6 steps for early financial planning with your future spouse before marriage to avoid marital disaster.
Getting married soon? Well, you should start preparing yourself to tackle the new financial situation. Marriage not only means sharing of goals, desires and ambitions but also partaking assets and financial liabilities. From personal finance needs to investment, everything becomes shared. Marriage brings modifications in financial situation.
While finding a partner for life by itself a significant challenge, basic money management is perhaps a bigger challenge to the institution of marriage itself.
People mostly viewed marriage as a rose colored glass of love but they tend to overlook the importance of financial planning. In reality, not having these talks early on can hurt our relationships and lead to major financial arguments
Money arguments have been identified as one of the leading factor of divorce. Having a financial plan and taking time to engage in meaningful money talks on a regular basis is very essential for a couple. If you or someone you know is about to get married, take or advice them on some financial planning ways to make prior to getting married.
#1. Complete a financial wellness assessment
Before both of you sit down to talk about financial story, you need to know exactly you each stand financially. 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. Other important financial aspects you can include is your savings ratio, debt to income ratio and emergency fund. Your assessment should also include a quick examination of your financial attitudes and confidence about your knowledge of money matters. You can consult a licensed financial planner on this matter.
#2. Create a debt reduction plan
You don’t necessarily have to completely eliminate your credit cards or student loan debt before tying the knot with confidence. But it is recommended to have at least an action plan to deal with your debts. Many couples delay getting married until after student loan debt or personal loan are less overwhelming. Bringing the baggage of of debt into a marriage can be a major stress factor for a couple. Couples should spend some time to understand each other’s current debt obligation. But, instead of just identifying the potential problem, focus on establishing a debt reduction plan to deal with your loans and debt as effectively as possible.
#3. Be honest on your financial situation
You aren’t alone if the thought of getting financially exposed in front of a future life partner seems less than ideal to you.
Discussing about your financial situation prior to getting married requires trust and honest communication. You can even go beyond the financial wellness assessment and take a look at your credit reports together. Just remember that this process is not designed to dwell on the past. It is a way to use the past to guide our future financial decisions in your life together. And if some financial baggage do exists, it is better to be honest early on so you can create effective solutions together as a couple.
#4. Schedule regular money talks that aren’t boring or judgmental.
It is significant to discuss about finances and get into money talks before getting married. This is helpful in understanding each other’s financial needs and liabilities. Some topic ideas that you can explore are:
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 means to you?
What do you look forward to doing the most when you have achieved financial freedom?
#5. Baby talk with your future spouse
So, let’s talk about babies. Not the cute or adorable part, but the part where you need to be ready financially to have them. Sit down with your partner and have their opinions about whether or not you should have baby right away or you will need to wait some time before having one. List down potential costs needed when you have a baby including food, housing, transportation, health care, clothing, child care and education, and miscellaneous costs.
Understanding that having children is a lifetime commitment both emotionally and financially is a great first step in the process of deciding when to start a family.
#6. Make a decision 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. The money in the account will be easily accessible to both the partners hence making it easy for any of them to withdraw money, make payments and track their financial activities. You also need to discuss how you currently handle day-to-day financial decisions. Whether you are a long-term planner or are you a 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.
Being honest about your financial situation with future spouse can make a huge difference in couple’s communication and strengthen your relationship. Honesty can go a long way to ensure a harmonious marriage because you two are in this together. Not having these talks early on can hurt your relationships and lead to major financial arguments.
What other financial topics should you discuss with your future spouse? Share with us in the comments section below.