In the excitement of wedding plans and romance, many engaged couples neglect to have the sometimes difficult, yet necessary conversation regarding finances. Although it is easy to postpone the talk for other matters, financial planning proves to be one of the most important factors in successful marriages.
Like it or not, money problems have an impact on relationship satisfaction and, thus largely contribute to divorce rates.
There is no doubt that it is important to discuss finances early on, including each other’s credit, debt and financial goals. By getting ahead of these issues, partners can create a practical plan for their married life and prevent money troubles from arising in the future. Talking about finances early also helps establish better communication, which is a valuable skill in any relationship.
Thoughts and Feelings About Money
Everyone views their finances differently, since feelings surrounding this topic are often molded by personal experience and family history. As such, people tend to repeat the habits of their parents. For instance, those raised by heavy spenders may be more frivolous with their cash than their partners. On the other hand, individuals who are raised in more frugal households may be more likely to hold onto their money.
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General thoughts about money also affect saving and spending habits, and therefore, highlight areas of priority. Regardless of personal opinions, there is no perfect way to approach finances. Instead, focus on analyzing individual thoughts and habits, by using family and past experiences as a guide. With this in mind, couples can work on reconciling any differences by creating a game plan that will place them on the same financial wavelength.
To create a plan for the future, partners must discuss how they will divide their bills. This could mean allocating major payments to the highest breadwinner, or distributing them evenly amongst the pair. How bills are divided will vary from couple to couple. However, it’s important to make bill distribution and payments manageable, to avoid creating debt.
In addition, newlyweds should analyze the benefits of having a joint or separate bank account, agreeing on the system that best meets their needs. Joint accounts can be a valuable way for couples to set aside money together, for housing, utilities or other major shared expenses. On the other hand, having separate accounts maintains financial independence and may be better for those who prefer to split bills evenly. A combination of both can also be a great option for those finding themselves somewhere in-between.
Lastly, individual and total incomes need to be taken into consideration. Having a well-rounded understanding of where each person stands will help newlyweds create a practical budget and plan their finances for smooth sailing.
Credit, Debt and Other Financial Obligations
Credit is often difficult to talk about, as it is an indicator of financial responsibility, and a low credit score could mean outstanding debt. However, partnerships require trust and honesty. By being frank about their credit, couples can then work on finding a solution to these issues together, like designing a payment plan that works. Determining how debt has accumulated and what habits have contributed will prevent newlyweds from repeating the same mistakes.
Credit is also an important factor when borrowing money. Buying a house, getting a family car or applying for a loan will require a credit check. For this reason, it is important to disclose this information early on. By making regular and timely payments, individuals can improve their credit scores, making it easier and less costly to borrow again down the line.
Additionally, couples need to disclose any other financial obligations, such as child support, alimony and elderly care. These costs are often overlooked and recur over a significant period of time. If any of these are present, they must be factored into the budget as well.
Net Worth, Prenups and Future Financial Goals
Net worth may not be important for young newlyweds. However, those with many assets should consider having this conversation. Overall net worth is crucial to discuss when considering a pre-nuptial agreement. Prenups determine the division of property and assets in the case of divorce, and protect individuals from being affected by their spouses’ debts.
Partners with substantial assets on both or either side could be excellent candidates for a prenup. Although often a touchy subject in marriages, prenups can be a great way for individuals to protect what they have worked for.
In addition to current net worth, couples should assess where they aspire to be in the coming years. After agreeing on a goal for a combined household income, the pair can then discern what must be done to achieve it. This may mean getting additional schooling, working more than one job, taking extra shifts or switching positions often.
It is also important to discuss joint and personal financial goals, creating a timeline for each. With a proper plan in place, spouses can support each other’s aspirations, working together to achieve a common objective.
Family Plans, Wills and Life Insurance
Family plans have an impact on the budget. Children are expensive to raise, so those wanting to have them should work out the details early on. By considering how the children will be brought up, potential parents can determine the resources they will need. Factors to consider include:
- The number of children.
- Stay-at-home parenting.
- Extracurricular activities.
Planning for your family is important, but so is planning for the inevitable. An unexpected death and lack of preparation could cause additional heartache and financial troubles for the ones who are left behind. That is why it’s important to get prepared and have this conversation with your partner early.
Wills and trusts offer the ability to account for all assets and help individuals create a plan for distribution. Life insurance, on the other hand, protects families from financial burden. Establishing a will or trust and getting life insurance can help protect what matters most, even in death.
Ultimately, having these conversations early can help you and your partner get ahead of the unexpected. Properly planning before the big “I do” makes managing finances easier and can take the extra pressure off, allowing you to truly enjoy the big day.
Related Article: Creating A Family Budget
By Mathew Sams –