The venue is booked, and you've written your vows. But have you discussed your credit histories? Or decided whether you'll keep separate or joint accounts? Those discussions can be just as essential as agreeing on the invitation list to future wedded bliss.
Even though research suggests that married couples are more likely to accumulate wealth and meet certain financial goals than their single peers, disagreements over money can derail those plans. Before tying the knot, experts recommend that couples have these six big money talks to prevent conflicts later:
Your credit histories. The average person is responsible for $16,860 of debt, excluding mortgages, according to the credit reporting agency Experian. That makes it likely that the person you're about to marry is bringing along some serious baggage. While married couples aren't directly responsible for each other's debt as long as they maintain separate credit accounts, one person's poor credit can ruin a couple's chances of jointly taking out a home or auto loan, or at least make it much more expensive than it would have been otherwise.
To prevent surprises, personal finance educator Taffy Wagner suggests asking each other: "What existing debt do you have? What student loans? What car payments that parents will stop paying? Are you about to lose your car? If you have a child, do you have child support?" If the discussion generates some unexpected answers, try not to get angry, she warns. "You can't hold anything against the person prior to your getting married—you were not there. We all make mistakes," she says. That spirit of forgiveness also extends to yourself. "Forgive yourself for financial mistakes that you made; you were not taught how to mange money," says Wagner.
Whether you want separate or joint accounts. Experts don't agree on whether separate is always better, so the decision to combine bank accounts or not depends on the couple. In general, older couples bringing substantial assets into the marriage—or the responsibility of children—are more likely to keep their money in individual accounts. But many personal finance advisers say that even younger couples should consider doing the same. "It's always best to have some separate accounts," says Sharon Epperson, author of The Big Payoff: 8 Steps Couples Can Take to Make the Most of Their Money—and Live Richly Ever After. "It just makes it a lot easier if [couples] can have an account that they go to for their own purchases where they don't have to tell somebody every time they're making a purchase."
Epperson practices that approach in her own marriage. Her husband likes to make almost daily purchases from Amazon.com, for example. "I don't bother my husband about it. I know it's on his credit card," she says. On the same note, her husband doesn't ask her about the makeup and clothes she buys with her own money.
Even when just one spouse works, the same advice applies. Epperson says a stay-at-home mom, for example, should also maintain her own bank account, with a percentage of her husband's income funneled into it. Says Epperson: "A stay-at-home mom who is not making any income should still have fun money," her term for individual accounts that go toward personal expenses. Similarly, if one spouse earns more than the other, equal sums should go into the individual accounts because they are based on household income, not each spouse's income, Epperson explains.
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Vienna, Va.-based couple Gene and Bettina Donohue apply Epperson's strategy to their own lives. They maintain separate credit cards on top of their shared overall accounts. Because they are focusing on their budget as they try to refinance their home, they use their individual credit cards for relatively minor purchases, such as Bettina's manicures. Gene, 38, a consultant, says one benefit of the separate system is the surprise factor. He had no idea what he was getting for Father's Day, for example. He adds that he and his wife never fight about money, since they use their separate accounts for such small items.
Separate accounts also ensure that both members of the couple know how to manage money, says Candace Bahr, cofounder of the nonprofit Women's Institute for Financial Education and owner of an investment firm whose clients are predominantly divorced women. She points out that marriages don't last forever. "Even in the best marriages, one spouse is going to die. So it's still important to maintain your own identity," Bahr says. She recommends keeping assets, retirement accounts, and credit in one's own name. If one spouse is completely responsible for the finances, that leaves the other vulnerable in the case of death or divorce, she says."
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Your long-term financial goals. Some people want to go on an exotic vacation once a year; others prefer to scrimp for a down payment. Talk about it ahead of time so you're on the same page.
Your spending styles. Don't be surprised if you're a spender and he's a saver. In fact, says Bonnie Eaker Weil, a New York-based relationship therapist and author of Financial Infidelity, that's probably why you're getting married. "People don't understand that if you pick a person who gives you the most trouble that [it] will challenge you in the areas you need help with. It's very unusual for people to have the same money [attitude]," she says. If you discover that you and your betrothed are polar opposites when it comes to budgeting, try to turn that into a positive by using each other to find a happy medium, Weil suggests.
Who will do what? Do you like paying the bills, while she tends to lose them under a stack of paperwork? Is she the investing whiz, while you prefer to keep track of the checking account? A system of assigning tasks and making sure that each spouse takes over some financial responsibilities tends to generate the best financial results, according to a study by the Hartford Financial Services Group and the MIT AgeLab. It found that couples who divide up financial tasks, where one spouse handles day-to-day bill paying and the other investment management, fare better than those who hand over the financial reins to one person while the other takes a back seat. The couples with the so-called divide-and-conquer approach were more likely to have more savings and to develop a financial plan for the surviving spouse. Yet only 11 percent of respondents practiced this kind of shared division of labor.
How will you respond to needy family members? According to Fidelity, 10 percent of generation X-ers provide financial support to their parents or in-laws, and the average amount is about $3,500 a year. Eric Cramer, a financial consultant at Charles Schwab, says that the financial crisis has turned family into "the lender of last resort." To ensure that a request from your sister doesn't blow up into World War III at home, talk in advance about whether you would feel comfortable—or not—helping out family members who find themselves in a pinch.