Can Finance and Romance Go Hand in Hand?
by , CFP®, President, Charles Schwab Foundation; Senior Vice President, Schwab Community Services, Charles Schwab & Co., Inc.
February 9, 2011
My fiancé and I are tying the knot in April. We're in our late 30s and really looking forward to our new life together. My big concern is that we haven't spent much time talking about our finances because I know money differences are a big cause of marital problems. What can we do to avoid this?
With Valentine's Day just around the corner, the timing of your question is perfect. That's because, while money may not seem romantic, understanding your feelings about money can be an important part of keeping your love alive. So I'm happy to have the chance on this occasion to share my thoughts on how couples can keep finance issues from ruining their romance.
Get to know each other financially
You and your fiancé probably feel you know each other pretty well. But if you haven't discussed your attitudes about money, you may still have a few things to learn. For instance, is one of you a saver and the other a spender? How do you each handle credit and debt? What about financial independence and control? These are underlying concerns that can rear up later if you don't address them now.
It may seem hard to bring these things up at first, but think of it this way: You're not just talking about money. You're talking about your dreams for your future together and how you can make them a reality. Do you want to buy a house? Raise a family? Travel? These all take money. So start by making a date to talk about what you each want, how you'll prioritize your goals—and finally how you'll work together to finance them. The rest should follow quite naturally.
I should also note that a prenuptial agreement may be appropriate for some couples, especially if one or both of them is coming to the marriage with considerable wealth. But even if you don't decide to go the legal route, it's crucial to talk out all the details of how you will merge your financial lives.
Decide how much financial togetherness you want
At your ages, it's likely you've each been financially independent for a while. So deciding upfront how much you want to mingle your finances is important. My personal preference is to create a "yours, mine, ours" system of three accounts that will allow you each to have a separate (but equal) account for personal expenses and a joint account for shared expenses. That way you can both have some autonomy, but also work together for common goals and expenses.
When it comes to saving and investing, there's a bit more to consider. For instance, if you already have assets, you could decide to keep those assets separate to maintain some financial independence. If you're comfortable pooling all your resources, how will you manage them? Will you do it together or is one of you more comfortable with investing and willing to take the lead? Even if you don't have a lot of money now, talk about it so there will be no surprises or hurt feelings later on.
Agree on roles and responsibilities
Don't let misunderstandings about everyday money matters cause a problem right off the bat. Make sure you have a plan to handle:
Be willing to listen
- Expenses—Which ones will you share (mortgage, utilities, groceries) and which will you keep separate (clothes, personal entertainment)? If you both work and one of you makes more money than the other, agree on what percentage of your individual incomes you'll contribute to the household that's fair to each of you. Then agree on who will be responsible for actually paying the bills.
- Debts—This can be sticky. If either of you is coming to the marriage with student loans, credit card debt or car payments, you need to decide how these will be paid off. Will you each cover your own debts? Is one of you in the position—and willing—to help out the other? Then talk about how you'll handle credit and debt as a couple.
- Savings—This is one of the most important agreements. How you save will determine whether you meet your goals—both mutual and individual. Decide what percentage of your incomes you'll save each year and how you'll divide your savings among short-term goals like a vacation and long-term goals like retirement.
Everyone has different feelings about money based on their experiences, so it's important to listen and not be judgmental. In fact, it is my experience that understanding each other's attitudes toward money actually brings couples closer. Find a comfortable time and place to begin the conversation, plan together, dream together—and when you toast each other on Valentine's Day, toast to your financial future as well.
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