Words by Sara Desautel
Planning to merge money once you’re married? Maybe you feel like it’s too soon or too scary to talk about it. It’s common for couples to face debt early in their marriage or to have lofty savings goals that seem unattainable. There are some easy and important things that will keep you and your spouse moving together towards the same financial goals. We sought advice from Rich Cullen, a Registered ParaplannerSM, for tips on setting your marriage up for a successful financial future.
1. Talk about it before you walk down the aisle.
Ideally couples should discuss the state of their individual finances before they are married. You don’t need to make or delay a marriage decision based on finances. However, finance-related differences and associated stress are the #1 cited cause for divorce, so the “finances” discussion is a must—ideally upfront. At the very least, you should have a plan for attacking debt and addressing any glaring differences you might have.
2. What’s his is yours and what’s yours is his.
Our tax laws and any state that is a “community property state” means couples own an undivided, equal share in “joint” assets. Further, even though you can have separate credit scores, it is your combined score that is often looked at for big ticket items. In a perfect world, couples would save cash for big purchases and avoid debt, but at some point in time, couples will likely need to seek some sort of credit—for example, when buying a house. It’s important for couples to come to agreement on what expenses their income can support and lay the foundation for the elimination of debt, which will result in the subsequent improvement of their credit score.
3. Make goals and stick to a budget.
Couples who are starting a new chapter in their lives may either have more debt or more income (or both) than they’ve ever experienced in their lives. By starting with a series of financial goals (i.e. in 3 years, we want to be debt free, in 5 years we want to move into a home with 20% down payment, in 7 years we want to purchase a quality used or new car, and in 35 years, we want to retire, etc.) then the budget is the “how-to” in achieving those goals.
4. Don’t expect to get rich overnight.
Cars, houses, children, college education, and retirement do not come cheap! Time is your best friend when it comes to accumulating wealth and some of these goals need to be saved for simultaneously while others will be of relatively low importance in the beginning of a marriage relationship.
5. Make big decisions together.
Healthy marriages function when each spouse has a “say” in the financial picture. Each relationship is different in terms of who compiles and tracks the budget to include paying the bills, but much of this is administrative or clerical in nature. The actual decision as to where the dollars are spent is a mutual decision that both spouses should have ownership in.
6. Live within your means.
Never extend yourselves beyond your means—don’t buy the house, car, or other purchases that may put your long-term financial health at risk.
7. Set aside funds when times are good.
Save for retirement on a committed and consistent basis including socking away portions of pay-raises and bonuses.
8. Be open, honest and willing to forgive.
Transparency is of the utmost importance. Any good relationship is based on trust, so there will need to be lots of it combined with grace when someone inevitably makes a poor financial decision!
Rich Cullen is a Registered ParaplannerSM and Representative of Northern Capital Management, Inc, which offers wealth management and financial planning services, they have openings for new clients and do not have an account-size minimum.
Rich can be reached at (509) 456-2526 or [email protected].