STORY BY LEO ADAM BIGA
When you begin to think about marriage, among the myriad things to consider is finances: How compatible are you and your partner’s spending, saving and investment habits? What assets and liabilities does each of you bring to the relationship? Who currently pays the bills?
Financial planning pros say that the earlier and more openly you talk about money, the less likely it will become a problem.
“It is essential that both parties be straightforward and honest about where they stand,” says Certified Financial Planner Maria Sinley of Smith Hayes Financial Services Corp. “No one likes a financial surprise. You don’t want to be applying for a mortgage and find out that your spouse-to-be has horrible credit. It could be student loans, it could be credit cards. If they’re in over their head, it’s important that the other person knows about it.”
As touchy as discussing one’s net worth, income and debt is, planners say: Just do it.
“Money is rarely an easy topic to discuss, especially for stars-in-their-eyes young couples,” says Sinley. “It doesn’t occur to them to have the discussion.”
If one mate is a saver and the other is a spender, for example, she says, this can lead to conflict if it isn’t discussed and the implications aren’t understood by both partners.
Control is also an issue that comes with shared finances. “Even if both of the partners are savers but one is more controlling, trouble can follow.”
A premarital counselor, parent or friend could prompt a dialogue about money.
“Some couples enter marriage with a na´ve understanding of where the money comes from and where it goes,” she says. “Often, they think it’s going to go further than it does. The expression, ‘Two can live as cheaply as one’ doesn’t always prove to be true. You need to understand the importance of creating a budget and/or spending plan.”
Heritage Financial Services Vice President Mark Scott says an advisor can be a neutral third party to guide the money conversation and educate you about combining your finances. Financial professionals and bankers can provide standardized blank forms, for example, which can help with summarizing net worth, income and expenses. Using the information from both parties, a combined summary will give a clear — and often revealing — financial snapshot for the new household.
“If you have a good working knowledge of financial matters as a couple, then you’re more likely to make better financial decisions. It’s one less source of stress on a marriage.”
In order to set up a combined household, you must make decisions on how to handle the money that is coming in. Maintaining joint and/or separate accounts is one of many methods to consider.
“Sometimes it’s good to have ‘yours, mine and ours,’” says Sinley. “The ‘ours’ is to pay household bills and living expenses. The ‘yours’ and ‘mine’ are for personal use. It’s your money; you can do what you want.” Scott recommends creating a financial plan that covers the fundamentals, beginning with a budget that tracks income and expenditures.
Beyond managing everyday money needs, he says that some planning is necessary. This includes having the right risk-management tools in place, such as health insurance, disability insurance and personal liability coverage, which are vital to protecting against overwhelming expenses that could arise from a catastrophic event.
Scott says both partners should be familiar with the financial instruments they possess. “My spouse doesn’t like to get into all the details of things, but if something happens to me she will know what we’ve got in place and where to go for help.”
TO PRENUP OR NOT TO PRENUP
A prenuptial or premarital agreement is an option for individuals who wish to protect the personal assets they are bringing into the marriage. Legal advisors say that this type of agreement is not necessary for most couples. “For average young couples, I don’t know that a prenup is necessary,” says Maria Sinley, “but understanding what each is bringing (to the marriage) is.’’ When it comes to older, more financially established couples marrying, assets are often more involved and children and ex-spouses are likely to be part of the picture. The more complex the situation, the more legal and financial advisors’ services are needed, says Mark Scott.
For information on choosing a financial advisor, contact the Financial Planning Association of Nebraska at 402-397-0280, or visit www.fpanet.org.
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