Planning For Two: Combining Your Financial Futures After Marriage

Over the past few years, I’ve watched a growing number of friends get engaged and then get caught up in the excitement – and chaos – of planning their weddings.  In the midst of preparing for the big day, it can be easy to lose track of planning for the long term.  All the wedding blogs will tell you that agreeing about money is critical for a happy, balanced marriage, but if you’ve never had the conversation before, how do you know where to begin?  If you’re already living together, you may have a head start in some of these areas, but it’s still important to discuss these money issues before you get married, keeping in mind the importance of being open and patient with each other.  Your wedding represents the start of your future together – and managing your money well now can help smooth your path towards that future.

Your current situation:

Debts: You and your partner should discuss your current debts (credit cards, school loans, mortgages, etc.).  How much debt does each of you have, and how are you currently paying it off?  Do you expect each other to contribute to paying those debts?  Do you have a date in mind to be debt free?  Do you know, or even have, your credit score?  (You can get your credit reports, but not your score, for free from http://www.annualcreditreport.com.) Most importantly, what are your respective attitudes towards debt – do you only carry cash, or are you always carrying an ongoing credit balance?

Budgets: How do you currently spend your money?  How much do you want to be paying for housing, groceries, entertainment, and other monthly expenses?  Who is going to physically be paying the bills?  How are you getting health insurance, and can one of you receive better benefits through the other’s employer?  Many credit card companies and sites like Mint provide useful tools for understanding your historical spending patterns and breaking them into specific categories.  Together you should discuss all your current and expected expenses, and develop a baseline budget.  Of course, the other key element to the budget is income, which comes with a separate set of questions.  Are you both currently employed, and living off your salaries, or with help from parents or investment income?  Do you intend to keep working, at least in the near term?   The budgeting process will also help you determine how much to set aside in an emergency fund – you’ll want to sock away at least 3-6 months’ living expenses in an accessible, short-term account, particularly now that you’re both responsible for another person.

You may already know the answers to some of these questions, but understanding your overall financial situation will help you to achieve your short- and long-term financial goals.  Now, you just have to set them.

Bank accounts: Once you understand where your money comes from and goes, you should discuss how you want to manage it as a married couple.  Setting up a joint account simplifies check writing and bill paying, but many couples elect to keep separate accounts, or maintain one joint account with individual accounts for personal expenses.  If you’re contributing to a joint account, how much will you each contribute?  What will your goals and uses for the account be?  Make sure to discuss guidelines for making larger purchases, and when one of you can make purchases without consulting the other.

Savings and Investments: You’ve addressed the day-to-day money questions, so it’s time to discuss your attitude towards savings, investments, and planning for the future.  Do either of you currently have brokerage accounts?  Are you contributing on a regular (monthly or quarterly) basis?  How do you intend to use your savings accounts – are you planning to pursue graduate education, buy a home, or start a family?  Your ability and inclination to invest is often a reflection of your spending patterns, and if you haven’t historically focused on socking money away, it’s time to start building the habit.  This is also a good time to discuss your thoughts on where to keep your investments – a function of your attitudes towards risk.  Are you actively investing and in the market, while your partner prefers conservative, short-term CDs?  How much information, or control, are you willing to share over your savings or investment accounts?  As with bank accounts, joint investment accounts add the benefit of convenience, but take away some independence in decision-making.

Retirement: You’ve heard it before – it’s never too early to start saving for retirement.  Focusing your investing in retirement accounts can also provide some tax advantages (useful to offset the impact of your pending change in marital tax status).  You and your partner should discuss your collective goals for retirement.  At what age do you each intend to retire?  Where, and how, do you want to live?  How do you intend to finance your retirement living?  Do you currently have IRAs, 401(k)s or employer pension plans?  How will you share information on the performance of your retirement assets?  Though retirement may be a long time away, planning and sharing now may help you avoid surprises down the line, as well as inform other nearer-term financial decisions which you’ll make together.

Most importantly, this financial discussion should mark the beginning of a ongoing conversation about your finances.   Your thoughts on these topics may change over time, and your partner won’t know unless you tell them.  Learning able to talk comfortably about money may be one of the most challenging goals you’ll set for yourselves, but you’ll be well rewarded in the end – financially and otherwise.

Photo by http://www.flickr.com/photos/allyrose18/ / CC BY-ND 2.0

John Prendergast John Prendergast is the co-founder and CEO of Blueleaf. He serves on the board of WiredTiger, a developer cloud optimized databases. He is also the founder and organizer of the Lean Startup Circle Boston. In addition to his decade and a half as an entrepreneur, John spent nearly a decade as an investment banker and financial advisor.