Congratulations, you've found Mr. or Ms. Right, fell in love and now the Big Day is right around the corner. If you're planning to say "I do" soon, save yourself some arguments later by talking about your money now.
More important than the cake, flowers or even the invitations is preparing for your financial future together. Make a date to sit down, discuss your goals and expectations and come up with a plan for an effective merger of your financial lives. It may not sound romantic, but considering that quarreling over money is one of the biggest causes of marital discord, a money talk may be just what Cupid ordered.
"Financial dates are a great way for couples to set priorities, build trust and increase marital bliss," says Jennifer Openshaw, chief executive of FamilyFN, a Los Angeles company that provides financial advice. "Probably the biggest mistake couples make is not talking about money. It's really about setting aside time so you can both plan for your hopes and dreams."
1. Where would you like to be in five or ten years?
This question is the best way to start a money conversation, says Openshaw. For example, does one of you want to go back to school, start your own business or own a vacation home? And if you plan to raise a family, how many children and when? Would you both continue working, or would one spouse want to quit and stay home with the kids? Discussing your hopes and dreams together will help you set priorities and identify savings goals.
2. What are our assets and liabilities?
Before you can create an effective strategy to reach your goals, each person should fill out a net worth worksheet, detailing his or her assets and liabilities. Once you know where you stand right now, it's much easier to move forward. If you'd like to consult a professional to help with your financial planning, see How to Pick a Financial Planner for more information.
And if you haven't discussed it already, now may also be a good time to bring up a prenup. A prenuptial agreement spells out how assets will be distributed in the event of a divorce. With about one-third of first marriages and half of second marriages ending in divorce, it makes sense to protect your financial interests.
Prenups aren't just for the super-rich. If either of you owns a home or has investments, owns a business, plans to support the other through school, or you have children from a previous marriage, you probably need a prenup.
Make sure you broach the subject with your partner as soon as possible. It may not be the most romantic discussion, but better now than bringing it up the night before the wedding. Learn more about prenups.
3. Should we keep our finances separate or combine them?
Some couples relish the unity and trust that joint accounts foster, while others prefer more freedom and autonomy by maintaining separate accounts. Or you can have both — some couples set up a joint account for household expenses, to which both people contribute based on their income while keeping separate accounts for personal spending.
The key is to find a system that works for you. Make sure you consider your individual money styles. If you are a saver and your partner is a spender, for example, you might find managing an all-purpose joint account too nerve wracking and opt for a combo approach or separate accounts entirely.
4. What about our investments?
Whether or not you choose to combine your investment accounts is, again, entirely up to you. (Note: You cannot open joint IRAs or 401(k)s, though you can change beneficiary information.) Nevertheless, it's important to view your portfolios as a whole to make sure you aren't overlapping. If you both hold shares of the same stock, for example, you could be placing yourselves at risk should anything happen to the company. Check for overlap in your mutual funds using Morningstar's free Instant X-Ray.
5. How will we handle daily spending decisions?
One of the first tasks newlyweds should tackle is creating a budget. Sit down together and plot out how much you expect to spend on groceries, clothes, eating out and other household expenses.
"Budget" doesn't have to be a four-letter word — think of it as a means to reaching your goals. You should also take this time to discuss other spending issues, such as how much each of you can spend without consulting the other. You probably don't want to discuss every $5 purchase, but you don't want to come home from work and unexpectedly find a new Mercedes in the driveway, either.
6. Who will be responsible for paying the bills and preparing the taxes?
In my house, I'm the chief financial officer. My husband and I both contribute to cover the bills, but I'm the one who physically writes the checks, rebalances the portfolios and hashes out the taxes. I'm more organized than him, so the task naturally fell to me, though you might find splitting the duties works well in your relationship.
Our arrangement doesn't mean I leave my husband in the dark, though. We have a date every month to go over the budget, review our saving strategies and progress, and discuss upcoming expenses, such as vacations and big-ticket purchases.
Paying your bills electronically is a great way to reduce the burden of this task. Or, you might consider using software, such as Quicken, or Web sites, such as Mint, to organize and track your finances.
No matter who ends up handling the bills in your marriage, make sure each partner knows where to find all the different account information, including Web sites, passwords and bill due dates in case anything should happen and the other person needs to take over the responsibilities.
7. What is your tolerance for financial risk?
One of the biggest culprits in marital money fights is a mismatch of risk tolerance, says Jonathan Rich, author of The Couple's Guide to Love and Money. "A lot of life's most important decisions involve weighing risks," Rich says. From investing strategies to career moves, if one of you prefers to take bigger risks in hope of bigger rewards while the other is content to play it safe, you could each end up resenting the other for his or her carelessness or for holding you back, says Rich.
If you're on different ends of the risk spectrum, don't even try changing your spouse's point of view — it won't happen. Instead, try to compromise on financial strategies that both of you can stomach.
8. What are our insurance options?
Adding a spouse to your health insurance may be cheaper than maintaining separate plans. Consider your specific health needs, then look at the costs and benefits of each person's plan choosing. Combining your auto-insurance coverage will probably also save you money. You'll want make sure you have enough homeowners or renters insurance to protect your combined possessions. And what about life insurance? Do you need it? If you already have some, either privately or through an employer, do you need to change your beneficiary information?
9. How does your credit report look?
The good news is that simply marrying a person with bad credit will not drag down your stellar record. What's his is his and what's hers is hers. So, if you apply for a car loan by yourself, your spouse's credit report won't even enter the picture.
But when it comes to applying for joint financing — say, you plan to buy a house together — lenders will consider both your histories. It's better to know ahead of time of any potential problems than to receive the shocking news in the mortgage lender's office that you're stuck with a higher interest rate, don't qualify for as much money as you'd planned or that you're being turned down for the loan entirely.
Order copies of your credit reports. You are entitled to a free copy each year from the three major credit bureaus through AnnualCreditReport.com. You and your partner should examine your reports, look for errors and fix them. Then, if there's room for improvement, come up with a plan to boost your credit score.
10. How will we tackle existing debt?
Make a pact to pay off your debts. Start with the balances that carry the highest interest rates. You may choose to work individually or collectively to pay off debts you accrued before the wedding, but don't add each others names to your obligations. The commingled debt would be nearly impossible to untangle should you ever divorce, and if one of you were to default, the other would be left holding the bag.
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