For Love and Money -
How to Plan a Healthy Financial Future
If every couple devoted as many hours to strengthening their relationship as they do to planning their wedding, US marriage statistics would boast a brighter tale. The high divorce rate proves combining two lives in wedded bliss requires more than a knack for stamping a monogram atop every unembellished surface. So just what is the key to a healthy marriage? A healthy financial portfolio, apparently. Financial woes are one of the main stressors in a marriage and a primary cause of divorce.
It’s easy to see why love and money don’t always mix. Polite society has banished the subject of money, which joins religion and politics in the prohibitive club of taboo discussion topics. Commingling the concept of dirty, cold, hard cash with that of pure, virtuous love is therefore decidedly uncomfortable. Single people grow accustomed to treading the financial landscape alone during the first phase of adult life, and suddenly marriage enters the equation. But rather than addressing the financial impact of “me” becoming “we,” the topic becomes the proverbial pink elephant in the room.
In a perfect world, an honest financial discussion occurs long before the sparkling diamond adorns your left finger. But if you’ve been negligent, and you know who you are, there’s still time to lay your financial cards on the table. A wedding is often the first big ticket item for which a couple plans and saves, and it provides an obvious opportunity to bring this taboo subject into the open.
Now’s the time to set a precedent for your financial future. Here’s what you need to do now to avoid some of the major roadblocks confronting couples when balancing their mutual checkbook:
Practice Financial Fidelity
Financial planning is certainly not the most romantic task on your wedding checklist, but how romantic will you find pawning your engagement ring to pay off your groom’s insurmountable gambling debts? Bottom line – get over yourself – and practice full financial disclosure now. Talk about your spending habits, your savings and credit history. Revealing past credit problems or bad habits now will allow you to work together to clean things up and start your financial future with a clean slate
Many couples errantly assume to have matching long-term financial goals, while the reality often proves otherwise. Your partner may aspire to retire early, while you would rather work towards a dream house in the country. By discussing your dreams and ambitions from the beginning, you can draft financial compromises and investment concepts that help you achieve both goals.
Get a System
Achieving these long-term goals and managing day-to-day transactions requires a money management strategy that fits your needs. Work together to arrive at a system you both can live with. Will you have one checking account or two? How much can you afford to save each month? At what price point will a financial transaction move from being an individual choice to a mutual decision (i.e. – if it costs more than $500 – gotta run it by the wife first!)
Divide and Conquer
One of the favorable characteristics of marriage is that it encourages economic specialization. Perhaps you've got a knack for managing daily transactions and paying the bills, and hubby-to-be is practiced with long term investments -- or vice versa. Working as a couple, each individual can develop the skills they're good at, leaving the other tasks to the partner and assuring all financial tasks are handled by the most able person. (You can tackle together anything falling under the “we both hate it” category – two heads are better than one!)
Heed Wedding Expenses
As debt causes undue strain on a relationship, the last thing you should do is start your marriage in the red. Unfortunately, planning a dream wedding often leads to big credit card bills after the honeymoon ends. With the average wedding now approaching a hefty $28,000 tab, a large chunk of which is often funded by the bride and groom, an all too common scenario is a gorgeous new dining room table adorned with matching place settings - all stacked full of credit card bills addressed to the newlyweds. Avoid this nightmare of debt from the beginning. Establish a reliable method to keep track of all wedding expenditures, set aside a portion of your budget for a just-in-case fund, and cut back wherever you can.
Reduce Post-Wedding Debt
Even if you manage to escape the wedding without racking up debt, it’s imperative to stay on track. If you’re planning on buying a home together, give yourselves at least six months to save a down payment, and reduce your debt-to-income ratio. A few months of financial improvement can help you save thousands on your mortgage. Throughout your life together, continually work to consolidate your debt, pay more than the minimum due, and cut spending.