Is it just me, or does it seem that it is always peak season for weddings? If one were allowed to give a financial toast to the newlyweds, here’s what I’d say.
Money is the root of all evil, but like any tree, a good root system is essential for anything beneficial to happen. Have a conversation about money to start understanding each other’s money values and the standard of living that you desire.
Talk openly about cash flow, and seeing how your life together will impact your monthly cost of living and ability to save. Agree on spending authority by creating a budget or agreeing not to spend more than $X on any given purchase.
Make smart use of your respective benefit plans. There may be some benefits overlooked when you were single that may be good to have now. Make sure that both are maximizing their retirement savings and taking full advantage of any matches or other reasons to save.
Understand what each other’s financial situation is all about. You need to know what kind of earnings, assets, living expenses and debts that your partner has. The hidden surprises here often come in your partner’s cost of living or large education loans that are masked by small monthly payments against big outstanding balances. Learn how responsible your future spouse is regarding spending, credit cards and other revolving debt.
Create a savings plan. It would be ideal if the plan can be established to save more than what is going into your 401K or other deferred retirement savings. Someday, you may need to access those after tax savings for a home or for a roof on the home that you already own.
Talk about the possible dark side of your life together. If one of you becomes ill, permanently disabled or passes away, what happens? It isn’t a common occurrence, but when one of a newlywed couple goes down for an extended period– things can deteriorate quickly. Ascertain that you’ve got long term disability income insurance. Understand the details of your group coverage and be sure that those benefits are adequate to take you through any period of sickness. Review your beneficiary elections, and decide if you should change them to each other. Most end up doing this, especially after children.
For couples with assets that pre-date the wedding, discuss the ownership of these assets. If they’re not already protected by a trust, consider the reality that a pre-nuptial agreement or some alternate form of ownership may be wise. This would be notable if these assets, such as business interests, are co-owned with a partner or another family member. This won’t only save you if the marriage fails– it may also save you if there’s a lawsuit or some other action that causes your spouse to lose everything financially.
Money seems to be frequently at center stage when marriages fall apart. Keep the lines of communication wide open. Review your plans periodically to be sure that they are reasonable and that there isn’t any wide deviation from the plan.