When you take the plunge and get engaged it can certainly be a very exciting time. You’ll begin to look forward to the big day and then your life together. Suddenly, both of you will be plunged into new territory. Are you going to share your assets from day one? How will you deal with bills? What about savings? What about debts? Whatever decisions you make, they can only emerge from open discussions and two-way communication. That can be challenging, especially if one party or another has financial difficulties. It may not be a subject that has ever been discussed during your relationship and it can potentially damage the relationship – but it should be addressed. You must move forward together and agree on a financial strategy, otherwise it will eventually become a major source of strife in your marriage.
Agree on the Principles
You and your partner may have totally conflicting views on money. You may be a saver by temperament but you partner has always been fairly carefree with money. If you find difficulty taking about this face-to-face you could even begin by separately answering a series of questions that set scenarios. If you then look at the answers you have made as individuals you will see the potential sources of conflict.
Credit Scores
Once you are married your score on joint accounts will reflect the performance of both of you. When it comes to a mortgage a credit score is especially important. If one of you has a poor record you should discuss how you can improve that. Scores will improve slowly with every repayment that is made on time.
Own Up
If you or your partner have financial problems you need to solve them. Credit card debt is common and expensive, with interest rates floating between 12% to 29%. You should clear any balances by taking out a personal loan or credit line which will have a defined term and equal installments on a monthly basis throughout the term. There may be existing commitments that one or other partner may have, everything from existing personal loans to alimony.
Define your Goals
These can be short, medium or long term, and might include…
• Paying off debt…
• Start saving for an emergency fund…
• Think about setting money aside for a deposit on real estate…
• Retirement provisions…
You should be certain that you both agree on these goals so that you can work together to achieve them. Each of these goals are important. An emergency fund should ideally be a minimum of three months of your fixed costs. If it is in place there will be no reason to reach for the credit card.
Budget
Your first budgetary issue will probably be the cost of the wedding. You need to get quotes from different companies and at the same time consider where the money is coming from; parents, other family members or yourselves or a combination of all three.
After that there is your monthly budget once you are married.
Children
The arrival of children will change things. There are the extra costs involved and the implications of losing a second income stream for a short time or for a number of years. Career plans should crop up when discussing whether you want children and what you will do when they come along. The average cost of raising a child up to the age of 18 is $245,000.
Preparing for Retirement
It may be many years ahead, but the sooner you start to make provisions the more chance that compound interest can work for you. You must get your affairs in shape for both your interests and that includes insurance, life, health and even disability. The discussion on how much and individual needs by the time they retire used to be pretty straightforward. With $1 million in savings, at a 5% interest rate, one could be reasonably assured of having $50,000 in annual income by investing in long-term bonds and simply living off the income. But interest rates are currently very low, so investments must either be diversified or you’ll need larger savings.
Practical Issues
The law covers the issue of communal property, but even when prenuptial arrangements are in place there are still plenty of litigation cases in the event of divorce. No one goes into marriage expecting it to fail, but it happens.
Some couples decide to have joint accounts and others retain personal accounts. It is a subject you have to agree on during your discussions.
There’s no shortage of issues to address with your partner? The discussion might be difficult, but don’t let it affect your relationships . Perhaps you can work things out over a period of time because the wedding day is in the future. The time will be well spent and will provide the foundation you’ll need for a happy, life-long marriage.
Disclosure
This article was sponsored by Just Right Installment Loans