Talking Money with your (future) wife
As I had written a few weeks ago, a good friend of mine is getting married in early 2010. Being a financial planner, I always find it interesting to see how couples deal with money. It is often overlooked but it shouldn’t be. Studies have shown that financial corners and disputes rank at the top of the reasons for separation/divorce. It’s a lot more complex than most people think and it’s so easy to overlook when you are in love and visualizing the wedding, your honeymoon and all the other good stuff that is to come.
There are an infinite number of ways that family finances can be managed but the two keys are like every other aspect of a marriage; communication and being willing to compromise. This subject will be discussed over time but I consider it even more important to discuss before getting married.
Here are the main questions I think should be discussed. Let me know if you think of any others?
-Should we combine our financial assets/debts?
This is not an easy question. I think it’s a question that should be asked and reflected on. Obviously, as we grow in a relationship, finances tend to merge because future expenses are often for the family. As well, it becomes very time consuming to split every expense and of course you can be much more efficient by combining finances together. I think that as long as both agree on how money should be spent and saved, this is the easiest way to deal with personal finances. Mathematically, you will always be better off on the same financial team as your spouse.
-What kind of lifestyle do you aspire to?
This is a major question. If a husband is hoping to have a boat, a second house and lots of travelling, chances are that the lifestyle he is looking for could be different from that of his wife, especially if her desires are for family, leisure and fitness activities. Chances are that if they simply avoid discussing this, the discussion will come up over and over. My example is perhaps a bit extreme but the reality is that no one expects or hopes for the same life. Ok, perhaps everyone wishes they did not have to work much without having any financial worries. But the reality for almost everyone is different. What kind of house, retirement, etc. There is usually a compromise to be reached that will make it a lot easier to deal with everyday budget and spending decisions.
-Who will be responsible for financial “chores” (paying bills, checking statements, etc?
I don’t think it’s ever a good idea for one person to do everything and be the sole person looking after these matters. However, this is what happens in my case since I am a financial planner and my wife just hates finance as much as I enjoy it!
Personal finance is a subject where both parties need to get involved. That being said, there is usually one person who has more interest in taking care of everything and a compromise can generally be reached for that person to follow a budget, investments, reports, etc. But at the same time, I think it’s important for both parties to get information so this information be discussed. One of the reasons of course is that if one of the members gets very sick or has an accident, the other should be able to still function.
Even though I take care of all financial aspects at home, we still discuss how we manage our money in terms of expenses (I give full disclosure on debt management and investment ;-) ).
-What are your thoughts on charity?
As you are now a couple and have partially or fully merged assets, charity becomes something that you should agree on since it is no longer one member giving but rather both. There are many ways to do this and one of them is to have each person decide to which charity they want to donate (splitting the money in two), or deciding on causes that are important to both parties. But when such subjects are discussed, it makes it a lot easier for both parties to know where they stand.
-What is your opinion about debt?
The reality is that almost everyone must use debt at some point, either to buy a house, a car, household repairs, help a parent, etc. It is important to clarify how debt should be used, to what extent and for what reasons. Using debt in itself is not a bad thing but there is obviously some level of risk involved and for that reason, it is critical for the couple to both be comfortable with their level of debt.
These are some of the questions and I’m certain there are many more that you have discussed with your spouse. I think the main point is that family finances need to be discussed in order to avoid frustration, conflict and misunderstanding.
How do you deal with finances with your spouse?
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