Recently engaged? Congrats! But before walking down the aisle, it’s essential for you and your fiancé to be on the same page when it comes to finances. It can be very easy to get swept up in the fun details of planning a wedding, but there are a number of marriage logistics that are important to discuss, including finances. Weddings are expensive, and might be one of the biggest events you plan together as a couple.
Not to worry! Earnest, a financial lending company, breaks down the real cost of getting married. Here, they’ve broken down 5 important topics for all newly engaged couples to address — sooner than later. Don’t be blindsided and prepare for how much you’ll be spending!
Studies show that people who disagree about finances once a week are 30% more likely to get divorced. Here are some financial talks to have as soon as you get engaged so you can move forward into a financially happy marriage.
1. Discuss How You’ll Pay For The Wedding
The most natural way to broach the subject at this point is to begin through the lens of wedding planning. Set a budget together, and be completely honest about your comfort level when it comes to the various options for how to pay for it, or if you’re okay with asking your parents for help.
In a 2017 survey for The Knot, 70% of couples planned to use savings to help pay for their wedding, while 51% planned to delay their wedding for financial reasons.
The survey also found that 74% of couples plan to take on additional debt to cover costs, with 21% considering personal loans specifically. According to the financial experts at Earnest, “Marriages work best if you stay transparent about money and financial goals […], [and] we believe in keeping stress low during a time of big expenses.” Their personal loans for weddings, for example, could be an option that will alleviate stress without burying you in high-interest debt, or forcing you to delay your special day. “Our low-interest loans are built so our clients qualify on the basis of their potential.”
If taking out a loan or accruing additional credit card debt is out of the question for you or your partner, that’s okay! And it’s good to know. This process is about learning more about one another. Having this discussion now will help you better understand your partner’s broader financial values and philosophies, and how to compromise if and when necessary.
2. Get Nitty Gritty
Talking about money can make some people feel quite vulnerable, but now is not the time to harbor those self-conscious feelings. Transparency is key. For example, if one of you makes a significant amount more than the other, be open about how that makes you both feel, and what that means in terms of future financial responsibilities. Overall, make a point to cover the following at some point soon:
Debt — Going into marriage with debt is more common than ever, especially with millennials. Lay it all out on the line so there are no surprises later on. From student loans to credit cards, be honest about what you’re bringing to the debt table.
Credit Score — As a couple, it’s important to know what your buying power is when it comes to big purchases like a house or car, meaning you need to know your partner’s credit score. If one of you has a low credit score, you can develop a plan together to improve it.
Income — Know how much earning power you both have, too, and again discuss how that will impact your joint financial decisions.
Savings & Assets — What kind of savings do you have? And do you have other assets that will be divided and shared?
Insurance — Are both of you covered by insurance? Whose employer offers the better insurance option?
3. Establish Common Goals
Once you have a clear picture of both your financial situations as individuals, talk about the financial goals you each have and what goals you’d like to establish as a couple.
Savings & Retirement — First, talk about savings, and outline how much and how frequently you want to contribute to it. If you’re both keen on investing, talk about options that will help you make it happen. An automated tool like Betterment, for example, is one popular option.
This discussion goes hand-in-hand with retirement, and other things you’re actually saving for. Talk with your partner about where and when you see yourselves retiring, and how you can plan accordingly and what that means from a lifestyle perspective.
Budgeting — Many couples choose one person to be in charge of keeping the books and paying the bills. This helps you streamline your various spending categories so nothing falls through the cracks. This is another area where you can use apps, like the ever-popular Mint, to help manage things.
Spending — Depending on how you plan to divvy up your accounts, another topic to cover is discretionary spending. If one of you is a big spender, it may be helpful to discuss establishing monetary limits and having separate accounts. Also talk about what kinds of purchases should be made as a team and vice versa. You can establish a rule of thumb such as: anything above $100 requires a discussion.
4. Forecast Different Scenarios
This is the part I like to call scenario roulette. This is a time when you can and should put both those rose- and realistic-colored glasses on, and ensure that you cover the hard-hitting topics like moving, children, and dream jobs.
You may already know most of these things about each other, but it’s important to think about them from a logistical and financial standpoint. Would you move if your partner landed a job somewhere far from family? How many kids do you see yourself having and would either of you be a stay-at-home parent? Would you be okay financially if one of you lost your job?
Some of these scenarios are more fun to think about than others, but it’s smart to consider these things now instead of the moment they catch you off guard.
5. Begin To Carve Your Own Path Together
Traditionally, couples merge their money when they get married, making a joint bank account a financial symbol of their union. However, this doesn’t mean this is a system for all couples. In 2016, 76% of couples said they shared at least one bank account, meaning approximately ¼ of couples kept their finances separate. Studies also show that millennials are least likely to be in favor of sharing bank accounts.
With all the advice and statistics in the world, what matters most is a financial solution that works for the both of you. And in order to arrive to that solution, you need to simply work together and communicate. Most of how you end up managing money together will come down to trial and error and honesty.