It's 7:00 PM on a Saturday night. You're dressed to impress, with minty-fresh breath and a Colgate smile to match. You're patiently awaiting the blind date set up by your mother and her friend from Bunco night. Your date arrives, and let's just say you're glad Mom likes socializing over games of chance! Date goes amazing, and you make plans for the next. Rinse and repeat for a few months, and it hits you: this may be the one! As the relationship grows, you become intimately familiar with your significant other. You talk about everything - favorite foods, pet peeves, even your dating history (!) and feel you know each other's innermost thoughts. You get engaged, have the wedding of your dreams, and it's happily ever after. Until you try to buy your first house together, and find out your spouse has a terrible credit score that precludes you from a mortgage. Then, you find out about the $20,000 in credit card debt. Yikes. How did this never come up? You know they broke their leg at age 7 playing soccer, but not that dozens of trips to wine country and shopping sprees have cost you the ability to have a place of your own?
Marriage is all about trust and communication, yet many couples don't discuss finances before or even during their marriages. A study showed a staggering 36.7% of marriages end in divorce due in large part to financial problems. So how do you avoid ruining a marriage over money? My wife and I have been married for several years, and I'm certainly no relationship expert. However, I believe we have a very strong financial foundation for our marriage. Here are my tips for managing the intersection of marriage and finance. This is such a big topic, I'm doing a two-parter on this behemoth. This week, I'm going to focus on the lead-up to the big day; next week, I'll tackle how to achieve marital (financial) bliss. And, yes, I did get my wife's consent before writing this and she is cool with it!
Just dive in and get the tandem bike already, you two!
Communication
For any of you who are (or once were) married, you know communication is probably the most critical aspect of a good marriage. When it comes to finances, that's no different, and it starts well before the "I Do". If you are in a serious relationship that is likely to lead to engagement/marriage, I think it's healthy to have financial conversations. Do you need to declare your salary, debt, equity, etc. to the nearest dollar? Not necessarily, but say you have a large student loan debt that you are paying down over time. If you get married to this person, your spouse is not legally responsible for that debt, but it may impact any joint financial decisions like buying a home. In my humble opinion, it's good to communicate these types of financial burdens to your potential partner. Yes, it may be awkward and lead to more questions, but if you can be honest and transparent, it will inspire more candid conversations about their finances as well and help build a roadmap for working through it together.
A young Eminem at work... probably don't talk like him to your significant other?
Shared Goals
If you are going to marry someone, you hopefully have similar financial goals. The only way to find this out goes back to the first tip: communication. If you are engaged (or maybe engaged-to-be-engaged, if that's a thing), have that conversation about what you want from life from a financial perspective. Your partner should be there to help you reach these goals, and vice versa. Many goals require both parties to work together, and you should be on the same page in your pursuit. Of course, you need to know what you want before having this conversation. What are your financial goals? Do you want to own a home? Retire early? Travel the world? Have kids? All of these topics have significant financial components and require a team effort to make happen. Once you know where you stand, talk it out and see where you both land. Hopefully you can have a loose idea of where you want to be in the future, and can start figuring out how to accomplish these goals.
If your goal in life is to run through toilet paper like a superhero, go for it!
Pre-Nup
You've met the person of your dreams, you have disclosed your finances, and spelled out your long-term financial goals. Now here's the kicker: do you ask for a prenuptial agreement, or prenup? These types of agreements can be deal-breakers for some couples. You're going to spend the rest of your life with someone (hopefully), but you're going to financially prepare for our divorce? Well, let's face the cold, hard facts. In the United States, approximately half of marriages end in divorce (8 of those are Larry King's!). Of course, no one should go into a marriage expecting it to end, but it's not unreasonable to prepare for the worst-case scenario. I'm not advocating for or against, and each relationship is different, but here are some considerations. First, how close are your financial situations? If you both have exactly $2.3 million in assets walking into the marriage, it's pretty dang equal. But, if one person has $500,000 in assets and the other has $25,000 in debt, it's a different story. Along these lines, my second question would be how much income does each person make? Again, if it's close to even, not as much of a concern. A large income difference may make a difference. Finally, more of a personal question only you can answer. Would asking for one cause irreparable harm to your relationship? If you've had conversations about your financial situation leading up to this, you should have a good sense of how your partner may feel about it. If it's really important to you, hopefully you can convey this to your partner and explain why. Not necessary, but if you decide to move forward, consider working with a legal professional to draft an agreement. My only piece of marital advice: do it once, do it right... and hope you never have to use that agreement!
So if we split up, I get the Beanie Baby collection, right?
Well, that's all I have for the lead-up to the big day. Communication is a critical component of a successful relationship, and finance plays its role. Be honest, open and thoughtful in your discussions on your current financial state. Be prepared to have conversations about your financial future, sharing your aspirations and listening to your partners. Now don't go off and get married until next week when I share what to do once you tie the knot!
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