Just got engaged? Here's what you need to know about combining finances
Talk about money before you get married
Valentine’s Day is one of the most popular days to get engaged. In fact, studies estimate that approximately six million couples got engaged on Tuesday. Thus begins the frenzy of telling friends and families the exciting news.
Once the frenzy dies down, however, it’s time to start planning – not just for your wedding, but for your combined financial future as well. Finances can be a complicated and sensitive topic. Many couples will talk freely about a range of subjects but shut down when it comes to discussing money. Like any other issue in a relationship, it is important to talk openly and honestly.
Here are a few topics that are vital for newly engaged couples to discuss before combining finances:
Liabilities and Assets – It is critical to know what each person is bringing to the table in terms of both debt and assets. Couples should discuss any and all financial obligations, liabilities, credit card debt, car payments, and other loans. They should also be aware of each other’s assets like properties, insurance, and retirement accounts.
Spending Habits – Couples should discuss spending habits and be aware of their partner’s tendencies so there are no unexpected surprises. Is he or she a spender or a saver? Does he or she make payments on time? Be aware of each other’s credit scores as well.
Financial Priorities – Have an idea of each of your overarching financial aspirations and priorities. Do you agree you should save for a house, your children’s education, or retirement? Perhaps it’s more important for both of you to splurge on travel while you’re young. Discussing these priorities can help to ensure that you each are working toward the same goals.
Organizing and Managing Accounts – Decide if you want to open a joint account or keep them separate. There is no right or wrong answer as it is purely based on your situation and comfort level. Once you’ve decided, assign financial roles. Decide who will be responsible for the bills, investments, keeping insurance current or whether these should be managed together. This will help ensure nothing is overlooked and that each area of your financial plan receives the attention it deserves.
Plan for Unpleasant Possibilities – Your beneficiary is the individual who receives your benefits in the event of your death. Keeping the beneficiary current is especially important when it comes to your retirement plan and life insurance. While it may be tough to discuss such unpleasant topics after such a happy occasion, it’s important to be prepared for the unexpected.
Marriage is one of the biggest decisions any individual will make in their lifetime. While there are many exciting things to plan such as a wedding and/or a honeymoon, getting your finances in order beforehand is an important part of starting your new life together on solid footing.