19 Jan 5 Financial Topics to Discuss BEFORE you say “I DO”
Getting married is a monumental moment in a person’s life. On your wedding day, your individual life changes dramatically when you become a we instead of a me. I can honestly tell you that my wedding day and the birthdays of my children are still the most monumental and memorable days of my life. Getting married to my husband is the best decision I ever made. However, I would be lying if I told you that marriage did not require work and true commitment, over and over again.
When I attend weddings now after being married for 15 years, I have a completely different perspective than I did when I was much younger. I often wonder when I watch a couple interact with one another on their wedding day about how they will get along after the honeymoon. I often think about the couple’s expectations about what it will be like to live their lives together as husband and wife. I am curious if the couple believes in happily-ever-after and love-conquers-all? Or are they prepared to share their life together and honor their vows to love each other for better or for worse, in sickness and in health, for richer or for poorer?
If you are currently engaged to say I DO, let me be one of the first people to say, “Congratulations!” I want you to enjoy your new life together as a married couple. Planning a wedding is very exciting. However, please don’t forget to plan for the marriage.
Finances are a serious topic that both people entering a new marriage need to be in agreement about. I want to encourage you to talk about the following financial topics BEFORE you get married. I truly believe that the transition from me to we will undoubtedly be much smoother if certain conversations take place BEFORE you say I DO, rather than after the honeymoon.
1. The first financial item to discuss is a new monthly COMBINED budget. As a married couple, most people choose to combine their income and expenses in order to run their new household. Going through this exercise, although it can be a bit tedious, will facilitate good conversation. I want to encourage you to both agree on how you will handle your money as a married couple. Remember, unmet and unclear expectations regarding financial issues are one of the top three reasons couples argue and even divorce.
I have actually done the heavy lifting for you and have created a very detailed budget worksheet. All you have to do is fill in the blanks. Simply subscribe to email updates at emilygstroud.com, and my budget worksheet that is normally reserved for personal clients will automatically be sent to you via email.
2. After you have a realistic budget, and a better understanding of how much discretionary income you will have each month, you will be ready to start discussing your financial goals as a married couple. This is the fun part. You can start dreaming together about the life you hope to create.
Here are some topics to discuss to begin your conversation:
- What are you each passionate about? What do you love to do?
- Where do you see yourselves working and living in 5 years, 10 years, or 20 years?
- Are you ready to purchase a home, or do you need more time to save money for a down payment before you can make the leap into home ownership?
- Do you want to have children? If so, ideally when and how many?
- Does one of you want to stay home and take a break from their career when your children are young?
- What are your long-term goals for your careers?
- Do you need to get further education to achieve your career goals? If so, are you financially prepared to pay for more education for one or both spouses?
- Do you want to travel? If so, you need to save money to pay for it.
3. The third financial topic to discuss is the money, or property, that you have accumulated already as a single person. What assets, if any, do you already have? This includes checking and savings accounts, brokerage accounts, retirement accounts, real estate, and even a business.
Have you started saving for retirement? If you have not started saving, don’t be dismayed. Find out if either one of you has the opportunity to save in an employer sponsored 401k plan. This is the best way to systematically save for retirement every month and reduce your federal income taxes.
4. All financial skeletons must come out of the closet. Trust me, it will always catch up to you. Please, please do not be dishonest with the person you are about to marry. If either one of you has student loans or credit card debt, you need to discuss it with your future partner. You also need to talk about your credit scores. Both of these issues will dramatically affect your future ability to purchase a home or other large purchase, such as a car, after you are married. If you do have debt, do not be ashamed. Take responsibility for it and come up with a plan together to pay it off.
5. Finally, do you have a cash reserve? I suggest a minimum of three months of living expenses in a savings account. If there is any uncertainty regarding your employment, then I recommend a cash reserve of at least six months of living expenses. A lack of a cash reserve is the number one reason people get into credit card debt. If you don’t have any money set aside for unforeseen expenses, you can get into trouble financially very quickly.
Many people often ask me if they should use their discretionary income to pay off debt or to create a cash reserve. My answer is saving money and paying off debt are both equally important. Consider allocating a certain percentage of your monthly discretionary income to savings goals and a certain percentage to debt repayment. Once you are free from debt, you will be able to save even more! Saving money is the pathway to financial freedom.
Getting married is one of the most exciting life events, and my hope for you as an engaged person is that you will walk into marriage as prepared as possible. Even if it’s uncomfortable, talk about these financial topics with your future spouse. You will soon find that having these conversations now will set you up for a more peaceful marriage later!