Love is grand! But when a couple says “I Do,” they could get more than they bargained for if they do not go into their marriage with their eyes wide open regarding the state of each other’s finances.
For example, my wife and I married later in life, owing a combined total of $179,000 in secured and unsecured debt. Needless to say, most arguments during the early years of our marriage revolved around money. (This all happened before I became an adviser and got a bit more savvy about money matters.)
Thankfully, although it was not always easy, we were able to work through our money issues and pay off our debt while still putting money in the bank.
Many married couples are not so lucky. In fact, conflict over credit and debt is a leading cause of divorce. Therefore, I always advise couples who are about to marry to become familiar with one another’s credit histories and scores, to be up front with one another about the kinds and amounts of debt they owe, and to spend time talking about their philosophies when it comes to using credit, saving, and spending. If their philosophies differ, I urge them to reach an understanding before their marriage about when they will use credit, how much debt they feel comfortable with, how much they will save each month, and so on.
I understand that this recommendation is not romantic, but couples who talk about the state of their respective finances and about their money values and priorities before they marry are more likely to live happily ever after than couples who don’t.
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Here are some of the specific things I recommend you and your future spouse do before you walk down the aisle:
• Establish short- and long-term financial goals for your marriage. Your short-term goals may include building up your savings and paying down your unsecured debt. Your long-term goals may include purchasing a home, starting a family and building a retirement fund.
• If either of you has a lot of unsecured debt, like credit card debt, develop a plan for paying it off together as a couple, even though the only person legally obligated to pay it is the one who took on the debt. The sooner you get rid of the debt, the closer you will be to achieving your financial goals. This advice applies especially to high interest credit cards and retail charge cards.
• Develop a household budget. A budget is an essential money management tool. Review it together at the end of each month to compare what you actually did with your money to what your budget says you would do. If you went off course, figure out why and what to do.
• Agree to minimize your use of unsecured debt, like bank cards and retail store cards. It’s best if you both promise never to charge more than you can pay off in full before interest starts to accrue. The exception would be if you have an unexpected emergency and using credit is the only way you can pay for it. If that happens, you should resolve not to charge anything more until you’ve paid off the balance.
• Don’t trade all of your individual credit for joint credit. Marriage does not obligate you to have joint credit only and in fact it’s best for each of you to have some separate credit. However, when you are ready to purchase a big-ticket item like a home, you will both probably want to be on the note (and you may both need to be in order to qualify for a mortgage).
• If you each have separate credit card accounts, don’t hide your spending from your spouse or increase the spending limit on a card without talking about it first. Financial secrets are almost always found out eventually and once they are, they can destroy a marriage.
Bottom line, as a married couple, share responsibility for your finances, manage your debt responsibly, and communicate openly and often about your financial needs and wants. Following this advice will help keep you out of financial danger and increase the likelihood that your marriage will succeed.
Oh, one final word of advice. If you are going to pay for all or a part of your wedding or reception, do not go into debt to do it! Accumulating debt for this reason sets the stage for irresponsible borrowing in the future.
I’m not trying to be a killjoy, but only spend what you can afford. In the end, your wedding is about you and your future spouse and the people who come to witness your marriage, not about an elaborate location, expensive trappings or a sumptuous meal at the reception.
If you cannot afford the wedding you want without going into debt, then delay your marriage until you have saved enough to pay cash for it -- or rethink your vision and scale back. The same is true regarding your honeymoon. The last thing you need when you are starting your marriage is a pile of unpaid debt.
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Philip Cioppa Managing Principal and Chief Investment Officer of Arbol Financial Strategies, LLC, Arbol Financial Strategies, LLC (Securities offered through LPL Financial, Member FINRA/SIPC), Phil has more than 10 years of financial service experience and specializes in asset management strategies, insurance planning and taxation issues.