Talk finances before you tie the knot
It’s always fun to discuss the excitement of your wedding plans, but what about the not-so-fun topics? Among these are your personal finances and how you plan to handle money matters as a married couple.
Before you take a vow to share the rest of your life with a significant other, you should have the money talk to determine whether you’re on the same page. Many arguments stem from money and could make or break your marriage if you aren’t both on the same page.
1. Share your philosophy on money
How do each of you feel about money? You will have both come from different backgrounds with different family and cultural influences that affect the way you think and behave around money. Discuss together what are your thoughts on how financial affairs should be managed? Talk with each other about what you learned about money as a child so you can gain a better understanding of your respective views.
Perhaps you were raised by parents who were well-off and you continue to live to the same standard as if you still had the income to support the lifestyle of your youth. If you fit the bill, marrying a saver could result in conflict. How will you work this out?
2. Be honest about credit reports
After you’re married, you may want to explore options to raise a mortgage to jointly buy a home. This is not the time to let the worm out of the can and have your partner find out about a bad credit blip that may impede on getting an affordable mortgage
Discuss your credit report and any history behind this.
3. Disclose financial obligations
Be open and honest with each other about any financial commitments you currently have and would like to keep or have to keep. Now’s the time to come clean and discuss all arrangements. These may be apart from committed debts; donations, or commitments that you have to support family or child support payments. Have all of these out in the open. Other outstanding obligations, student loans and credit card debt, should also be disclosed.
4. Set goals
Have you thought and discussed together your short term and medium term goals? From buying a home, or even a car to spending a few more years travelling overseas before settling down and starting a family all involve money and a financial commitment or sacrifice. Determine if you share common goals. At some point, you will need to establish joint goals.
If you’re going to spend the rest of your life together, why not learn how to manage your money as a unit? Putting a budget around your wedding is a good start. Together as a financial unit you have more potential combining everything than if you keep everything separate. Having a budget and a plan is a good way to have conversations around money and keep things on track
6. Talk about children
IRD says the cost of raising a child is about $250,000 over their first 17 years.
That being said, that does not take into account any loss of income while a parent is a stay at home parent. Are children in your plans? If so, have you developed a timeline and a plan of action to cover the costs associated with parenthood including the initial set up? What will be the return to work plan? This is different for everyone but the outcome makes a big difference financially. I call this financial family planning.
7. Plan for retirement
Assuming you’re together for the long haul, retirement will be an important thing to think about. You will need to allow for at least 25 years in retirement depending on when you plan to stop working. The sooner you jointly start on a plan to cover this the more comfortable you will be in retirement.
The other thing that is important to discuss and review on a regular basis is Life insurance and other insurance policies that can assist if there are any major health issues. Jointly consider these as the whole family can be affected in times like these.
8. Will you have joint or separate accounts?
Some couples decide not to combine their finances and instead maintain separate bank accounts. In most cases to combine your finances makes a lot more sense and jointly you can move towards your financial goals more effectively.
Having separate accounts and splitting the bills may work until there is only one wage then the other spouse feels that are not part of the financial equation.
9. Career plans
Discuss your medium and long term goals for your working life and career? Do any of these involve extra study? What will the cost be? Do you have a dream to start a business and be self-employed. To have the support of each other to fulfill these dreams and plans is essential.
10. What’s your backup plan?
When crap happens in life that you have not planned on it is important to have a backup plan. This removes tension in such times and makes hard situations like a break in employment easier to sail through. Set aside a regular amount until you have a fund that can cover you for a period of time. I suggest that this account does not have easy access and it is funds you both agree to discuss before accessing them.
To start the process, please schedule a quick Strategy Session with us today!