By Wendy Mihm | Thursday December 9, 2010
Maybe you’ve dated for years and split more than your fair share of checks. Perhaps you’ve even lived together and split the rent. But too many couples take for granted that the knowledge they’ve gained through these experiences alone will be enough to see them through. They forget that money is the number one hot topic of disagreement in most marriages. These couples get caught up in the excitement of planning a wedding, and they simply don’t realize that making a commitment as lifetime financial partners is a different ball of wax entirely, and merits some serious preparation.
I’m not suggesting you should somehow become independently wealthy before you marry someone. What I mean is that you you and your partner should have some serious conversations about money, and have an idea of what you’re getting into before you tie the knot.
To that end, here are the FinancialRx 5 things you must do before you marry. They are not rocket science in and of themselves, but they are not always easy to execute, if done thoroughly and honestly.
1. TALK TALK and TALK some more about money.
Why? Because money will affect your life every day, in big ways and small. And whether you know it or not, each of you probably grew up and spent your young adulthood with very different ideas about money – about how it should be earned, how it should be spent, how it should be saved, how much you need now, how much is enough to retire on, or how much is too much to spend on a bottle of wine.
You could have a little fun (and be truly nerdy about it like my husband and I), and break out some financial power tools to see how much you’ll need to save each month to have a million dollars by the time you retire. Whatever it takes. Just talk about what you both value and make sure you’re both honest with yourselves and with each other about what you truly want and expect. Here are some topics to get the conversation rolling:
- Joint checking account or separate accounts?
- How much debt do you each have now – don’t forget credit cards, student loans, home loans, auto loans, etc? Be honest – now’s the time.
- What do you consider a lavish expenditure? An everyday expenditure?
- What are some things you can’t live without?
- Do you have any shared financial goals? A house or second home? A family? An emergency fund? Travel? Retirement? Education?
- Do you plan to give to charity?
- Do you have any financial commitments to family?
2. Commit to saving money—together.
Even if it’s not a lot of money, make a commitment to your partner, shake his or her hand, and write it down. Then go to the computer together and set up a joint IRA or Roth IRA, link it to one or both of your checking accounts (or your joint account), and set up automatic transfers, and voila! Now you have an automatic savings vehicle that you don’t have to think about, that is building a tangible future for you both to enjoy, together. As you earn more, you can increase the dollar amount and watch the savings grow, as you grow as a couple, over time.
3. Consider a mediator.
Even if you’re very much aligned in terms of money, you’re not identical humans. This means that you will, at times, spend money on different things, and it will cause friction. When that happens, it’s good to be able to turn to a third party for an unbiased perspective. If you have a financial advisor or accountant or even a therapist you can turn to, that can be helpful in really difficult situations. But something as simple as a look at your bank or credit card statement can be an excellent reality check for both of you for those smaller skirmishes. Perhaps you’re a little miffed that he spent $270 on new ski boots (didn’t he just get some two seasons ago?), but a glance at your Visa statement reminds you that you spent $285 on a new beach cruiser two months ago…
4. Understand and agree that it takes time to build wealth.
Then see point number 2. If this is just about saving money, why did I bring it up again? Because it’s not just about saving money, it’s a whole philosophy that you both must understand and agree to if you are to be in financial harmony throughout your marriage: building real wealth takes time. Period. If one of you is constantly dropping $10, $15 or even $20 on lottery tickets or entering into foolish get-rich-quick schemes while the other is packing their own lunch and maxing out their 401k, fights will surely break out and money will be wasted. You must be on the same page with each other on this strategy. Then support each other with long-term investments toward wealth-building such as higher education, career changes and lifestyle adjustments.
5. Splurge on each other every now and then.
All work and no play makes Jack a dull boy. Likewise, all saving and no spending makes Jack and Jill a divorced couple. Sure you should save some money. But you should spend some too. On each other, on yourselves, and most importantly, on doing things you enjoy doing, together.
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