Dear Carrie: My fiance and I are in our late 30s, and this will be the first marriage for both of us. As we make plans for the future, one of my concerns is that we haven't spent much time talking about our finances. I know money differences are a big cause of marital problems. What can we do to avoid this? — A Reader
Dear Reader: 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 share my thoughts on how couples can keep finance from ruining their romance.
Get to Know Each Other Financially
You and your fiance probably feel you know each other pretty well. And chances are you've already established some basic money ground rules, such as who pays for what, especially if you've been living together. But if you haven't gone deeper and discussed your underlying attitudes about money, you may still have a few things to learn. And now — as you plan to join forces long-term — is the time to learn them.
In fact, it's wise to dig deeper and ask some very specific financial questions before you tie the knot. 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 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 hopes for your future together and how you can make them a reality. Do you want to buy a house? Raise a family? Launch a new business? 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.
Decide How Much Financial Togetherness You Want
At your age, it's likely you've each been financially independent for a while. So deciding upfront how much you two want to mingle your finances is important. My personal preference is to create a "yours, mine, ours" system of three checking 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 your savings and investments, 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'd rather pool some or all your resources, talk about it now to prevent surprises or hurt feelings later on.
Agree on Roles and Responsibilities
Don't let misunderstandings about everyday money matters cause problems right off the bat. Make sure you have a plan to handle:
— Expenses. Even if you've already been sharing certain expenses, make sure you're each comfortable with how you'll handle everyday costs once you're married. Will you each contribute to household expenses such as your rent/mortgage, utilities and groceries? Will you keep certain personal expenses separate such as clothes or individual entertainment? Here's an especially important one: If you both work and one of you makes more money than the other, agree on what fair percentage of your individual incomes you'll each contribute to the household. 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? While you're not responsible for each other's debts that were accumulated before the marriage, 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.
— Saving and Investing. This is one of the most important agreements. How you save and invest 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 such as a vacation and long-term goals such as retirement. Even if one of you is more comfortable with investing and wants to take the lead, it's important that you're both involved with all major decisions.
Make It Formal (Or Not)
Once you and your fiance have spent some time discussing how you want to merge your financial lives, another option is draw up a prenuptial agreement that not only spells out how your assets will be distributed in case of divorce but also stipulates the financial terms of your marriage. This is by no means a requirement. In fact, for many couples, the real benefit comes from having the discussions, not from having a legal document.
Before you tie the knot, however, it's important for all couples to create or revisit their estate planning documents including powers of attorney, beneficiaries and will.
Be Willing to Listen
One final thought. Everyone has different feelings about money based on their experiences, so as you and your fiance begin to talk about money, it's important to listen and not be judgmental. In fact, it's my experience that understanding each other's attitudes actually brings couples closer. Find a comfortable time and place to begin the conversation, plan together and dream together. Toast to your financial future!
Carrie Schwab-Pomerantz, Certified Financial Planner, is president of the Charles Schwab Foundation and author of "The Charles Schwab Guide to Finances After Fifty." Read more at http://schwab.com/book. You can email Carrie at [email protected] The information provided here is for general informational purposes only and is not intended to be a substitute for specific individualized tax, legal or investment planning advice. To find out more about Carrie Schwab-Pomerantz and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.