Relationships can be a beautiful thing. Romantic dinners, exotic getaways, and talks of adopting a furry pet or starting a family are all part of the fun. What is not fun, however, is having "the talk" about money and other financial matters with your partner prior to walking down teh aisle. For many couples, this topic will first come up while planning the wedding, which might be too little, too late. Before setting the wedding date, first set a date to have the awkward, yet vital, conversation with your partner. Couples will benefit from an honest understanding of who and what they are committing to when saying, "I do," as opposed to being blindsided by your future spouse's financial trouble.
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To avoid financial infidelity, consider the following talking points to ensure that both of you are financially compatible and ready for marriage.
1. Credit Histories: Many college graduates are bound to borrow money to bridge the gap for a proper education. Alongside college loans, young adults may also be committed to car payments or incurring credit card debt. When considering marriage, knowing your partner’s existing financial obligations will help avert surprises when applying for a home equity loan or financing a new appliances, for example. Depending on where you live, your partner’s debt may become yours. Community property states such as Arizona, California, Nevada and Texas, make one spouse responsible for the other spouse’s debt acquired during the marriage. On the other hand, Common law property states, see debt as yours alone, unless the debt was necessary for family necessities such as tuition, food and shelter. Whether the debt is yours, mine, or ours, considering whether or not to help pay for your spouse’s debt is something to discuss.
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2. Separate vs Joint Finances: Opting whether or not to keep your finances separate as opposed to shared is something that couples may want to chat about as well. Maintaining individual checking and savings accounts is convenient when one partner decides to pay off his or her debt alone. As part of the cohabitating agreement, couples may comfortably settle for paying bills separately. For example, one spouse may want to pay off the utilities, while the other spouse agrees to pay rent. The key to making it work is by communicating expectations earlier in the relationship and being responsible.
You may also want to discuss whether you will be applying for credit cards together or keeping separate credit lines. Both scenarios have pros and cons. The positives of applying together include helping one person obtaining higher credit as well as better interest rates. The downsides of a joint credit include both being legally responsible for payments, and delinquencies show up on each other’s credit reports.
3. Spending Habits: Some couples may be in tune with their partner’s spending styles, while others have no concept at all. It’s definitely possible that both of you have the same attitude toward spending and saving. However, what if half the couple is a spender, while the other half is a saver? Knowing this in advance, can help couples plan ahead and set realistic budgets. Additionally, partners can help each other when it comes to curbing expenses, splurging or meeting in the middle.
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4. Responsibilities: Relationships survive on communication and sharing responsibilities. One may be good at couponing, while the other may be excellent balancing the checkbook. Divvying up the financial responsibilities can help keep both partners stay involved in the finances without burning out or worse, missing a payment because of lack of communication. When assigning tasks regarding finances, consider each other’s strengths and weakness. Dividing and conquering the finances will help free up time to tackle other tasks.
5. Saving for the future: You dream about a vacation home. Your partner wants to max out the retirement account. Talk to your significant other about monetary goals and agree on which ones are priorities versus nice-to-haves.
6. Financial Support: If you help your parents financially, or occasionally lend a sibling money in a pinch, be transparent with your partner as this is something he or she may not agree with. On the other hand, your partner may be more than willing to help knowing the circumstances upfront.
7. Waiting It Out: After discussing financial expectations and responsibilities with your partner, you may both agree that fixing your finances takes precedence over marriage. If you determine that waiting is the best option, then your relationship can be more financially secure come the big day.
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