It’s easy to get swept away in the romance and roses leading up to your wedding. However, there’s more to tying the knot than a heady feeling and sweet nothings. Over time, marriage is built on the foundation of mutual understanding and trust, and money is one of the most overlooked components. However, it is one of the main causes of conflict and stress in relationships.
According to Fidelity’s Couples and Money study, nearly 45 per cent of married couples argue about money, and 25 per cent identify it as their greatest challenge in the relationship. Rather than figuring it out along the way, it helps to discuss financial issues openly before getting married, so that you have a roadmap ahead. Here are some important talking points.
Debt And Credit Scores
This is non-negotiable. ‘If there are any major loans, formal or informal, your partner needs to know about them,’ says personal banker Fathima TB. ‘When you start life together, it means you end up being affected by one another’s financial burdens. These could include student loans, credit card debt, car loans, medical bills, or personal loans. You will have to disclose why you accumulated the debt, the exact amounts that are owed, along with interest rates and repayment plans. In addition, it always helps to create a strategy for the debt payoff in advance, based on your income. You will also need to discuss your individual credit scores, which will impact your future loan applications and interest rates. By assessing credit scores, you can improve your credit, keeping in mind past bankruptcies and missed payments.’
Budgeting Habits
Each person has their own unique methods of spending and saving money. One person may be frugal and budget out only necessities, while saving for ‘sensible’ purchases. Another may love to travel, shop, or eat out. When there are different expectations about how money will be spent, it leads to conflict. Day-to-day spending habits need to be discussed, as do large purchases. What are your priorities, and how do you intend to go about budgeting them? It is ideal to find a middle ground. Tracking your expenses using budgeting apps can help you further keep track of and manage money.
Banking Patterns
‘There is no standard prototype for how married couples should bank,’ says Fathima. ‘You can merge your finances and put them all in joint accounts. You can decide to keep your finances entirely separate, or you can go hybrid – one joint account with some money, while the rest of your savings are independently held. Before deciding on what works best, discuss how bills and expenses will be split and who needs to pay what. A hybrid approach usually works best. Maintain a separate account for personal expenses, and open a joint account for house essentials like rent, utilities, and groceries.’
Income, Investments And Retirement Plans
Consider your respective careers before you decide on a financial style. Start with your income, job stability, and then move into your future career goals. Do you want to start a business at some point? Or take a break to study further, or for childcare? Also factor in your retirement plan and work towards it together. This ensures your financial timelines are in sync and also influences your lifestyle, investment strategies, and appetite for risk. Work towards short-term goals such as holidays or a new car, as well as long-term goals like buying a house. Also, review how marriage will influence your tax and filing status. Consult a professional on how to optimise tax benefits, the impact of combined incomes, and deductible expenses. If you’d like to have children down the line, this can significantly raise the budget of your household. Childcare, education, and medical expenses have to be factored in.
Emergencies And Contingencies
If you’re getting married, it’s even more vital to begin an emergency fund for an added financial cushion. This will help you avoid using further credit and getting into a debt cycle. Discuss what qualifies as an emergency, how much you will need to save, and where the money will be kept. You can also review and opt for appropriate insurance plans, which are a huge relief in times of uncertainty. This could include health coverage, life insurance, car, and home insurance.
Legal Affairs
‘It might be premature and even sound foreboding, but one has to be prepared for illness and even death,’ says Fathima. ‘Discuss your legal documentation, who will have control over your assets, who stands to inherit what, and how your finances will be legally managed. Wills, powers of attorney, and children’s guardianship are key talking points. Finally, it may seem unpleasant and even distasteful, but a prenuptial agreement can be discussed, especially when there are significant assets involved. This can protect both parties if there is a divorce and provide clarity on financial rights and alimony. Consult an attorney to ensure the terms are fair, before you sign on the dotted line.’