The Mint Grad

The cost of commitment

5 money questions to ask before tying the knot

Tying the knot these days doesn’t just involve making a personal commitment to the one you love. It often means saying “I do” to your partner’s finances as well.

So if you’re planning a walk down the aisle or have recently gotten married, you should have a heart-to-heart with your mate about your financial goals and dreams. The following five questions are a good place to start planning your future together.

1. How do our money personalities compare?

Just like our personas differ (e.g. outgoing with friends, reserved with coworkers), people also tend to have “money personalities.” Your money personality can be shaped by your childhood experiences, upbringing, long-term values, and/or current lifestyle. But it can also be a result of how financially fit you are – meaning how much you know about money; how well you manage your money; and how financially secure you feel. No matter, your attitudes and perspectives about money play a huge role in the decisions you make and the habits you form.

So, here are two easy ways to start assessing your relationship with money:

The important thing to remember is that even if you and your partner have opposite money personalities, you can still have a financially healthy relationship by practicing open communication and compromise.

2. Will we have joint or separate bank accounts?

Some couples choose to have individual savings or checking accounts while others opt to join everything and co-mingle accounts once they marry. You may also decide to have both – separate accounts for your own spending, and then a joint account from which you both pay household bills.

One of the benefits of separate accounts is that you’ll gain more money-management skills by personally balancing your own checkbook and keeping tabs on your savings. The other benefit is having greater financial independence to handle your money they way you see fit.

However, even with separate accounts, it’s still important to have some basic ground-rules. For example, you might agree to check in with one another before making a major purchase, of say, $500 or more.

If you choose to maintain a joint account, you’ll also need to discuss how it gets funded. Will you each contribute dollars to it on a 50-50 basis, or will you each put in a certain percentage of your income? Talking through these issues early on helps establish expectations and can avoid potential misunderstandings down the road.

3. What is our plan to pay off existing debts?

As with everything else honesty is the best policy when it comes to disclosing your debts to your significant other. Blindsiding your partner, after you’re hitched, with thousands of dollars in student loans or credit card bills is not likely to start your marriage off on a positive note.

The better approach is to have that conversation upfront and jointly decide how you will manage your existing obligations so they do not affect your ability to save and plan for important life goals such as purchasing a home, traveling abroad, or starting a family.

You can start planning to pay off existing debts by reviewing your budget (whether that’s a shared budget or individual), identifying sources of debt and checking your credit scores.

4. How will we handle future loans and credit?

The wedding planning process is a good time to consider how the two of you feel about spending and saving money. Does one of you feel comfortable blowing the budget, while the other cringes at the expenses on the credit card?

Figuring out your joint perspective on future credit is just as critical as dealing with past debt. The first step is to come to common ground on how credit dependent you want to be. While certain major purchases like a home or a car will probably require a loan, smaller credit purchases (e.g. for concert tickets, groceries, clothing) can rack up unexpected debt.

It makes sense to decide upfront how much routine monthly spending will be done with cards, as opposed to cash. You might consider adding a column to your budget (listed CASH or CARD) that indicates how the monthly bills will be paid.

Additionally, once you and your partner have reviewed your budget and credit histories, discuss how you plan to handle any potential loans. As un-fun as it may sound, you need to discuss the implications of credit decisions like joint borrowing and co-signing which will have both of you on the hook for repaying those debts (even if you divorce).

5. What are our plans for the future?

Personal goals almost always carry a price tag, so make sure to discuss your short, medium, and long-term goals with your partner.

Chances are you’ll both have a variety of things you’d like to accomplish. Is graduate school in your future? Backpacking across Europe? When do you see yourself retiring – and how would you spend your time if you retired tomorrow? (Okay, it’s a long ways away but still an important thing to plan for!)

By talking about your priorities, and answering the five questions listed above, you two can be off to a great start together (no unwanted surprises).

 


Who are you committed to?

Planning to walk down the aisle? Moving in with a roommate? Is a sibling asking to borrow cash again? If you’re making financial decisions with someone else, chances are you’ve had some conversations about your budget and expectations going forward. Share your story and any tips you have for figuring out the cost of commitment.