When entering into a marriage there are so many different aspects to consider. There is the thought process and planning associated with buying a house together, deciding if you want a family, where you want to live, what wedding you both want, how your home with being decorated, and finances.
Along with making these other decisions, one of the most important ones is having a conversation with your soon-to-be spouse is finances. Without entering into this conversation you run the risk that arguments will rise over finances and money in the future. It is a known fact that this is one of the most common topics that cause disagreements with marriages. These tend to fall into the categories of big purchases, financial decisions, spending habits so it is important that before you go ahead and day ‘I do’ that you have an open and honest conversation about money.
It is important that you are both transparent about any debts that you have, what you are planning for retirement and your financial ambitions for the future. Once this has all been discussed you will be able to enter your married partnership and jointly walk the path to your financial future.
In order to ensure that this conversation covers all important areas, here are some topics to consider:
Current Debts And Outstanding Balances
It is crucial that before you enter into the marriage that you have taken the time to gain a full and clear understanding of your partner’s overall financial state. When having this conversation you want to gain an understanding of all debts they have, including any student debts they have built up, credit card debts or other forms of finance, any car loans as well as mortgage payments and balances.
Although any debts will remain in the current person’s name, they can still influence how as a married couple your overall finances stand and how likely you as a couple will be able to gain new finance together if needed.
In an ideal world, the best outcome would be for the marriage to be entered with as little or no debt on either part. This of course isn’t always possible so it is important to be able to have an open conversation about how these debts will be eliminated in the future.
Also, you will want to discuss future financial considerations that as a couple you will want to make. This could be applying for a mortgage in the future. If this is something that you will be planning and striving towards it is important that you work to get those debts paid down as they will influence the amount of loan you are eligible for as well as impacting on your credit rating and the types of mortgages that you will be eligible for.
Future Financial Planning And Budgeting
It is important to understand one and another spending habits now before getting married, so they don’t surprise you in the future and cause a topic of disagreements. It can cause friction within the most loving of relationships if one person is more conservative and cautious with spending than the others. You may find that one person is tighter with their spending habits whilst the other is quick to flash the cash and spend.
Unless this is discussed openly, you could find it causing friction, resentment, and arguments about the topic of overspending.
In order to prevent spending from becoming an issue, it is helpful to understand and establish a budget. By sitting down together you will be able to understand how much needs to be spent on all household running costs, food, mortgage or rent, and socializing and entertainment. Once this has been understood you will be able to find a common agreement when it comes to individual budgets and sole spending.
Current Financial Assets
When entering into a marriage it is also to consider what assets you have now and how your sole wealth will be expected to change over the future years. No one enters into a marriage expecting it to come to an end. However, divorces do happen.
It is important that you consider and discuss what measures, if any, will be put in place. Of course, there are high net worth divorce attorneys that can manage how assets are divided. Or alternatively, you may wish to consider setting in place an agreement that covers how what assets will be retained if a divorce proceeding ever happened in the future through a prenuptial agreement.
Plan For Retirement And Savings
Not only will you be planning for the here and now, but you will also be wanting to discuss for the future You need to factor in and work out what you will be able to budget for savings.
It can be extremely easy as a newlywed not to think about the future savings goals and to use your surplus disposable cash on other things such as household furnishing, days out, or general discretionary spending.
It can end up being extremely costly if you don’t start to think and plan for your future now. The earlier that you both can start saving for this, the more you will be able to gain from interest.
It is therefore important to understand as a couple what type of retirement you are envisioning for yourselves. Do you plan to be able to take early retirement, are you wanting to be able to support your children and be financially able to help them buy their first car or house, are you still wanting a certain level of disposable income in these golden years? All of these answers act as the cornerstone when it comes to your future financial planning.
Along with understanding your future finances you need to agree on how to get the most from your savings. If you are considering investing your joint money it is important to understand and consider each other’s attitudes towards risk and reward to ensure that you are both on the same page with where joint savings are being put.