As you begin to build your life together, you should talk about money. While it may not be easy, the number one rule is to be honest. “It’s all about a foundation for your relationship”.
- Don’t hide any assets, income or debt; doing so is financial infidelity.
- Have an attitude of working together. “Don’t come from the mindset of ‘This is mine’ and ‘That is yours’ (although there are sometimes reasons for separate accounts).
- Schedule a discussion time in advance, and bring recent credit reports, pay stubs, insurance policies and statements for all financial accounts.
- No blaming. Just as you should be honest about your situation, be open to what your partner says.
- Talk about your financial memories with your parents. What kinds of conversations did you grow up with around money? Did they fight about money, were they spendthrifts; at the time of the month they paid the bills, was that a stressful experience?”
- Also discuss your current money habits — whether you live paycheck to paycheck, whether you are a saver, how you decide whether or not to buy something.
- If you find there are financial differences, there’s no need to freak out. You’re just learning about the other person, with an attitude of understanding. Later on, you’ll create out a setup that will work for both of you, even if you have different approaches.
- Take a look at the numbers -with your financial documents, tally up all your assets — savings, checking, retirement accounts, real estate, collectibles etc., and your debts — school loans, credit card debt, mortgages, etc. Then determine your net worth by subtracting your debts from your assets.
- At this point, if you don’t know it already, reveal your income to each other. You should also go over your credit reports. “If there’s anything else out there that hasn’t been known, now it’s going to be known”
- Set financial goals. Set three kinds of goals: emergency funds (3-6 months of essential bills), 1-5 year goals, such as for a down payment or a trip, and then long-term goals such your child’s education or retirement.
- Depending on your situation, you may need a professional to determine how to divide your money among debt, savings and retirement. (Find out How to contact a Certified Credit Counselor)
- Create a budget. Add your essential costs — housing, transportation, utilities, groceries — and discretionary spending — gym, shopping, entertainment, etc. If you aren’t sure how much you spend on various categories, track your spending for at least a month.
- Saving 20% of your take-home pay —10% toward emergencies if you’re still building savings and 10% toward retirement. If you’re living on more than 80% of your income, ratchet your spending down. i.e. cable, gym, dine out and less or downgrade your cell phone package.
- If you have debt, you should try to live on 70% of your take-home pay and use the other 30% for savings (20%) and debt (10%) – but make sure you stop accruing more debt.
- Decide how to set up your accounts. You can have 3 options: 1) all joint accounts, 2) a combination of joint and separate accounts, or 3) entirely separate accounts. Most couples do one of the first two.
- Designate a bill payer and a weekly or biweekly money meeting. One person should be made responsible for paying the bills but the other should always be aware of what is happening with the finances.
- Make sure to meet regularly about money. Look at whether saving and spending habits are still keeping you on track for your savings and financial goals.
- Set a minimum threshold cost for discussing big expenses. An easy way to head off fights about money is to agree to discuss any purchases above a set amount. We should agree that anything above a certain amount, the other person deserves the respect to have a conversation.”
- Talk about how you’ll deal with friends or family in need of money. Set a policy to discuss these kinds of situations together as a couple. “It depends on what you have in income surplus that you could help someone with, the severity of the situation, and the frequency.
- Call your accountant. Discuss with a professional whether it makes sense for you to file jointly or separately. If you decide to file taxes jointly, your tax bracket will likely change. Ask your accountant to make a tax projection to see about what you’ll pay.
- Update all your beneficiaries who will receive the benefits of a will, trust, life insurance policy or other financial accounts such as an IRA or 401(k), checking account or savings account.
- Consider giving your spouse power of attorney. With the power of attorney, your spouse can make legal decisions about your property and finances, particularly in the event of your illness or disability.
- If throughout a power of attorney you name your spouse your health care proxy, talk about what types of interventions you’d like or not like to have, if you were to become incapacitated. You could also create a living will to state whether life-prolonging measures should or should not be taken.
- Create/update your will. Without a will, the state will make decisions for you. A will is especially important if one or both of you have children already.
- Update or re-evaluate all your insurance policies. If you both receive health insurance through your employers, see whether it makes sense for you to be on the same plan, and if so, which plan gives you the coverage best for your situation and for the cost.
- Decide whether you’ll need life insurance. Many couples forgo it if both spouses work, but there are exceptions. “Buying new life insurance isn’t a priority unless we’re going to commit to new expenses we didn’t have previously, like a mortgage,”
- Look at your auto insurance to put your spouse on your vehicle, and meet with a broker to review your homeowner’s insurance.
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