Did you leave your future spouse at the alter, waiting to read the second part of my love and personal finance blog? Good. Let's discuss how to make your money and marriage mingle magically!
These two are literally inseparable... they super-glued themselves together at the forehead.
Communication - Yes, Again!
If you think you're done talking finances after the honeymoon, you're in for a shocker! Money should be an ongoing discussion with your spouse. Should it be a daily conversation? That's probably not healthy, and may cause friction in your relationship. But, you should be comfortable discussing your financial status, large purchases, etc. on a regular basis. Now that you're married, you have a partner that needs to be in the loop. As is true in any relationship, communication needs to be a two-way street. Foster that by sharing financial changes (e.g. I got a raise!) and how that may impact your family's outlook. Talk through plans to spend money; for example, home renovations or vehicle purchases. Depending on your budget and spending practices (which I will discuss below), you will need to have varying levels of consultation with your spouse. The biggest mistake I hear about is when couples only talk about finances when something goes wrong. Talk about the good stuff! Celebrate milestones like paying off debt. Make the money conversation a positive experience so that it doesn't become something you fear discussing.
Good basketball strategy... get everyone converging on center court, away from the hoop?
The Plan
You've gotten hitched and are ready to start your new lives together. Both of you have shared goals including a vacation home, a mega-yacht for international travel, and raising four kids... all while retiring by age 50. Now you have to figure out how to make it all happen. Chances are not both of you will have done personal budgets/spending plans, and shame on you for not reading Dough-Nuts previously to know to do so! But, seriously, starting a marriage on the right financial foot is predicated on realistic planning. So how do you go about making this plan? Start with the end in mind - what are your goals and when do you want to achieve them? We're in a world where you can literally type "cost of..." into your favorite search engine and find out approximately what any product, service, or life event will cost. Just for fun, I wanted to confirm what current estimates are for having and raising a child in the U.S. I'm consistently seeing around $250,000... not including college! Yikes, I'm sinking a cool half-mil into my kiddos before they even take Philosophy 101? Back on topic... my point is you can do a little research and really size up the goals. If you want to retire at 50, figure out how much money you will need to live the lifestyle you want and adjust your savings accordingly. In the course of this planning, you may have the sad realization the mega-yacht is a touch outside your reach. You need to be able to prioritize and make trade-offs. The whole point of this exercise is to determine what's realistic in order to focus on what's achievable.
So what's the actual plan look like? It can vary greatly, depending on what you and your spouse agree upon (yes, another conversation about money!). Many couples do joint accounts (banking, credit cards, etc.) to tackle shared expenses. Some choose to take on certain categories, e.g. husband pays for food, wife pays for entertainment. There's really no right or wrong way. The key is having a fair and honest conversation about how finances are handled. If one person makes triple what the other does, that person should probably take more responsibility for shared expenses, especially if your lifestyles require it. For emergency savings, I recommend both contributing to build it up, then replenish as needed (hopefully never!). For retirement accounts, this is a little tricky as you may have separate 401(k)'s or other individual accounts that can't be combined. Depending on contribution rates (which is a whole separate topic I will tackle in the future), you should try to each kick in similar amounts. Assuming you do a joint account for shared expenses, hopefully you have a modest-enough lifestyle to have some disposable income. What do you do with that? Well, I suggest having a small portion of your income as your personal spending money. This is money you can spend on things your spouse won't use (drinks out with friends, Giannis Antetokounmpo game-worn autographed jerseys, etc.). If both parties agree, this could be money you spend without consultation beforehand. Having this kind of arrangement can take some of the stress out of conversations about joint finances.
Wife: "This looks great!" Husband: "You're missing the point!" .... get it??? *GROAN*
Making It Happen!
Once you have a plan in place, it's time to put it in action. If you created a joint budget and your financial plan is agreed upon, you're off to a good start. Now, you have to execute to meet your goals. Stick to the plan as best as possible. Of course, life will change, but try to forecast as best you can. As is true with any marriage, each of you will have your strengths, and whoever is the most financially savvy should be responsible for managing the shared finances. The other person still needs to remain engaged and informed on the status of finances... the old "trust, but verify" axiom. If by chance you both want to be involved, even better! Just make sure to communicate through specific tasks to ensure neither person drops the ball. What if neither of you has a mind for finances? Well, shoot, then you shouldn't have gotten married! Kidding, of course, but I recommend finding someone to help you (hint - I can help free of charge, just ask!).
That crooked test tube is driving me nuts... please fix it!
For example, my wonderful wife was very upfront about her student loan debt when we were dating ($339,502.10!). She was just starting her career and had spent 10 years educating herself to be a physician. I was incredibly proud of her for this, and wanted to do everything I could to help her alleviate this debt. She knew fellow physicians who still had student loan debt 10-20 years into their practice and didn't want that burden. I knew it was critical for her to get it paid down to start building her retirement savings. If I'm being honest, I knew she was the one for me, and I didn't want us to be saddled with the debt either! As we were not married yet, I did not feel comfortable helping her pay it down at that point. For all of her wonderful traits, she does not have a strong interest in finance, but knew this was a passion of mine. She was comfortable enough with me to let me know some of the details, and I was shocked to see the ridiculous interest rates she was being charged. She had several loans from different stages of her education, with some rates as high as 8%! I did some research on refinance options to find her the best rate to combine all of these payments and shorten the term. I was able to find a refinance option that would shorten the terms (7-10 years down to 5) and reduce the rate to 3.95%. On top of this, she started making extra payments against the principal when possible. After we got married, she continued to plug away, working the debt down to a point where I provided the final payoff to kill this debt once and for all! Did we celebrate? Of course! We left our infant son in grandma's hands and celebrated with a great (expensive) dinner at our favorite local restaurant and had some fancy drinks out on the town. It was a major financial shift for us, scraping by to pay off that massive debt with a new home and newborn son. Now, outside of our mortgage, we do not have any debt and are making healthy contributions to our retirement savings. While that doesn't mean we don't carefully watch finances, we have breathing room and our marriage is stronger as a result.
I truly hope these last two blogs are helpful to you, whether you're married or still on the market! If you did leave the love of your life at the alter as I advised, you're ready to take the plunge now. Run back to the ceremony, exchange rings, and go do the Cupid Shuffle. And save me some cake!
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