While finding a partner for life is a significant challenge, basic money management is perhaps a bigger challenge to the institution of marriage itself. Money arguments have been identified as a leading predictor of divorce. That is why having a financial plan and taking time to engage in meaningful money talks on a regular basis can be a make or break decision for couples. However, if you or someone you know is thinking about getting married, be sure to talk about more than how much the wedding will cost or where you will spend the honeymoon. Here are 5 essential ways to assess your spending before you decide to marry:
1) Complete a financial wellness assessment
Before you share your financial story with your significant other, you need to know exactly where you stand. Your financial wellness assessment should include important information about your current financial status. At a basic level, complete a net worth statement and review your recent expenses. Then, create a spending plan so you can start proactively telling your money where you want it to go in advance. Some other important financial measurements include your savings ratio, debt to income ratio, and emergency savings. But a financial wellness assessment should also include a quick examination of your financial attitudes and confidence about your knowledge of money matters. You should also ask yourself a simple question: do I have a written financial plan? If you answered no, that can quickly be fixed with a simple, one-page financial plan.
2) Create a debt reduction plan
You don’t necessarily have to completely eliminate your credit cards or student loan debt to walk down the aisle with confidence. But it is recommended to at least have an action plan in place to do so as quickly as possible after exchanging your “I Dos”. Many couples delay getting married until after student loan debt or personal loans are less overwhelming. Bringing the baggage of debt into a marriage can be a major stressor on a couple. That’s why couples should spend time understanding each other’s current debt obligations. But instead of just identifying the potential problem, focus on establishing a debt reduction plan to deal with student loans, credit cards, car loans, or other obligations as quickly as possible.
3) Be sure to make time for a little show and tell
4) Schedule regular money talks that aren’t ridiculously boring or judgmental
Don’t stop with a one-time show and tell event. Make financial planning a regular event. This is the best way to avoid having your partner become your biggest financial enemy.
Some topic ideas:
- What important financial lessons did you learn growing up?
- What are your future vacation plans? How much will this cost? How often do you plan on taking trips?
- Will you be renting or owning a home within the first few years of marriage?
- Do you have any specific career goals or future dreams of self-employment?
- What does financial independence mean to you?
- What do you look forward to doing the most when you have achieved financial freedom?
5) Decide how you to manage your finances as a couple
Figuring out how to consolidate accounts can be a challenge. Sometimes it helps to establish a joint checking or savings account before getting married to set aside funds for the wedding or honeymoon. You also need to discuss how you currently handle day-to-day financial decisions. Are you a better long-term planner or are you well-organized and prefer to pay the everyday bills. This will help you start creating an initial game plan on how to consolidate accounts and whether it makes sense or not to keep separate accounts initially.
How will you make major financial decisions? Will you have spending rules such as a 24 hour waiting period for purchase over a certain amount? Do you feel comfortable using credit cards for everyday purchases to receive cash back rewards or does the thought of using credit going against your financial belief system?
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