Monday, January 19, 2015

Talking Finances with Your Fiancé

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GUEST POST BY SOCIAL MONSTERS



You and your fiancé have discussed everything from who makes the guest list to what kind of cake topper to get. But have you had a serious talk about money? Only 43 percent of people discuss finances before marriage, an American Express survey found, and a shocking 12 percent have never talked about money issues with their fiancé. This isn't something you want to treat lightly, either — according to a Money Magazine poll of 1,010 married adults, 70 percent of couples argue more about money than anything else, including sex, how to divide up the household chores and the amount of "together time" they spend.

Don't be that couple. Take time now to hammer out how you're going to manage your money once you've tied the knot. The following tips can help:


Schedule Time for 'The Talk'

Set a day and time to have the money talk. Clear an afternoon for this, and make sure you've each done some prep work. There's a lot of ground to cover, including spending styles, the amount of debt each of you is bringing into the marriage and what your financial goals as individuals and as a couple are. Each one of you should come prepared to discuss:

  • How much you make
  • The balances on every account you hold
  • Your spending habits
  • Your financial goals and how you envision reaching them
  • Who, if anyone, will be in charge of paying bills and which accounts you will merge?
  • Do you want to buy a house? When? How will you come up with the down payment? Do you want children? Will you both continue to work after kids come? When will you start saving for retirement? What are your expectations as far as vacations, cars and "fun" spending? How will you pay down debt? Get this all out in the open and look at it.

For a comprehensive look at having a successful discussion of this sort, visit The Simple Dollar.


Make a Budget

Next it's time to create a budget that reflects your goals as a married couple. Your budget should take into account your essential expenses (housing, transportation, insurance, utilities, food, etc.) as well as your discretionary spending (gym, shopping, entertainment, etc.). There are some great budgeting and personal finance apps out there to get you started and help you stay on track.

This is the time to determine how much of your combined income you're going to save and how much you'll use to pay down debt. While nothing is set in stone, most financial experts agree that Elizabeth Warren's 50/30/20 rule is a good guide. It allows for:
  • 50 % of your income to go to the above-mentioned essential expenses
  • 30 % to go to your "wants" like eating out, vacations, etc.
  • 20 % to go to paying down debt, saving money for emergencies, investing and retirement


A Word About Credit

If either one of you is entering the marriage with bad credit, be honest and make improving it a priority. Your credit rating affects a multitude of things, including your ability to buy a house, get a car loan and start a business. It could even influence whether an employer offers you a job or not.

Vow to pay your bills on time. Work debt repayment into your budget, and look for ways you can pay down your biggest debts. Consider using some or all of your wedding gift money to help pay down debt. For more information on improving your credit score, visit MyFico.com.

This is the most exciting time of your life as a couple. Have this talk and get started with your best financial foot forward.


Photo courtesy of Social Monsters

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