Getting Engaged: Why Engaged Couples Should Discuss Finances

If you are getting engaged here are some reasons why engaged couples should discuss finances. Even if you are already engaged to be married, you are sure to have a lot on your mind.

When all the fun and excitement is over and you return from the honeymoon you will have everyday life to live. Where? You will need your own home, so house-hunting will be high on your financial priority list. Unless you are very fortunate, your finances will likely be the most important aspect of your marriage that you will have to think about. It is important to talk about such issues before you get married.

In fact, if there is just one thing that newly married couples should agree upon it is money! Discussions about money, particularly about the lack of it and how it is used, can rapidly degenerate into arguments. This is one of the major reasons for the breakdown of marriage or any other relationship between two people. It has been shown that couples who discuss their finances before marriage tend to be more relaxed in their engagement and their marriage than those who don’t.

Here are some of the financial issues you should discuss:

Debt:

This is important. If either partner has debt, and is finding it difficult to manage, then it is best to discuss this before marriage. Couples should plan their finances:  their income and expenditures – and honesty regarding debt will help to cement a long-lasting relationship. What you should try to avoid is referring to the debt as ‘your debt’ or ‘my debt’ – it should be ‘our debt’ and it may make sense to combine your finances to clear it.

In general, couples who make separate decisions on finances argue about money almost twice as much as couples who share financial decisions. ‘Reflecting the lack of communication and collaboration about financial matters, these couples are more likely to argue about money, as well as lie about or hide information about money’.

Sure, it may be difficult to discuss, but get it out into the open. Couples can work together to overcome such problems – secrecy leads to distrust. Where at all possible, a marriage should not only be based upon a stable financial footing, but also on honesty. If you cannot be honest with each other then why get married?

If you are unable to clear any debt immediately, then try to arrange a repayment plan between you where you pay an affordable amount each month. This should ideally be arranged so that you are debt free by the day of your wedding.  If it is going to have an impact on your short-term finances, then you should both know about it and work it out between you. Do your very best not to marry already in debt.

Bank Accounts:

Discuss whether you should have a joint account or individual accounts. If you cannot agree, why not have both? A joint account can be set up to handle shared expenses such as household expenditure, power bills, and vacations and so on. You could then each also have your own personal accounts, the content of which you can use as you wish.

It doesn’t matter what you agree, as long as you discuss it during your engagement and not argue over it after marriage – marriage should be serious, but also be fun.  Some couples divide their combined income into three – one-third being deposited into each of a combined household account and each partner’s individual accounts.  You can discuss between yourselves what is the best arrangement for you.

Prenuptial Agreements:

There are other factors which can affect your finances such as a prenuptial agreement. While some people look on this as planning the end of a marriage before it has even begun, this is not the case. In fact, the marriage itself is a form of ‘prenup.’  After signing the marriage contract, you both have certain legal rights regarding property and financials. It applies to all couples, and is legally binding whether it suits you or not.

Some couples regard a prenuptial agreement as a means of arranging these rights to best suit each of them. For example, a voluntary arrangement defining the distribution of income and use of bank accounts can be made legally binding. You can agree that individual incomes remain separate but that each partner has an equal right to access any joint account.  You can make it binding that a joint account can only be used for joint expenses – household expenses, vacations and so forth – and requiring both signatures for withdrawals!

Savings:

Another important aspect of a marriage is savings. This is something which should be discussed between you when getting engaged. When romance transitions to the practicalities of marriage, it is wise to be prepared for those unexpected financial expenses which often seem to come at just the wrong time!

How much should you save? Should it be a percentage of each person’s income or a set amount from your joint account each month? You could agree to have money transferred from your paychecks to savings before you get it – that way you save automatically every month. How should you save: into a savings account, investment portfolio, IRA?  This needs to be discussed between you.

What are you saving for? Many couples save for the future, so if any urgent finances are needed it is available. Some save for vacations while others save for their children’s education – college costs for example. Before they get married, many engaged couples discuss the children situation. Children can be expensive. Child care fees must either be found or one partner will have to give up their employment – unless you have obliging parents close by!

Why Engaged Couples Should Discuss Finances – Conclusion

Although you will have many things to discuss, it is important to make finances a priority. Marriages tend to last longer when they are based on a sound financial footing, and discussion and agreement are always better than conflict and friction. Get together and talk about your finances using the above suggestions to help you.

Believing that you will ‘be OK’ is not a way to plan your future. Rather than trust to love and luck, it is better to agree on how you should manage your income from an early stage in the engagement. Planning and preparation for your financial future will result in a stronger and happier relationship.

UBS Investor Watch; Couples and money; Who decides? 2014




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