April 2002
Do You Alice, take John as Your Financial Partner?
Amy E. Gibb, MBA, CFP
The flowers are beautiful, the dress is perfect, it will be the wedding of your dreams. You both want kids and you like each other's families. What isn't perfect about this union? But are you financially compatible? Have you both been honest about your past financial indiscretions? Are you ready to forgo financial single hood for the commitment of a financial partnership?
Even if you aren't Ivanna and Donald Trump, you still need to have some serious financial conversations with your future partner. It is time to come clean about the financial skeletons still living in your closet. The time for your spouse to find out about your unpaid student loans or bad credit is not from a banker turning you down for your home mortgage request. Do you have big credit card debt while your wife has money saved in her 401(k)? Are you a spender and your wife a saver. These are all issues you need to discuss with your financial-partner-to-be.
Prenuptial agreements might be a way to discuss finances but they won't help you with the day to day issues that arise regarding money. What if you are older, have been married before or are skipping the nuptials and will be living together? All this advice still applies.
First come clean with each other. Lay out everything that you own and that you owe. Discuss any financial mistakes of your past. Share tax returns, credit reports, bills and investment statements. Talk about your money philosophy, your thoughts on spending, saving, and charity. Discuss family baggage regarding money and what you learned growing up. Share your dreams, hopes and goals. Get a financial planner involved to help you set a good foundation for your marriage.
Once you have covered the basics, move to the next step of planning your financial future. Build a budget of all joint expenses and income. Talk about whether you will commingle your money or keep it separate. Whatever path you choose, it is always a good idea for each person to have a bank account and credit card in their own name. Each financial plan is individual to the couple but I suggest that each person in the marriage have some money of their own to spend as they choose. One way this can be done is for each person to take from the family budget an equal amount each month for personal expenditures, like hobbies, gifts, sporting event tickets, regardless of what each spouse makes or whether they work outside of the home.
Money is a source of power and control. The more the power is shared equally between partners, regardless of where the money originates the better. An exception to this might be when one spouse or the other receives a financial gift or inheritance. I recommend that this money be kept separate. If the recipient chooses to commingle this money with their spouse they must understand that they loose all separate control of this money in daily life, at death or in case of divorce.
As you continue in your life together, spend time each month talking about your finances. Ask each other what works, what doesn't, where are you regarding your financial plan and what changes need to be made. At least once a year have a "board meeting" about your finances where you look at your financial statements and plan for the future. A good time to do this is during tax time when you have to address these issues anyway.
Many marriages and financial partnerships end and often the source of contention is money. The more time you spend anticipating problems at the start, and managing them along the way, the better chance you have of maintaining the relationship and prospering together.
Amy E. Gibb, MBA, CFP
President
Money $ense
Amy@MoneySenseSolutions.com, www.MoneySenseSolutions.com
303.494.5362
Financial Advising for individuals and business owners
"Money isn’t everything, Managing it is"
Amy E. Gibb, President of Money $ense works with her clients to help them plan for a successful financial future. She may be contacted at 303.494.5362, or for more information go to www.MoneySenseSolutions.com.