If you’re about to get married, or have recently tied the knot, chances are you and your mate talked through virtually every aspect of the wedding ceremony. But what about a thorough discussion of the money matters that will affect your life together after the Big Day?
Unfortunately, studies show that most couples are loath to have a true heart-to-heart when it comes to sharing about finances.
But before you walk down the aisle — or even if your guy already has put a ring on it — here are four questions you should ask and answer in order to boost your financial harmony:
1. How was money handled in your home when you grew up?
This question is designed to find out what deeply-rooted money beliefs your partner learned in early childhood.
A question like this, says Jane Honeck, a CPA and Personal Financial Specialist, “starts the conversation in a non judgmental way.”
By exploring follow-up questions like: “Did your parents fight about money? Who made all the money decisions? And did your mom or dad have all the power?” Honeck says you’ll better understand – and perhaps empathize with – why your mate acts a certain way with money or makes various financial choices.
“If your parents had a lot of debt and really could care less if they saved money, then you might handle your finances the same way,” says Honeck. Alternatively, she adds: “you might do everything exactly the opposite,” to avoid following in your parents’ footsteps.
Either way, it’s important to discuss your earliest money lessons with your future spouse, notes Honeck, who is also the author of the new book “The Problem With Money? It’s Not About the Money!”
It’s not uncommon, however, for couples to shrink away from talking about finances – often because both parties want to avoid the same money arguments they heard their parents having. But for the sake of financial intimacy, an honest, candid “money talk” is one of the best ways to get your marriage off on the right foot.
Ultimately, says Honeck, “if you can hear where the person is coming from, you can have a little bit of compassion for them, and then you can negotiate from there.”
2. What is your credit rating?
I’m the first one to admit that you might raise an eyebrow by coming out and flat-out asking your honey what’s his or her FICO score. Talk about a romance killer. But that doesn’t mean you still can’t get the 411 on your partner’s credit standing – and do it in a loving, constructive way.
The key – as with all financial conversations – is to avoid some of the potential minefields that may occur. So don’t start the discussion by saying: “Let’s talk about all the financial skeletons in your closet.” That’s a sure-fire way to put your would-be spouse on the defensive.
Instead try the following conversation starter, recommended by Bill Hardekopf, the CEO of LowCards.com. “The safest way to go about this is to say: ‘Honey, since we’re about to join forces, it’s a good idea for us to get our free credit reports from the credit reporting agencies, just so we can review everything, make sure there are no mistakes, and see where we both stand.’”
A review of one another’s credit reports can offer insights into how financial responsible – or how reckless – each of you has been. But don’t take this as an opportunity to bash your partner. Instead, if they’ve had problems, talk through what got them into their predicament and find out if they learned anything from their credit setbacks.
Knowing your spouse’s credit rating is particularly important if you intend to get join credit cards or loans co-sign for a home or car. With joint accounts, each of you is responsible for 100% of the debt incurred together.
Additionally, if one of you has poor credit, the person with good credit may want to make the credit-challenged spouse an authorized user or a co-signer on certain accounts.
An authorized user isn’t a joint cardholder and thus isn’t liable for any debts. The downside: being an authorized user won’t benefit that party’s credit rating. By contrast, if the person with shaky credit is a listed as a co-signer on an account, he or she will get to “piggyback” off the other party’s good credit, and will enjoy the benefits of having an account in positive standing listed on his or her credit report.
3. How much debt do you owe?
Census Bureau data show that the median age of a first marriage in 2010 was 28 for men and 26 for women. Since people are getting married later, both the bride and the groom have each had more time to rack up credit card debt or student loans.
Fortunately, just because you get married doesn’t make you automatically responsible for your partner’s debts. But that doesn’t mean you both shouldn’t know all the obligations each one of you has. And that includes everything from student loans to credit cards, mortgages, auto loans, outstanding taxes, and even family loans.
Paying off such debts will impact you both, affecting your ability to save and invest for your future. So you absolutely must be clued in to each other’s existing bills.
The best way to avoid financial stress is to reveal these debts early in the marriage planning, says Hardekopf. “It’s not romantic and may be difficult, but it’s not fair for your spouse to learn about these when the bills come in.”
4. Do you want joint or separate accounts?
Whether or not to maintain joint or separate accounts is a personal decision and varies from couple to couple. Some newlyweds opt to keep their finances completely independent, and others choose to co-mingle everything. Still other couples take the hybrid approach (and my recommended strategy) by keeping separate accounts and then having a joint account from which they pay household bills.
Talking through this issue, and being upfront about how money from each account is to be managed will help stave off financial infidelity down the road.
Admit it: how many times have you spent money or made a purchase and tried to hide it from your significant other? When you have your own checking or savings account, you typically don’t have to ask for “permission” or get your partner’s approval for most purchases. Couples without such an agreement, however, are often plagued by “secret spending”–a phenomenon that can threaten the financial health of the relationship, as well as put up barriers to overall communication.
In a recent survey of 327 Americans, commissioned by CESI Debt Solutions, a nonprofit agency dedicated to debt-free living, 73% of married couples said they believe spending more than $100 without telling your spouse is unacceptable. Nevertheless, 80% of those polled admitted that they spend money their spouse doesn’t know about.
Obviously, American couples need to do a better job of communicating about finances. That’s why the four questions above are by no means comprehensive. Rather, use them as a good way to jump start what hopefully will become a lifetime of positive communication and healthy dialogue about money matters.