People say that money can’t buy you happiness, but not having can sure cause a lot of problems, especially in your marriage. A survey by Ramsey Solutions showed that nearly two-thirds of marriages start off in debt and that over a third of couples fight about debt and hide purchases from one another. Money problems have also been shown to be one of the leading causes of divorce in America.
Marriage and finance go hand in hand, just like the bride and groom. The intermingling of your lives will also mean an intermingling of some or all of your assets, accounts, and debts and your credit scores, although still largely separate will become more and more intertwined as you make joint purchases and take out loans together. That is why in this article we’re going to be going over some tips for making the transition from being single to married as smooth as possible. We’ll walk through the evolution of a relationship with tips for each point along the way.
Finance for Dating Couples
When you first start dating someone new the excitement of it and the desire to not do anything to upset your new romance means that lots of really important life things are overlooked while we focus on more trivial clues as to how our partner is responding in the relationship. This is perfectly fine, especially early on. However, as you settle into your relationship you first need to look for financial clues about your partner. No, I don’t mean trying to sneak a peak at their checkbook. I mean you should look to see how they live their life financially. What type of job do they have, do they appear to have a constant stream of new stuff, and do they appear to have the same tastes for spending as you do? You can glean some serious insights from this, and you may recognize some initial attractions that are now red flags – expensive new car, luxury condo, closet full of expensive clothes… all paid for by a job doing what? Hmm… Or maybe you notice a fellow frugal patron who doesn’t mind going out an having a good time, but enjoys a date night in just as much as an expensive dinner, living well, but within their means.
In either case, once you get past the initial phase of dating it is important to start to open up about finances. You can do this casually to ease into the conversation with simple asides like, “Can you believe Netflix is raising prices again?” You’d be surprised at how a simple comment like that can get a response like, “I know. Don’t those guys know I have $80k in student loans, a $600/month car payment, and three maxed out credit cards?” Well, let’s hope that isn’t the response. You can also lead conversations by talking about your own finances, whether good or bad. Tell them about your student loans, your job, how you think your apartment is a great deal or too expensive, etc.
For men the main hang-up about talking finances is usually related to how much they earn. This is understandable as it is rooted in the cultural history of man as the provider. Women, meanwhile are often worried about being seen as a gold-digger who is only interested in you because of your money. These stereotypes and worries are nonsense. It is better to be honest up front because it will save you a lot of pain later on.
Advice: Do not open up any joint accounts, co-sign on loans, or become financially entangled at this point in a relationship!
Finances for Fiancés
Now you’re engaged. You’ve got the Big Question behind you, but you’ve now also got a wedding and the rest of your life to plan for. Yet, in the eyes of the law, you are only slightly more than dating. Hopefully by this point you and your spouse-to-be have had long and deep conversations about finance, but if not, now is the time.
You need to give each other a thorough snapshot of your financial situation. This should include:
- Discussion about salary, bonuses, stock plans, company benefits like 401(k) and healthcare, and the stability of your work
- Discussion about your financial position with respect to checkings, savings, and other accounts, as well as investments in stock markets or other funds
- Conversations on your assets (home and car) and your liabilities (loans) on those. How much do they cost to maintain, insure, and make payments on?
- Discussion on all of your debts ranging from credit card debt to student loans to whatever.
- Conversations on your budget and how much you are able to save every month.
This can be painful, especially if there are disparities, but having the conversation sooner than later is really important. You don’t want hide something throughout the engagement only to have it grow to something intolerable when you start off your marriage.
Note: If your partner was previously married you should talk about any claims or residual financial entanglements that they still have with their ex.
Financial Involvement Before Marriage
The big question here is whether you should become more financially involved. I advise that you tread with caution here. Don’t co-sign on loans or open up joint accounts at this stage. If you do want to commingle your finances try doing it in cash – put a jar on the kitchen counter to save for something nice like a trip together or to pay for a part of the wedding, and each commit to put a small amount in each week.
However, you can help each other out financially. If your partner, for example, has $2000 in credit card debt and is starting to fall behind and you can pay that off no problem, you should consider it as their financial problem will become your problem once married. If you are so inclined, you can also save money by moving in together (although if both partners own homes this can become tricky to manage)… However, you should not buy a home together until you are married.
Moving in together can allow you to share many of the common costs like rent, internet, food, utilities, and more. To manage this, I suggest that each of you take a bill and put it in your name alone. Try to balance it relative to your own income or to what you think you can both handle. I know that a lot of people will want to retain their personal space, but unless you have a moral objection to living together, engagement is a good time to work out the challenges of living together full-time.
Pro-tip: Remember that your wedding is supposed to be a celebration of your love, not an event to show off how much money you have (or had). Set a budget and stick to it!
Advice: Don’t open up joint accounts or co-sign on loans, but do consider making moves to help your partner out if they have some bad debts or are struggling financially.
The Big Day has come and gone and now you are married. At this point hopefully you have been completely honest with each other, but if not, open up now. Even if you’ve now been married for 10 years, and have been hiding something, open up now! Hiding financial problems may make you feel heroic, like a silent martyr, but it actually just makes you financially unfaithful to your spouse. If there is bad news, air it out, and develop a plan to tackle it together – because that is what marriage is about – tackling issues together. If you have been hiding something, I hope it is the fact that you have a giant extra pile of money squirrelled away.
At this point you should use your combined financial resources to build your Emergency Savings Fund, tackle your debts (using the Snowball or Avalanche methods), and save for retirement. If you don’t yet have kids you need to use this time to be aggressive in pursuit of your financial goals, whether they be eliminating debts, buying a house, or getting your Emergency Savings Fund up to 6 months of income.
As part of becoming a team, you need to open up joint accounts, put the other person on your accounts, make them beneficiaries incase of your death, and do a combined Wealth Check-in. Many people like to keep some accounts to themselves, and this is fine as long as your partner knows they exist and are a beneficiary incase of your death. In fact, having separate (but equal) accounts can be a great budgeting tool. Many couples I know have grown to tolerate their partner’s spending when they both save in separate special accounts that can be used for buying anything from handbags to fishing gear.
The Big D
Sometimes things don’t work out, and then comes the Big D – Divorce. This is obviously something that can lead to fights over everything, including money, assets, and who gets stuck with the bills. However, even after all the papers are signed you will likely still not be financially separated for a long time if you have co-signed on loans together or joint retirement accounts that can’t be easily separated.
My only advice here is to understand the on-going financial commitments and watch them as best you can. If possible, try to arrange for loans to be refinanced to be in the asset owners name, and avoid co-signing on any new loans.
As your relationship moves form dating to engagement to marriage (and possibly beyond) you will become more financially entangled with one another. Honesty is the best policy, and you need to learn to respect your spouse financially. Talk openly about your concerns and aspirations. The earlier in a relationship you do this, the better. You don’t want to make it into your first years of marriage only to find out that festering financial problems are going to cause strife.
Have questions? Drop us a message with questions about your finances and we’ll do our best to get them answered during our Friday Q&A.
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