I’ve had a rash of newlyweds coming into my office lately and having just tied the proverbial knot a few months back myself, the subject of money and nuptials has been coming up a lot. Study after study points to finances as the number one reason for divorce, so I decided to put together a list of questions to help newlyweds start off on the right foot financially.
As you work through the process of merging your financial lives, I think the most important thing to remember is that a healthy dose of communication, just like in any other aspect of a relationship, is the key to success.
Maybe less obvious, but almost equally as important, is that your end goal shouldn’t be to force your partner, or yourself, to have the same views on money. More common than not, the couples I see have very different tendencies when it comes to money. There’s almost always one partner that naturally spends more, or one that’s more comfortable with debt, and on and on. The point isn’t to “get on the same page”, but instead to understand each other’s differences and accommodate accordingly.
So without further ado, here are a few questions to ask before you jump into “for as long as you both shall live”.
Spending
#1) How much can we spend without asking the other? You don’t need to get permission to buy a pack of gum, but setting a dollar figure that warrants a phone call before you make a big purchase will save a lot of heartburn in the future.
#2) Will we have a budget? Whether it’s Mint.com or the envelope system, choosing a tool that works for both of you to keep your spending in check is one of the biggest steps you can take to financial success. Unchecked champagne taste and a Miller Lite pocketbook is a recipe for disaster.
Family
#3) If, when and how many kids do you want to have? Talk about big financial decisions. CNN estimates that it cost $241,080 to raise a child until the age of 18, and if you think they’ll stop asking for money after they turn 18, think again.
#4) Will your parents be able to support themselves financially through retirement? It’s an unfortunate reality that a lot of people in this generation are going to end up picking up the tab for decades of their parents’ financial debauchery, and if you’re one of them, this is probably a piece of information that your spouse-to-be would like to have.
#5) How do you feel about accepting financial help from family? Before you take that ten grand from your mother-in-law to install a fro-yo dispenser in the kitchen (or to pay off aunt Sallie Mae), consider two words: strings attached. And if the money is coming in the form of a loan, be prepared to have your spending habits scrutinized until the day you pay them back.
#6) When is it ok to loan money to friends and family? “What? I thought you’d be happy to loan my cousin the down payment for his new trailer house. You know he’s good for it.” Not only will having a game plan here save a lot of friction with your partner, it also works miracles when you can firmly tell your cousin Jim Bob that you and your partner have a no-lending policy when he hits you up for cash.
Debt
#7) How much do you owe? “I just assumed you knew that my $250k underwater basket weaving degree would mean I had a few student loans”. When you’re taking someone for better or for worse, you probably want to know what you’re getting into before you sign on the dotted line.
#8) How do you feel about debt & credit cards? If you pay your balance off every month and your partner seems to have no qualms with the fact that they’ve been making minimum payments on their Banana Republic card since the first Bush administration, you both might have some work to do.
#9) What’s your credit score? Choosing whether or not to marry someone based on their credit score would be ridiculous, so why even ask? If your soon-to-be-groom thinks that paying the electricity bill is optional, there’s a better than average chance that you’ll have some money arguments down the road that could be prevented by making a game plan.
Saving
#10) How much will we save? Talk about how much you need to be putting away and set it up to come out of your paycheck before you ever see it (planning to save when you can afford it is a one-way ticket to the poor house).
#11) How will we choose where to invest our savings? If your spouse wants to risk your whole nest egg trying to find the next Apple and your preferred method of savings is a coffee can in the back yard, you’re going to need to figure out a compromise.
Logistics
#12) How do you feel about prenuptial agreements? This is a subject that a lot of people feel strongly about one way or the other, so make sure that you know where your partner stands.
#13) To what extent will we combine our finances? Some people prefer to keep everything separate, while others prefer to merge. Don’t automatically assume that your partner wants to be 50/50 partners with you.
#14) How will we delegate financial responsibilities? Sometimes one partner enjoys paying the bills and balancing the checkbook, which is fine, just make sure the other isn’t in the dark as to what’s going on with your money.
#15) Will we need outside help? Consider talking to a fee-only financial advisor, especially if neither of you are monetarily inclined. The National Association of Personal Financial Advisors is a good place to start (www.napfa.org).