So, you’ve decided to get married – congratulations! Now, there are so many questions to address in planning for the big day. Who will be on the guest list? Where will the reception be held? What food will be served? While planning a wedding is exciting, there are other, more significant questions to consider about issues that will affect the marriage long after vows are exchanged and the bouquet is tossed.
Financial disagreements are a significant source of stress for married couples. Disagreeing or failing to communicate about spending habits, saving, and views on paying off debt can lead to arguments and resentment. These issues vary depending upon a couple’s stage of life and whether they are entering a first or second marriage. In this article, we suggest questions to ask each other about planning your financial lives together before you say, “I do.” Some questions are for young couples, others are for second marriages, and some are for those who found new love later in life.
Importantly, since there is rarely one right way to handle financial matters in a marriage, we do not offer specific approaches here but note that communicating regularly, calmly, with loving intentions is always recommended.
First Marriages
Typically, but not always, first marriages involve couples in their mid-20’s to mid-’30s. Both of you have been managing your finances for at least a few years. Even if you have been living together, you have probably been handling your financial matters separately. Here are some of the questions you need to ask now. First, answer these questions independently and be honest with yourself before having these conversations with your partner.
What are your spending “styles”? For example, does one of you live according to a monthly budget while the other takes a more “day by day,” carefree approach to spending?
How much debt will you have as a couple, and how will you manage it? Do you plan to combine your debts after you are married and pay them from your joint income, even if one of you has a lot of debt and the other has little or none? Keeping pre-marital debts separate may make you feel that your marriage is starting on a divided path. On the other hand, if one person comes to the marriage debt-free, he or she may resent paying off the other’s debts, while the person who owes those debts may feel guilty about it.
What are your priorities for your money? Does one of you want to save for a down payment on a house, but the other is laser-focused on paying off student loans? Do you have a joint vision for how to use credit cards? What are your views on helping out family members with financial needs? Examine the “why” behind your priorities – there may be critical emotional issues to address, so please handle them with TLC.
What will your combined expenses be, and how will you pay for them? While it isn’t true that “two can live as cheaply as one,” if you have not been living together before getting married, you can likely reduce the amount you jointly spend on housing costs and other items. How much income will you have together, and how will that income cover your rent, car payments, student loan debt (see above), contributions to retirement savings, and other expenses?
Second Marriages
You are more experienced in handling your finances than younger couples and are also more set in your ways. You probably have more assets than you had in your 20’s and 30’s and may also have emotional and financial baggage acquired during a prior marriage. Here are things to discuss finances before you join your lives together in a second marriage.
Review the points above for first marriages – all of them still apply. Discuss your spending styles. Disclose all of your debts. Identify priorities for spending and saving (including spending on vacations, making retirement account contributions, whether you expect to buy a new car every two years, and so on).
Will you combine your assets, keep them separate, or some of both? Discuss bank accounts, investments, and retirement savings accounts, as well as any real estate. For example, will you sell one of them or keep it as a rental property if you both own houses? What will you do with the sale proceeds or rental income?
Does one of you receive or owe alimony or child support from/to a former spouse? If so, there may be provisions in your divorce decree regarding alimony and remarriage. How will you handle these financial obligations as a couple?
How will children from previous marriages affect your combined household’s finances? If one of you has children and the other does not, there may be considerable differences in how you typically spend your income. How will you handle that? Will saving for college (and perhaps private school tuition) come from your combined income or remain the obligation of the respective parents? Do you want to protect assets for children from previous marriages? Keep in mind that one of you will die first, and without a trust or other legal agreement in place, the surviving spouse will likely be entitled to all of a couple’s assets. If a child is applying for financial aid, all parents AND step-parents must complete the FAFSA form (or SSS for private K-12)[1].
Should you consider a prenuptial agreement? While it isn’t romantic, it can make sense, especially if there is a large income or asset disparity between the two of you, or one of you owns a business or has inherited wealth. Marriage is a contract, and talking with an attorney, even if you ultimately decide against a prenup, can help to bring important issues to light. The necessity and impact of signing a prenup varies greatly depending on the particular state(s) where you will be living. Therefore, it’s generally best to find a local attorney that knows the ins and outs of your state's current laws. Both parties should have their own attorneys review the prenup and represent them when executing any legal documents. If both parties use the same attorney, signed documents could be nullified at some point in the future.
Marrying Later In Life
If you are getting married in your 60’s, 70’s, or even later, you have accumulated a good amount of experience in managing your own finances. You have also had time to accumulate assets, and sometimes debts. You may want to leave all, or at least a disproportionate amount of, your net worth to your own adult children and grandchildren, which can raise issues when combining financial lives. This is especially true when one of you has considerably more resources than the other. Here are issues to discuss if you are planning to get married later in life.
Review the points above regarding first and second marriages. Discuss your spending styles. Disclose all of your debts. Talk to independent attorneys in your state and consider whether a prenup would make sense.
What do you want your adult children and/or grandchildren to inherit, assuming your assets outlive you? You and your spouse-to-be need to discuss your expectations; then, after you have made your decisions, discuss your intentions with your adult children. This can be a highly emotional issue, but know that many have walked this path before and there are professionals to help you make these decisions, and with the legal contracts that ensure your wishes are honored.
What lifestyle do you want, as a couple, and how will you pay for that lifestyle now and in retirement? Will one of you be working after the other retires? If you are both working, is there a substantial difference in your incomes? How long will you continue to work if you have not yet retired? What is your strategy for meeting your joint living expenses in retirement? If one of you plans to retire long before the other, will the working spouse cover most of the household expenses so that the retired spouse can delay taking Social Security to maximize his/her benefits?
Where do you want to live in retirement? Talk about your ideal location – would that be close to children and grandchildren, in a big city or a small town, or do you see retirement as a way to fulfill your dream of living as a nomad?
Are you on the same page in terms of traveling? There is a big cost difference between taking extended trips abroad and staying in four-star hotels versus renting a motorhome and traveling around the U.S.A.
Do you have a Social Security strategy? After you have been married for a year, you are entitled to spousal benefits under Social Security. You can choose to receive 50% of your spouse’s payout instead of your own if that would provide a more considerable benefit. In addition, you may be able to delay collecting your benefit while taking the spousal benefit to maximize your eventual payout. Be sure to consult with an expert regarding these crucial issues and decisions.
For all couples: Making major financial decisions offers benefits to married couples extending beyond bank accounts and investment portfolios. When couples are on the same page about financial matters, they tend to fight less. Talking about these things is critical – even though you have the best intentions, it is impossible to know what your partner is thinking. So schedule time to sit down and work through these questions – it can make a big difference in helping to keep your marriage a happy one.
Gold Medal Waters offers financial advisory services that help couples to address these issues. We would be honored to help you as you begin your journey together. Contact us at https://www.goldmedalwaters.com/contact.
