Most people don't talk about finances before they get married," says Celia Ray Hayhoe, a financial planner and family financial extension specialist at Virginia Polytechnic Institute and State University. "It's the last taboo subject."

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Before you tie the knot, read this primer on how to become fiscally in step with your spouse. If you've been married awhile, consider this a refresher course.

Newlyweds: Start talking

Before getting married (or not long after the nuptials), you and your significant other should discuss how money was handled in your families -- a money history, as Hayhoe calls it. Talk about your experiences with money as a child, how your parents handled money and how money was perceived.

This gives people a chance to find out how their partners view money and to understand their own feelings. If things get heated, sit back-to-back and repeat what each other says. This forces a couple to listen more carefully and prevents them from seeing body language or facial expressions that can sabotage a face-to-face conversation.

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Next, move on to financial goals. Each of you should write down five goals, then compare lists to see which you agree on and how to prioritize them. You need to know what direction you want your financial lives to take before crafting a budget to get there, says Nancy Flint-Budde, a financial planner in Clifton Park, N.Y.

Resolve differences

After you have a financial plan, you can track cash flow to see how much you're spending, figure your net worth and develop a budget -- but not one that puts handcuffs on either one of you.

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The budgeting process will show who's the spender and who's the saver, if you haven't figured that out already. It can also reveal other money habits that could lead to disputes later if you don't nip them in the bud.

"There's no money personality that's all bad," Hayhoe says. For example, spenders can bring spontaneity to a relationship. They can also rack up a lot of debt and frustrate the money-saving spouse. The two have to reach a compromise that doesn't give the spender free rein or reign him or her in too tight.

Hayhoe suggests setting aside money in the budget to give each person an allowance to spend how they please, no questions asked. This system can work especially well if you have disagreements about investing. If one of you is more of a risk-taker, use the allowance to set up a separate investment account. Then the cautious spouse won't have to fret about losing retirement savings.

Create a financial union

Couples don't just have to agree on long-term goals; they also have to get their daily financial lives in sync. Blending the nuts and bolts of your financial lives can be trying -- especially if one or both of you have been married before. Here are some of the major issues:

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Checking accounts. Many couples deal with cash flow by keeping separate bank accounts. Some find three accounts work well -- separate accounts plus a joint one for household expenses. Others rely on one joint account. It's a personal decision based on what works best for the couple, Flint-Budde says.

Couples who maintain separate accounts should include their spouse's name on the account, she adds. Then, in case of an emergency, the other spouse can tap the account. For couples who have only one joint account, both spouses must keep careful records so they won't lose track of what the other has spent.

Credit cards. Flint-Budde and Hayhoe agree that a joint credit card is usually a bad idea. "Any time you sign up for joint debt, you're both responsible whether the marriage lasts or not," she says. However, if one spouse has a bad credit record, you might have to get a joint credit card.

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Debt. You need to decide whether you'll pay off debt together or cover payments on your own. If one person has a lot more debt than the other, Hayhoe says, that person should pay down as much of it as possible before the wedding. That way, one spouse won't have to make sacrifices to deal with the other's debt load.

Bill paying. It's natural for one person to handle the bills. But then the other spouse often has no clue how money is being spent. Sometimes it helps to take turns managing the checkbook. Or if one person is writing the checks each month, both should sit down on a regular basis to discuss what's being paid and to find ways to cut back on spending, Flint-Budde says.

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Taxes. Couples will no longer be hit with the marriage penalty thanks to the new tax law signed by the President May 28. Before you likely paid more on a joint return than if you were still single. With the new law, the standard deduction for joint filers will increase from $7,950 to $9,500 -- double the size that single filers get. Congress also expanded the 15% bracket on joint returns -- so that it is now exactly twice the size of the 15% bracket on individual returns. This prevents part of a couple's income from being pushed into a higher bracket simply because they get married.

Benefits and assets. Be sure to change the beneficiary on your insurance, retirement and other accounts so your spouse gets the proceeds. Look at employee packages to avoid duplication in areas such as health care. If you have life insurance through your employers, that's probably all you need until you have a child.

Consider disability insurance if you don't have any or if the coverage through your job isn't adequate. Finally, make sure you have a will so your assets get distributed according to your wishes.

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