Talk About Money Before Getting Married

  • Start with budgets, accounts and goals.
  • Addressing estate planning is vital, regardless of your age.
  • Open and honest communication may help you avoid money arguments and financial problems.

Discuss finances early

Have you and your spouse–to–be discussed how you plan to handle finances after the honeymoon? If you haven’t, you may be setting yourselves up for a rough go — at least in the beginning. It might even affect your entire time together.

Many studies point to money as a common topic of arguments in many marriages. One reason might be that couples don’t spend enough time talking about money before the “big day”.

Marriage is a many–splendored thing, but when you begin to peel away the layers, one important thing you find is a business arrangement. That’s just one reason why it’s called a marriage “contract”.

As with any business arrangement, in a marriage you have money flowing in and money flowing out. As long as more flows in than flows out, the arrangement usually works. But a marriage isn’t a typical business — there’s an emotional aspect to everything, including the couple’s finances.

To help get the discussion started, here are some issues you should address before you tie the knot.

Budgeting

Some say that the key to financial success is to spend what you have after saving, rather than saving what’s left after spending. Once you sit down and estimate your monthly income and expenses as a couple, it then becomes a matter of budgeting to control expenses and setting money aside to help you acheive your goals.

Combining accounts

As a couple, do you want to combine everything into joint accounts or keep them separate?

As engaged individuals, you probably already have your own savings, checking, and brokerage accounts. But as a couple, do you want to combine everything into joint accounts or keep them separate?

Having separate accounts lets each of you feel independent, knowing you can tap your finances whenever the need arises. On the other hand, joining accounts can help unite your goals and create a more effective investment program.

Housing

If each of you already own real estate, you will need to face issues with housing, including: Will you live in one spouse’s home, or sell both homes and purchase a new one together? What will be the likely tax consequenses of selling — especially if the sale will result in substantial capital gains or losses?

Financial goals

It’s important to set aside money for emergency expenses in case of sickness or job loss. Experts recommend saving three to six months’ living expenses.

That’s why it’s important to establish financial goals and determine your priorities as a couple. Do you want to dine out often, or eat in and save? How much do you want to spend on travelling and entertainment? How about buying and decorating a home, leasing a car, etc.?

Debt

An infographic that says before you say i do make sure you are on the same financial page

Some people are raised to never borrow money unless it’s absolutely necessary. Others are taught that it is acceptable to take out a loan — even for a luxury item.

Differing attitudes toward debt are just one reason it’s important to know before the wedding what, if any, debts each of you is bringing to the marriage. If there is debt, decide whether to combine it or to keep separate credit histories and records.

Many experts recommend each individual retain his or her credit cards and credit history. Doing so helps ensure financial independence and provides greater flexibility if either of you finds yourself alone at some point in the future.

If one of you has a poor credit history, it may be advisable not to commingle debt in order to retain the other’s better credit rating.

Estate planning

Addressing estate planning is vital, regardless of your age. It’s about control, not wealth or what you own. In a marriage, two people are committing to legal responsibility for each other. It’s appropriate to talk about how you want to provide for an orderly transfer of assets, suggesting guardians for children, medical care, and who can speak for each other in times of incapacity.

There are five essential documents you will want to speak with a professional, like a lawyer, about, including:

  • A will provides instructions for distributing your assets to your beneficiaries when you die. In it, you name a personal representative (executor) to pay for final expenses and taxes and distribute your remaining assets.
  • A durable power of attorney lets you give a trusted individual management power over your assets if you can’t manage them yourself. This document is effective only when you’re alive.
  • A health care power of attorney lets you choose someone to make medical decisions for you if something happens and you can’t make them yourself.
  • A living will expresses your intentions regarding the use of life-sustaining measures if you are terminally ill. It doesn’t give anyone the authority to speak for you.
  • While there are many different types of trusts with different purposes, each accomplishing a variety of goals, a revocable living trust is one type of trust often used in an estate plan. By transferring assets into a revocable trust, you can provide for continued management of your financial affairs during your lifetime (when you’re incapacitated, for example), at your death and even for generations to come.

Pay particular attention to beneficiary designations or life insurance policies, IRAs and 401(k) plans.

Consider the financial implications of life insurance and what would happen if a wage earner or work–at–home spouse were lost. Pay particular attention to beneficiary designations or life insurance policies, IRAs and 401(k) plans. Each provider — insurance company, financial institution or plan administrator — needs to be contacted to update the beneficiary designations on these valuable assets. (This step is particularly important in the case of a second marriage.)

When appropriate, include your Financial Advisor, tax advisor, and attorney in financial discussions before you say, “I do.” Open and honest communication before your wedding day may help you avoid money arguments and financial problems in your marriage.

Next steps

  • Set aside a time to have a conversation about money and goals.
  • Discuss things like joint accounts and which home to sell or keep.
  • Be strategic about the debt you bring to the marriage and how you combine it after the wedding.
  • Make an appointment to create or update your estate plan.

Wells Fargo Advisors and its affiliates do not provide tax or legal advice. Please consult with your tax and/or legal advisors before taking any action that may have tax and/or legal consequences.

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