When getting married, the cost of throwing the wedding isn't the only money discussion you and your significant other should initiate before walking down the aisle.
It's important to have frank discussions about finances and your views on handling money. These conversations may be uncomfortable at first, but avoiding them could prove much more costly down the road: Money problems are one of the leading causes of divorce.
"If you can lay it all out and meet halfway, you can set yourself up for a successful financial relationship, as well as a stable emotional relationship," says Joshua Mungavin, CFP, a financial planning analyst for Evensky & Katz Wealth Management in Coral Gables, Florida.
And it doesn't have to be a stressful experience. Establish an open dialogue by "discussing goals and aspirations, and what it will take financially to get there," says Mungavin. "It's a good way to ease into the overall conversation that doesn't require a direct confrontation."
Mungavin recommends including these topics in your conversation:
Will you merge all your accounts, keep individual accounts, or create a mix? How will you title the accounts?
Spending and saving habits
Spenders and savers can peacefully coexist if you keep the lines of communication open. Ask each other:
- Does the higher earner get to spend more?
- Do you spend out of the joint account as long as there are sufficient funds?
- Do you have to answer to each other for expenses?
- Do personal expenses come out of a monthly allotment each one gets for these types of expenses?
- Is there a specific dollar amount that requires a discussion with your significant other prior to a large purchase?
"Ultimately, newlyweds' credit scores will affect each other and can impact your ability to get a mortgage and buy cars," Mungavin says. "If one partner has credit problems, it's important to discuss why these issues exist and what has changed to make sure they don't happen in the future." Learn more about the factors that can affect your credit score.
While you're chatting, Mungavin recommends you to ask each other the following:
- Do you want and are you comfortable with a prenuptial agreement? If so, consult a qualified professional.
- What happens with any assets held that were the result of an inheritance?
- Who pays the bills, in what proportion are they paid and how?
- When do you want to retire and what does retirement mean to you?
- What will your estate plan look like?
- What is your risk tolerance and how will that affect your investment choices?
Use a budgeting calculator to help get a handle on where your money goes. And be sure to consider how you'll protect your income and property in your discussions. Your State Farm® agent can answer your questions about life insurance, disability income insurance, and homeowners insurance.
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