financial conversations to have prior to marriage

Financial Conversations to Have Prior to Marriage

Marriage is about celebrating two people who’ve decided to embark on the rest of their lives together. It’s an exciting and fulfilling time! Yet, marriage also brings with it the joining of two separate financial pictures, backgrounds, and priorities. Engaging in these conversations with your soon-to-be-spouse, while difficult they may be, can help avoid even more difficult conversations or circumstances in the future. This article will explore different financial conversations to have prior to marriage to ensure you hit the ground running on the same track!

Discuss Your Spouse’s Financial Past and Present

When having financial conversations, it’s best to just jump right into it. You’re planning on spending the rest of your lives together, why wait to have these discussions? Common discussions related to your spouse’s financial past and present include:

  • What assets are you bringing into the marriage? Will everything become jointly owned? If not, why?
  • What debts do you currently carry or have carried in the past? Knowing whether your spouse has a debt problem from the beginning is key to sorting it out. If you were to find out years into the marriage they’d been carrying a massive amount of debt which keeps you from qualifying for a mortgage to buy your first home, imagine the negative emotions you’d feel toward your spouse.
  • Are you a spender or a saver? How have they saved/invested in the past? If they’ve done a great job saving and you’re more of a spender who has a hard time setting aside enough money every month, or vice versa, you’ll need to discuss what will keep you both happy in terms of not spending too much. Maybe that’s keeping separate checking accounts, so each person doesn’t haggle with one another over certain expenditures. Or, maybe it’s joining checking accounts to simplify, consolidate, and help hold each other accountable.

Set Joint Financial Goals

As important as it is to understand your past and present financial pictures, setting joint goals to works towards together will be the foundation upon which you start to build your life together. Those goals may be to start a family, buy a home to settle down in, travel, or retire early, to name a few. These conversations should be fun and exciting. Envision the best possible life together, what does that entail? Why can’t it become a reality if it’s a goal you’re both aligned on and agree to work towards together!

These conversations should also include family and career plans. If you plan on starting a family, will you remain a joint income household or will one parent stay at home to take care of the newborn? In terms of your careers, are you both happy where you’re currently working? Does either of you plan on returning to school, taking some extended time off, or starting a business?

These are big and financially impactful decisions and it’s not uncommon for there to be disagreement. The key is to find a middle ground, understand each other’s perspectives, and even be willing to compromise for each other when necessary. You likely won’t always both agree on the goals you set out to accomplish, but that does not mean you can’t always be supportive of each other in pursuing them.

Define Your Roles

Who will be responsible for paying the bills? Who will ensure the credit cards are paid off every month? Who will ensure you’re increasing retirement savings every year? Having defined roles with your joint finances makes it much easier to stay on top of things. If you’re both scrambling to remember to pay the bills each month, or you haven’t discussed who will review investment accounts and when to make further contributions, the latter is probably not getting done.

If one of you is more interested in investments and the other just making sure you’re financially sound on a monthly basis (paying off credit cards, maintaining an emergency fund, setting aside money in the travel fund, etc), then define your roles accordingly. Keep each other up to date, but each individual can “specialize” in their respective responsibilities so to speak.

Protect Your Future

Thinking about our own mortality, especially prior to or soon after marriage, can be tough. But it’s an essential part of any strong financial plan. You wouldn’t want to leave your spouse in a scenario where you’re unable to work and provide income. Or in the worst case, you’ve passed away and he/she is unable to pay the mortgage or fund your children’s college education with the resulting loss of a lifetime of income.

Losing one income in a household that planned on having joint incomes for the foreseeable future can have a dramatic impact on your lives. Fortunately, there are insurance policies to help guard against these unfortunate events. Keep in mind, many employers offer life and disability insurance as part of their benefits packages for employees. Any coverage needed on top of the free benefits you receive from an employer can often be bought through your employer or in the private marketplace.

Life insurance pays to the surviving spouse when the covered individual passes away and provides the funds in lieu of the deceased spouse’s income. For millennials, term life insurance policies are relatively cheap for the amount of coverage they provide. Again, it’s not something we like to think about, but it’s even harder to think about leaving your family behind with a mortgage or unfulfilled college educations costs. If you’re covered, you have the peace of mind knowing your family will be financially secure should the worst-case scenario ever happen.

Disability insurance helps guard against an individual’s inability to work and the subsequent loss of income. Determining how much coverage is needed can be determined on an individual basis. However, disability insurance only covers up to a percentage of your base salary, often only 50-60%, so if you’re in a high-commission dependant job, you’d want to make sure you have as much as 80% of your income covered.

The Bottom Line

The list could go on and on regarding the different conversations spouses should have regarding their newly conjoined finances. However, the key takeaway is simple – have these conversations in the first place. DO NOT avoid financial conversations with your spouse and keep an open line of communication. Neither of you should feel bad about asking questions or working together to get a better understanding of how you’ll move forward with your joint finances. Lastly, hiring a financial planner during and after this big life transition can help facilitate these discussions, set joint financial goals, and get started on the right track. If you’re interested in learning more about how I might be able to help, schedule a free consultation today!

Levi Sanchez, CFP®, CPWA®, CEPA®, BFA™
Levi Sanchez, CFP®, CPWA®, CEPA®, BFA™
Levi Sanchez is a CERTIFIED FINANCIAL PLANNER™, CERTIFIED PRIVATE WEALTH ADVISOR®, CERTIFIED EXIT PLANNING ADVISOR®, BEHAVIORAL FINANCIAL ADVISOR™ designee and Founder of Millennial Wealth, a fee-only financial planning firm for young professionals and tech industry employees. Levi’s been quoted in the New York Times, Business Insider, Forbes, and is a frequent contributor to Investopedia. He is an avid sports fan, personal finance and investing geek, and enjoys a great TV show or movie. His mission is to help educate his generation about better money habits and provide financial planning services to those who want to start planning for their future today!

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