Between popping the question and your wedding day, you and your partner will have plenty to plan. One of the many things you’ll want to sit down and discuss are your expectations about finances. While this probably isn’t as much fun as cake tasting, it’s well worth the effort: Psychology Today reports that 27% of survey respondents reported money to be a key stressor in their marriage.1
Having honest discussions about money early in your relationship can help lay the foundation for a lifetime of healthy financial behaviors. As you prepare to tie the knot, take these six financial considerations into account first.
Topic #1: Where you Stand Today
Money is often viewed as the most private of topics. As a result, couples frequently don’t share much information about their financial status until they are close to marrying. We have even heard from people who do not find out about their spouse’s dire financial circumstances until months into the marriage!
Before you tie the knot (preferably well before), it’s imperative to be upfront about where you stand today. You’re sharing your lives together, so it’s time to tell each other the private details, like:
- “This is how much I have in my bank accounts”
- “Here’s what my investment and retirement accounts look like”
- “My income taxes are up to date” (or, “I’m making payments on the balance due from two years ago”)
- “This is the list of my debts, including:
- The kind of debt it is (credit card, student loan, car loan, mortgage, etc.)
- The interest rate
- The current balance
- Whether any debt is in arrears”
These conversations, like many relating to money, can be uncomfortable. But you need to disclose your financial status to the person who will soon be legally and financially tied to you. And you need to know their situation. If they’re not volunteering this information to you, ask them. It’s OK for everyone to have a past, but money secrets are just time bombs in your relationship.
Topic #2: Your Financial Influences
By the time you’re engaged, you’re likely familiar with some details of your partner’s childhood. But you may not know how finances were handled in their household growing up.
Were their parents frugal, coupon-clipping savers? Or maybe they splurged on dinners out and shopping trips every weekend? Now’s the time to dig deep into how your partner’s family and upbringing may have shaped the way they think about money. With all expectations out on the table, you can begin to establish how you will handle your finances in your joint future.
Topic #3: Discuss Your Financial Triggers
Most people overspend at some point. Some people are stress-spenders; others spend when they’re bored. Many splurge when they feel social pressure to do so. Whatever causes you to go over budget, it’s essential to identify it and make your partner aware. Having your spouse as an accountability partner can help both of you stay on top of any harmful spending habits either of you may have.
Topic #4: Decide On Joint or Separate Savings
Will you combine your finances into joint accounts or keep them separate (or, more likely, something in between)? For much of the 20th century, married couples were expected to completely merge their accounts, essentially considering themselves one financial unit. While this still works for many couples, in our twenty years in practice, we have noticed a trend towards keeping more accounts separate from one another.
Some couples where both earn income keep separate accounts to reserve their own discretionary income. Others find it useful to funnel a certain amount of earnings into a joint account dedicated to paying off monthly bills like the rent or mortgage, car payments, internet, utilities, etc.
Each choice has its own benefits and challenges. Whether or not you choose to combine your accounts, it’s critical to sit down and discuss your spending and saving strategies with one another. Even when each partner has their own bank account, spending habits and decisions can affect your shared future—one spouse’s overspending can lead the other to feel that’s an irresponsible way to handle “our” finances.
Topic #5: Decide Who Does What
If you are already living with your partner, you likely have developed roles around the house. Perhaps one of you cooks and the other cleans, or somebody makes the bed and the other takes out the trash. In a similar way, you’ll want to determine your financial roles. If you are more interested in the investment markets, you could decide to take the lead on your portfolios. If your partner is more organized than you are, they could handle paying the monthly bills. Make a list of all financial tasks and decide who should do what. However you choose to divide the responsibilities, keep each other aware of where you stand. We advise that you set up periodic money dates where you take a few minutes to eat good food while discussing your finances.
Topic #6: Talk About Taxes
While people tend to only think about taxes once a year (a fact that Ken and Britta lament on a regular basis), you’ll want to get a jump on determining how you plan on filing next year. As a married couple, you can choose to file as married filing jointly or married filing separately. You may want to meet with your accountant early to determine which filing strategy may be best for you. Better still, follow our usual practice of setting an annual tax planning meeting before the end of the year. Developing a filing strategy can influence other aspects of your finances, making it a good idea to determine your strategy in advance.
Getting married is such an exciting time, and the days leading up to and following your wedding may feel like a whirlwind. Before you tie the knot, sit down with your partner, and have a serious discussion about your finances as a couple moving forward. Getting organized now, and understand each other’s financial strengths and challenges, could save you untold time and headaches later in your marriage.