Discuss Your Finances Prior to Getting Married
You've met your perfect match, and you've both decided that now's the time to make it official. You've announced the engagement, spent hours creating the perfect registry, made the guest list, and picked out invitations, but there's one crucial piece of planning that you shouldn't overlook – planning for your financial future together.
While talking about finances might not seem romantic, it's important to take time to discuss your financial goals and expectations before the big day arrives. Doing this now will not only give you a jumpstart on building a successful life together, but it can also help you avoid future conflicts over money.
Here are some tips and suggestions for getting the conversation started. Remember that there's no time like the present to talk about your hopes and dreams together.
Make a List of Short- and Long-Term Goals
Don't assume that the one you love knows exactly what you envision for the future. Take the time to make your expectations clear now. Share all your ambitions, both short- and long-term. For example, whether or not you want to start your own business one day, retire before 40, spend lots of time traveling or go back to school. Is buying a house soon important to you or would you rather wait to get settled? Assuming that you both want to start a family, how soon do you want to get started? How many children do you want? Will you both work, or will one of you want to focus less on a career and more on taking care of the household and family? Identifying the goals you want to reach together makes your financial planning much more appropriate.
Determine Your Financial Risk Tolerance
Define what you consider to be an acceptable level of financial risk and discuss these ideas with each other. Incompatible definitions of "acceptable" financial risk can lead to confusion and conflict, so it's important to seriously and clearly discuss your individual views before you tie the knot. Not only will this help prevent marital conflict, it's also critical to creating a financial plan that makes you both comfortable.
Detail Your Assets and Liabilities
Here comes the time for complete honesty. Before you and your soon-to-be partner can develop an effective financial plan, you both need to create a comprehensive list of your financial assets and liabilities. To determine where you stand financially as a couple, discuss anything that may affect your ability to invest jointly, or that can make a big impact on your monthly budget. Be straightforward and specific with both the positive and the negative aspects of your financial history. This means everything, from the thousands that you've already socked away in your 401(k) to the student loans that keep you awake at night.
Consider bringing a copy of your latest credit report and score to review with each other. While this may seem awkward and potentially uncomfortable at first, particularly if you've made some mistakes in the past, talking about this now can save you both potential embarrassment and conflict later. After all, this approach is much less painful than uncovering past credit mistakes when you both sit down to apply for a mortgage or get a car loan. Determining where you stand now is the only way you can begin the process of financially moving forward together.
Now that you've assessed where you are financially as individuals, it's time to determine how to get where you want to be as a couple. To find out more about how to plan for your future together, visit our Take the Plunge and Plan for Your Financial Future page.
