Financial Planning for the Bride and Groom

money-wedding-rings

You may never have balanced your checkbook. But now that you are getting married, it is time you and your fiancé talked about finances. The good people at GroomGroove.com have provided us this article on pre-marital financial planning. From spending and saving, to bank accounts and investments, keep your marriage financially balanced.

Money is the number one cause of friction in a marriage and a frequent contributor to divorce. Much of that friction can be avoided in advance of getting married by having an open discussion with your fiancé about financial priorities and setting up a financial system to accomplish those priorities.

Priorities

Spending Habits and Checking Accounts

Typically, newlyweds are advised by financial planners to set up a joint bank account. This forces the couple not to think of “my” money but “our” money and is particularly important when one spouse earns more than the other or one spouse is perceived as the breadwinner. However, couples that maintained separate bank accounts prior to getting married often find it difficult to adjust to having joint bank accounts. “Having two checking accounts wasn’t working,” Rob Stevens, Claire’s husband says, “but having only one single account wasn’t going to be a solution. We settled on a single bank account where our pay was being deposited, groceries and investments would be paid out of, then paid each other $300 per week for our own spending to a separate account.”

Not uncommon, such strategies allow couples to be responsible with their spending, particularly if one spouse has different spending habits than the other. If, for example, Rob spent his $300 one week on tickets and travel to the “Final Four” college basketball tournament, he’d have to wait until next payday to be replenished.

Sticking closely to the rules is an important part of maintaining financial bliss, as most of the problems related to money are resentment-related.

My debt, your debt

College-educated men and women will likely bring some education debt into the marriage, which is something of an investment in the future. These debt payments need to be budgeted for, but in all likelihood, you will have been paying down your student loan prior to getting married. That may be old hat for you.

On the other hand, consumer debt (although often smaller than student loans), can be debilitating as many people can’t cope with credit card spending. Anna Bruno, an AXA-Advisors financial consultant tells GroomGroove.com, “Far too many people use credit cards as an additional income source and sink further into debt. The interest on credit cards builds up much faster than interest on a savings account.”

It can be quite surprising to see how quickly and where credit card money is being spent. Check out your credit card statements online and sort them by merchant. You’ll quickly see that five dollars “here and there” at Starbucks can add up to $3,000 per year of foregone savings. If you both have spending problems, you may need the advice of a financial counselor to help you through. Spending the money to talk with a planner will save you money in the long run.

Credit Check

That Macy’s credit card your fiancé has tucked away in her wallet may seem innocuous. Do you know, however, whether she’s paid the bills on time? Have you wondered what her credit rating looks like? If you haven’t, getting mutual credit reports is a good idea. The point is not to shame or be shamed, but know what you are dealing with. It is important in the event you and your wife want to get a mortgage to buy a condo or a house. Knowing your credit history can help in figuring out what areas you need to improve on and how likely it is you’ll be able to get a mortgage.

Credit reports are available on a yearly basis for free from one of the three major credit agencies. As a matter of law, you are entitled to a free credit report at www.annualcreditreport.com. There may be a recurring “credit monitoring” fee you should watch out for, but generally you can get your report and cancel any such monitoring fees so that the credit report really is free.

Sit down with your report and your fiancé to figure out whether there are cards that can be cut up. It’s often interesting to remember that “oh yeah, I forgot all about that Bloomingdale’s card!”

A Financial Diet

If you and your fiancé have set up a financial plan, so that you know how much money you are likely to get for your own entertainment, one way to stay on the financial wagon is by going on a financial “diet”. Get your fiancé to put the credit cards away. Hide them, if necessary! If your spending budget is $100 per week, each week you should withdraw $100 from your account and have the bank cut it into $10 bills. See how long you and your fiancé can last on $10 per day. You will essentially become each other’s personal bankers. It will quickly be apparent to you both the value of money and the value of saving. GroomGroove.com recognizes that you may have similar gluttonous spending habits as well. Going on a financial diet makes that new Cobra Golf Driver all the more worthwhile.

couple-finances

Investments

Taking some time to meet with a financial planner is very important, particularly if you’ve been working for several years but have no savings to show for it. If you have some savings and the idea that investments are a wise move, you’re ahead of the game. There are several different types of investments, and a professional can help you choose the method that is best for you and your fiancé.   One of the biggest mistakes couples make when investing is that they assume an aggressive stance while losing sight of the long-term. Bruno reminds investors that, “patience and persistence are the operative words here. Don’t let the market rattle you into changing your battle plan.”

Investments are particularly wise for young, soon-to-be-married couples when it comes to the prospect of planning a family together.   Not only is the price of daycare astronomical , but keep in mind that additions to your family of two might create the need for more living space. And remember that debt you are paying off from college will soon become your children’s debt, and to what degree will be determined by you. Saving for their college educations (not to mention any private education along the way) will become a factor from the moment junior arrives.

Retirement

It may seem a long way off, but thinking about retirement can be an eye opener. You will definitely need the advice of a financial planner in this case. Bruno posits, “If you have trouble saving money on a regular basis, you may try savings strategies that force you to save. Examples of forced savings strategies are whole life insurance, employer-sponsored retirement plans, and direct payroll deductions.” These are options that might not immediately spring to mind, but that will ensure you have a nest egg when the time comes.

In Sum

Money isn’t something to be intimidated by or ignored.   The key to a successful marriage, financially speaking, is to establish a clear game plan and stick to it.   Keep the lines of communication between you and your soon-to-be-wife open at all times, and always maintain honesty when it comes to your financial reality.

This article has been used with permission by GroomGroove.com. Check out the best online guide for the groom and best man at GroomGroove.com.