Before tying the knot, it’s important for you and your partner to sit down and have a sincere heart-to-heart about money. Premarital financial planning may seem uncomfortable, but by being frank from the very beginning of your marriage, you’ll learn a lot, which can be a huge stress-reliever in the long run. It doesn’t have to be an intimidating meeting sitting across a desk from one another; instead, make premarital financial planning fun by grabbing coffee or better yet, by ordering in some food and delving even deeper into your relationship. Who says that isn’t romantic? Read on to find out the three financial topics you and your fiancé/e should cover to establish good communication and build a solid foundation before the wedding.
Premarital Financial Planning
1. Talk about your past before starting your future
In your first financial conversation with your fiancé/e, you both need to lay all your cards on the table. Be open and honest about any debts you currently have, and any debt history that may have affected your credit score. Talk about secured debt like car payments or real estate, as well as unsecured debts like student loans and credit cards.
- What are the monthly payments and interest rates associated with each one?
- How long until the debt is paid in full?
Be sure to ask these questions, and also answer them for yourself. That way, you won’t have any surprises down the road.
Once you’ve established how much debt you each carry, you and your partner will want to get an idea of each other’s current finances. If you haven’t already, tell each other how much you currently earn (don’t forget about bonuses) and how much of that you save, invest and donate. Then, compare your monthly bills and any other financial obligations to gain a holistic view of your income and expenses.
Action item: Check your credit scores together to take the first step in understanding your joint financial future. Try www.creditkarma.com for a free credit score with no hidden fees.
2. Open up about your attitudes toward money
Now that you understand how much you each have, next you’ll want to discuss how you each feel about money. Here are some ideas of questions to ask.
- What do you consider disposable income: Clothes? Gadgets? Travel? It’s ok if you don’t agree on everything, at this point you just want to learn more about each other’s perspectives.
- How do you each feel about combining bank accounts? Would you rather keep them separate? Who will be in charge of paying the bills?
- How comfortable are you with risk? What types of saving and investing would you like to do?
- Do either of you feel the need for a pre-nup?
Some of these questions may seem tough, but asking them early on will be a huge benefit in your relationship. Rather than assuming what the other is thinking, you’ll instead encourage an open dialogue. Premarital financial planning is great not just for finances, but for every aspect of your life together.
Action item: Use this simple budget worksheet from the FTC to create a joint monthly budget together.
3. Map out your future financial goals
You know you want to share your life together, but what does that look like to each of you? By verbalizing both short-term and long-term goals, you and your partner can help each other prioritize and work towards achieving them.
- What are your career goals? How can you support each other in turning those plans into a reality?
- Do you plan on having kids? Start to talk about your childcare options early on to avoid any unrealistic expectations further down the road.
- Finally, how do each of you feel about home ownership? Talk about where you’d like to live geographically, as well as what type of home you prefer (single family home, townhouse or condo). Do you know what your monthly mortgage payments should look like? It’s never too early to start thinking about your dream home together.
Action item: Talk to a Carlyle Financial mortgage banker to assess your finances and find the perfect home at the right price.
What other financial questions do you think you should ask your fiancé/e before getting married? Let us know in the comments section.