The Most Important Discussion after the Most Important Decision

14 07 2009

The most important discussionEngaged couples spend a lot of time thinking about merging physical assets, points of view, and expectations for the future, but many omit the all-important discussion on how money will be handled within the marriage. The number one issue couples fight about is money, so being on the same page from the beginning can avoid a lot of conflict later on.

In a perfect world, couples would agree on things like how credit cards will be used, what sort of savings and investment plans should be in place, and how to stick to a budget, but in reality, that rarely happens. But with a straightforward conversation before the joint account is opened, five major mistakes can be avoided.

Mistake #1: Mismatched financial goals

It isn’t romantic, and may seem untimely, but it is never too early to talk about long-term financial goals. Couples should have an idea of when they would like to retire and what it will take to meet this goal. This includes when and how much they are going to contribute to superannuation and retirement funds, disability insurance, wills, and other joint assets. Both partners should have a clear understanding of the assets and who holds them, understand where the documentation is kept, and be clear on how they will be handled in the future.

Mistake #2: Overspending

Going from one household and no accountability for how money is spent to a joint household with a lot of accountability can be difficult. Different values, priorities, and spending habits make overspending highly likely a meeting of the minds when it comes to spending. Couples should decide on a spending limit that, if approached, requires a discussion. For example, if one partner wants to buy new golf clubs for $500 but they agreed to a spending limit of $300, a discussion would be needed before the clubs were purchased.

Mistake #3: Skipping the rainy-day fund

Bathrooms flood, people get sick, jobs get lost, and acts of God happen. Households living pay to pay have little recourse aside from credit when the unexpected occurs. Couples should agree in the beginning of their marriage to build up a rainy-day fund above and beyond their retirement accounts that is equal to at least three months’ salary. This money should be kept in a safe and liquid form (ie.., no real estate, or heavy penalties for accessing it) and should be used ONLY in case of emergency. Couples should agree on the use of this money before any of it is used.

Mistake #4: Pretending the budget doesn’t exist

All couples should have a budget and stick to it. When most people think of budgeting, the word tedious comes to their minds, but budgeting can be liberating. Setting boundaries about money fosters communication between partners, keeps partners focused on both long and short term financial goals, and can even spark creativity by forcing couples to come up with very inexpensive or even free entertainment when the budget shows that there is no more money at the end of the month. Couples should set aside time every month to take a look at the budget and designate one partner as the keeper of the spreadsheet.

Mistake #5: Living beyond your means

Even when couples have the same spending habits, use credit the same way, and have no disagreements about long-term financial goals, they can still live well beyond their means. The past year has taught us a lot about the dangers of taking on more debt than can be handled. Couples should make living below their means a way of life.

The money discussion is the most important discussion an engaged couple can have. Making sure they communicate well about something that most people take very seriously will hopefully set the tone for a long and happy life together.




One response

17 10 2009

I was engaged a few mon,s ago,,,and it was clear to me that he did not takie is debts as a serious issue, and this wa s one factor that help- me decode that it would be best if we parted before money became a issue fro us as a couple.

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