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A Money Lesson for Newlyweds (and Other Lovers)

Roses on Valentine's Day are a romantic classic, but what's even better for a strong, happy marriage? Money harmony. And it all starts with an honest talk and shared strategy.

Meet Me Halfway by The Black Eyed Peas is one of my favorite songs. It is about waiting for the one you love and finding common ground. The song is applicable to both finances and marriage.

The days of arguing over who loves the other person more and rose petals on the bed seem like a distant memory after a first big fight for newlyweds. Research has shown a major hot-button topic for married couples is finances. The reality is there will always be squabbles over money, but the following simple steps will help diffuse the situation.

Be open and honest

Money is a tricky topic to broach while dating, so many couples tend to put it off. However, once you are hitched, it is vital to discuss each person's financial situation. For instance, an insignificant amount of debt to one person may be massive to another. And that can lead to tension. To get on the same page, newlyweds should discuss how their parents handled money when they were younger and how they handled their own finances as adults. Understanding financial behaviors is important to determine whether there are any issues lurking. Is one spouse prone to putting off bills while the other is very strict about when things are paid?

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Talking about the big financial picture will bring couples closer and lessen the probability of one person sleeping on the couch.

For example, I had a client who was concerned that her husband had massive credit card debt. The balance was $3,000. In her mind, this was massive debt. She was upset that he was hiding information. As it turns out, the balance was closer to $5,000, but he had paid it down to $3,000 and was going to use his bonus to pay it off. He knew that his wife didn’t like her job and wanted her to have time to stay at home with the kids for a bit. He didn’t want his wife to think she had to continue in a role that didn’t support work/life balance. He didn’t want her to be alarmed about the debt, and he felt he was getting it under control. Meanwhile, she was mad that he was hiding information.

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Luckily, my clients’ situation ended up not being that serious. After discussing the credit card debt, the couple told me that they feel their relationship is stronger than ever. They also feel more confident about their financial future.

Agree on a strategy

Do you put most of your earnings in a joint account and then have a little in your own account or vice versa? Should one spouse be responsible for the other’s student loans or credit cards? It depends. Ultimately, every situation is different. Keep in mind, though, that in certain situations, both spouses may have to assume financial responsibility for student loans that were originated during the marriage because they are considered marital debt. This is particularly true in community property states.

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If you do combine all income into one household account, then set guidelines about how to pay the bills each month and what to do if there is any money left over to play with.

Get retirement minded right away

It is never too early to think about retirement. Many think only older people worry about retirement. Actually, everyone should start thinking about it as soon as they join the workforce. Many employers offer 401(k) plans to let employees contribute a portion of their wages to save for retirement on a tax-deferred basis. Some companies also match their employees’ contributions. That’s always a good place to start, and to have a discussion about your saving goals as a couple.

Don’t put off financial chores

It can be terrifying to look at the amount of debt accumulated over the past year or more. Some people keep concealing it, which only makes it worse. People toss credit card bills, bank statements and other documents into a closet or drawer. Avoiding thinking about it won’t make the bills go away!

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Couples should find out their credit scores and obtain a credit report to see where they are at financially. This will determine what needs to be cleaned up and the state of financial affairs. Once they find the areas that need work, there are a few debt-payoff strategies to consider:

  • High-interest plan. Of course, it makes sense to pay off the debt with the highest interest first, but there may be situations when you may want to pay off some pesky debt and gain traction. Every situation is different. Just today, I advised a client to pay of her car because it was a payment of $550 per month. She didn’t owe much on it, so paying off the car would allow her to have more cash flow. Financial planning is both an art and a science.
  • The snowball plan. Figure out what you owe and pay off the smallest balance first. Meanwhile, pay the minimum monthly balance on the rest of the debt. By paying off the smallest debt, you feel more motivated to take care of the rest of the mess, snowballing your gains in a good way. If a couple have separate bank accounts, they may choose to use one of the accounts to pay off debts and the other for living expenses.
  • The avalanche plan. Another strategy is the avalanche, where you pay off the biggest source of debt, but the snowball plan might be more realistic depending on your situation.

Budget the finances, but share the love

Once you’ve identified your problem areas and some possible solutions, your financial discussion wouldn’t be complete without drawing up a long-term outlook for your money plan. Look at what expenses will be like for the next six months and update (or create) your household budget. Also, set priorities about what you want to accomplish in a year. Do you want to buy a house or pay off a credit card?

Many couples struggle balancing building cash reserves, paying credit card and student loan debts and investing for their future life goals. Make a realistic budget to avoid those money woes or tiffs.

Newlyweds go through a lot of changes in the first year or two of marriage. They still have a lot to learn about each other, and those willing to sit down and do some honest talking about their finances are well on their way to a marriage filled with more “for better” moments than “for worse.”

About the Author

Marguerita M. Cheng, CFP®

CEO, Blue Ocean Global Wealth

Marguerita M. Cheng is the Chief Executive Officer at Blue Ocean Global Wealth. She is a CFP® professional, a Chartered Retirement Planning Counselor℠, Retirement Income Certified Professional and a Certified Divorce Financial Analyst. She helps educate the public, policymakers and media about the benefits of competent, ethical financial planning.

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