By Jim Chapman, Wells Fargo Institutional Retirement & Trust Managing Director
Now that you’ve walked down the aisle, reality sits in–and that includes realizing your new spouse’s money styles may be very different from your own.
It’s July – one month after the traditional start of wedding season. By the time a couple walks down the aisle, chances are they’ve learned their partners’ preferences on everything from cake flavors and music to honeymoon destinations and kitchen decor. But how much do they really know about their partner’s money style?
With financial issues frequently cited as a leading cause of divorce, it’s critical couples understand each other’s views on money and investing from the start. That means setting aside time in the planning process to have the money talk. Below are some ideas for having this difficult conversation about money—which are said to be harder than talks about religion and politics—before the wedding bells ring.
Money Talks: Financial Conversation Starters for Newlyweds
Open and honest lines of communication can help couples build a solid financial footing early on in their marriage. Here are some considerations for broaching the money talk:
Did you marry a money geek or a finance flowerchild? Often partners’ money styles will fall into one of these two categories. Before the wedding bells ring, couples will want to identify which. The money geek might consider drafting a budget the couple can discuss at monthly ‘money meetings’ as means for controlling spending and identifying family goals.
Is debt a dirty little secret? Before the wedding, it’s important to know what debts each spouse is bringing to the marriage and what their partners’ credit ratings are. Having a clear view can help the couple decide which debts to combine, which to keep separate and the impact on the other spouses’ credit history. Similarly, taking stock of any joint debt, such as credit cards or mortgages opened as a couple, will help when it comes time to set a budget.
Do you share common financial priorities and long-term goals? Whether it’s setting up an annual budget or devising a long-term investment strategy, couples can determine where to control expenses by identifying to common goals. Sitting down and listing monthly income and expenses is a good start to identifying shorter-term spending priorities, such as dinners out or travel, as well as longer-term saving and investment opportunities, such as buying a home or planning for a retirement at the beach.
How do you feel about prenuptial agreements and your estate? No one wants to think about separation when starting out in married life. Yet it’s a good idea to get a sense of your feelings – and your partner’s – on prenuptial agreements and estate plans. In some cases, a “prenup” may actually boost each individual’s sense of independence while protecting the wealth each brings to the relationship. Similarly, it’s important to talk early about how couples want to provide for an orderly transfer of assets, considering the financial implications of life insurance and what would happen if a wage earner or work-at-home spouse were lost. Also now may be the time to update beneficiary designations on life insurance policies, IRAs and 401(k) plans.