Did you know that during the holidays is the most popular time of year to get engaged? 16% of all couples get engaged during the month of December. But after the joy of the ring and the proposal, it’s time to have some frank conversations with your betrothed about money.
A recent article in YourMoney.com suggests 5 financial questions you should know the answers to well before your big day.
1. How are we going to finance the wedding?
According to theKnot.com, the average couple in the U.S. spends just under $30K on their wedding. And while a lot of men leave the details of the wedding planning to the woman, determining the budget and financing of the wedding should always be a joint decision. After all, when it comes to money, “mine” and “yours” is about to become “ours”.
YourMoney.com points out the importance of having a calm and realistic talk with your fiancé about who will pay for what, where the money is coming from and how much you will budget for each element. Assumptions and misunderstandings can quickly cool the warmth of newly-engaged bliss. What if the groom thinks that her parents are paying for the wedding and, in reality, they are only covering the rehearsal dinner? Or maybe high quality photography is a top priority to the bride-to-be and her fiancé thinks they’ll save some money by using cousin Marco and his new Minolta.
These are the details that have to be worked out early. Planning a wedding is stressful enough without being blindsided by misunderstandings about money. YourMoney.com advises, “Remember that – as wonderful as a wedding day is – starting your married life deeply in debt can limit your options for years to come. For some couples the sacrifice is well worth it, but it’s vital that both partners are on the same page.”
2. How much do you make… and owe?
Hopefully by the time you get engaged you’ve already shared this information with each other, but if not, it’s past time to open up. Arguments over money are one of the main causes of contention in a marriage. Putting in the work to get in alignment before tying the knot can save you a lot of frustration in the future.
YourMoney.com warns, “Financial imbalances – whether they’re down to different salaries or disparate debt burdens – can seriously impact your life together. It’s important to know how much each partner makes, how much debt they carry and their attitude towards saving before making a lifelong commitment. It’s also important to hammer out how you’ll plug any gaps in disposable income, whatever the source of the disparity. This way you can identify any sources of friction before they threaten the stability of your relationship.”
3. Where do you see yourself living in ten years?
This question is important for several reasons. First of all, it establishes where each person prefers to live in terms of location and lifestyle. If her dream is a ranch in Montana and he wants a highrise apartment in New York City, they have some things to work out. Also, a residence is the likely the largest purchase you will make together. As YourMoney.com says, “Buying a house often involves huge financial and lifestyle sacrifices, hopefully in return for increased security and the hope of capital appreciation. Both partners need to agree on how far they’re willing to go for a home to call their own.”
4. Will we pay for our children’s education?
Couples need to be on the same page about what they will contribute to their kids’ education costs. With the price of higher education today, saving for tuition can take decades. Both partners should discuss whether they plan to pay for their kids education costs and, if so, set up a 529 plan or other saving option to be prepared.
You should broaden this discussion to build a consensus on how you will approach money with your kids in general.
- Will they receive an allowance? Will they have to earn it by doing jobs around the house?
- How much will you give them for new clothes at the beginning of the school year?
- Will you buy them their first car?
- Will you allow your kids to live at home rent-free after high school graduation?
When the time comes, it’s important to present a united front to your children in the area of finances. There is nothing worse than a mom telling her kid that he can’t get a new video game unless he earns it and dad slipping him $40 behind her back.
5. Who will see us through retirement?
As YourMoney.com says, “Retirement may seem like a lifetime away, but our twilight years require a lifetime of preparation. Decisions you make now will seriously impact your quality of life in retirement, so this is a vital discussion to have with your partner.”
Go through how much each of you has saved towards retirement, what types of accounts you have set up and what your monthly contributions are. Discuss how contributions will work if one partner takes time off work to raise the children. Make sure that you have mapped out your working years and retirement savings together and discussed how much per month you will need coming in after retirement and what ages you plan to retire. Too many couples leave these plans for too late in life and end up shocked and dismayed from a lack of preparation. Discuss these goals with your financial advisor together. A good consultant will walk you through the right questions and help you build a unified plan.
The biggest thing that successful marriages have in common is effective communication. Tackling the important and challenging discussions about finances before walking down the aisle is a vital foundation on which to build a strong and lasting partnership.