Tying the Knot? Avoid 'Until Debt Do You Part'
BOSTON — With the wedding approaching, you've chosen the flowers, been fitted for formal wear, and planned everything from seating arrangements to your honeymoon.
You may, however, have neglected one of the most important elements: a plan for managing personal finances.
Why the avoidance? Some couples don't like to talk about money. Others may not think about it. A few may feel that talking about money will destroy the romance.
It doesn't have to be that way and, for your own protection, it shouldn't be. Talking about your feelings toward money is part of creating the trust and respect central to a good marriage.
And like so many other issues, this one belongs on the table before the marriage, rather than as a surprise afterward.
One important ground rule: Both partners need to know how much is being earned, spent, and saved. It isn't a show of trust to abdicate responsibility to your partner. It's poor planning.
If you are a young couple just starting out, this is the time to create a plan and set some goals together.
If this isn't your first marriage, planning is more complicated, especially if there are children from previous marriages. But this only increases the importance of a money talk prior to cutting the wedding cake.
Here are some topics to get started:
Net worth. You'll have photographs from the wedding, right? Well, take a financial snapshot as you start your new life.
Begin by adding up what the two of you own together - the value of your bank, mutual fund, and brokerage accounts, plus real estate and personal property.
Include joint accounts held with a parent or child and pensions or 401(k) plans at work. Next, add up what the two of you now owe together, including credit cards, mortgages, and school, personal, and family loans. Subtract liabilities from assets, and you have your net worth.
Money attitudes. Some people are compulsive savers; others, compulsive spenders. Most people fall somewhere in between, and the two of you should find out where your attitudes conflict and where they are in sync.
Do you pay bills on time? How much debt do you consider acceptable? And what about credit ratings, credit cards versus cash, and investing?
Joint or separate accounts. Many couples today keep three separate accounts: yours, mine and ours. Some money is deposited by each into a joint account for household bills, while the rest goes to individual accounts. This system works especially well if one of you does not like being second-guessed.
You might consider marriage the most important business arrangement you will enter into, ever. And as with any business relationship, you should discuss all the financial aspects before you begin.
Of course, things will change. Having children and changing careers have profound effects. Your system should be flexible enough to anticipate and deal with change. The constant, however, should be a shared understanding of family finances.