You’ve fallen in love, set the wedding date and picked out the dress, but have you talked about your finances?
Before taking the vow of “for richer or poorer,” it is important to discuss your current financial situation with your soon-to-be spouse to determine how finances will be handled during the marriage.
Few people speak about the link between finance and relationships, yet money often acts a major contributing factor to divorce. Understanding how to navigate through financial challenges and preparing for the future will allow you to build a strong financial foundation for your relationship.
Here is a list of 10 topics couples should discuss regarding their financial picture before saying "I do":
1.) Yearly Income: If the relationship is serious enough to discuss marriage then salary is a topic that is no longer off limits. Annual incomes should be discussed to determine what luxuries the couple can (or can’t) afford, where they will live and how bills will be paid. Don’t forget to take into consideration a partner who makes significantly more or has a commission-based income.
2.) Savings: It’s important to have a general idea as to how much your significant other has saved to determine your future financial stability. If your partner is living paycheck to paycheck, develop a plan that allocates money to an emergency fund. Ideally, you should have six months salary in the bank for an adequate financial cushion.
3.)Debts: If one person is bringing substantial debt to the marriage, it is imperative they do not attempt to hide it. Getting married could mean one spouse will share the responsibility of the debt; be upfront and develop a plan for paying off the balance.
4.) Bank Accounts: When getting hitched, it’s important to determine whether bank accounts will be separate or joint. Typically many couples opt for a combination of both. A joint account may be used for family expenses such as the mortgage, utilities and groceries while an individual account can be used for personal spending.
5.) Health Insurance Coverage: Once married, important decisions regarding insurance and estate planning need to be made. Are you both covered under separate plans through your respective employers? You may want to look at which health-insurance policy is more beneficial and take advantage of the special enrollment period and to have both of you on the same plan.
6.) Budgeting: Creating a family budget is an important task since your new spouse will contribute to various expenses. Evaluate your combined cash flow and determine how bills will be paid, money will be saved and finances will be allocated. Reaching a mutual agreement on spending will prevent financial problems from occurring down the road.
7.) Work Benefits: Consider how marriage may affect your employment benefits and insurance policies. Check to see if your employer’s plan allows a spouse to be added, some plans don’t allow double coverage. Also review your employer’s pension plans. Many employers provide 401(k) plans only for their employees, therefore, your soon-to-be spouse will need to be added as a beneficiary.
8.) Credit Score: Poor credit may indicate that one person has money-management issues. To improve bad credit, discuss financial mistakes and work together to change bad money habits. Failure to improve a poor credit score can delay attaining financial goals like qualifying for a mortgage loan.
9.) Retirement Accounts: If your partner has not started saving for retirement, take advantage of accounts that will help your financial situation. IRAs, pensions and other retirement plans should be evaluated along with other resources available. Be sure to establish the proper beneficiaries on these accounts so the assets will be dispersed appropriately in the event of an accident.
10.) Financial Goals: Consider your short-term and long-term financial goals as a couple. Buying a home, retirement planning and even investing styles are all aspects in which you should share similar ideals. Map out a plan that can help you reach your shared financial goals.
About Retirement Planning Group (RPG) Located in Riverwoods, Illinois, Retirement Planning Group (RPG) is a nationally renowned firm committed to tailoring the retirement process to each individual client. With a 95% client retention rate over the course of 16 years, the expert staff of financial professionals takes time to counsel each prospect and deliver a plan that will work for them. They have been featured in esteemed publications like the Wall Street Journal and Crain’s Chicago Business. Retirement Planning Group is located at 2610 Lake Cook Road, Suite 250, in Riverwoods, Illinois. They can be reached at (800) 596-0253. Find them online at www.rpgplan.com.