Discussing money with your spouse or partner is never easy. Such conversations can be difficult because they involve a degree of honesty and vulnerability about a very sensitive part of your life. 69% of adults in committed relationships report avoiding talking about finances to prevent some sort of argument. But, honesty serves as the foundation of any relationship, and this extends to the realm of finance. Planning ahead allows couples to streamline their financial connections and avoid issues in the future. The ‘Demand Newlywed’ portfolio aims to guide you on your new and exciting journey together. Our portfolio transitions with you through each stage of getting married to ease your stress during a monumental time in life. Consider scheduling a video consultation with one of our advisors to help you chart your new joint financial course.
All that being said, if you’re reading this, then you’re probably not afraid to broach the topic of finance with your partner. While you’re surely aware of the big-ticket items that need to be discussed (i.e. how much money do you have? How much debt do you have?), odds are there are some important topics that you probably haven’t discussed with your fiance. We’ve compiled a list of 5 financial topics that you need to discuss with your fiance… but probably haven’t.
1. Who’s going to do the taxes (and all the other financial “stuff”)?
Let’s face it – not everyone gets thrilled at the prospect of filling out budget spreadsheets and tax forms. In the case of most couples, one partner is much more financially inclined than the other. It’s important to take some time to figure out which one of you enjoys doing the finances so that you may split up the duties evenly. A few notes for the budgeters and non-budgeters alike:
- For the finance-inclined – make sure you include your spouse in every aspect of your finances. While you don’t need to hold their hand as you make the budget and allocate your investments, ensure that every part of your financial picture is transparent and communicated (Tip: holding a regular “meeting” to discuss finances can be extremely helpful)
- For the finance-declined – be involved! Even if you’d rather be doing anything other than talking about your budget, it’s important to know and understand all the financial decisions you make as a couple
- For couples who feel the same way about finances – this is where the negotiation comes in. Figure out which areas of your finances that you’re most adept at . Maybe you can survive checking the budget for an hour a month, but couldn’t bear to look at a tax form. Or maybe your partner LOVES figuring out and researching investments. The key is to start a conversation and make sure you are both OK with your roles.
2. What’s more Important: Savings or Vacations?
What are you saving for? Couples often must decide between alternatives such as purchasing a home and going on vacation. Going on vacation means a couple would continue to rent and buying a home implies very few vacations. When it comes to home buying, the cost has truly skyrocketed across the country, especially in popular cities. The main barrier between couples and home buying is the down payment and you might want to take a minute to calculate your hypothetical down payment. Ask yourself – how many vacations could that down payment pay for? That’s one way to choose. Think about it this way – if you take a vacation of your choice, how much would it delay your purchase of a home? Quantify it. Maybe a typical vacation for you would delay your home purchase by a year. Keep in mind that a home may be a very lucrative investment due to the same inflation that pushes the purchase price up.
3. How will we deal with debt?
Should you take on mutual debt? It depends. If you already have mutual or individual debt, it’s not a good idea. Many newlyweds enter into debt just to pay for their wedding. Unfortunately, accumulated debt has been shown to increase the chances of marital conflict. So, if one or both of you is already in debt, the priority must be paying off existing debt. In the absence of debt, a lot more options exist. Let’s take home ownership as an example, since nearly 80% of surveyed respondents reported that home ownership had a positive impact on their long-term financial future. Assuming that both of you will contribute to paying off the mortgage, coming up with an agreement about how each of you will contribute is likely a wise idea.
4. Should I Give My spouse power of attorney?
You know that one password you use for everything? Would you give it to your spouse for fun? Take a minute to think about it. At this point, you both should be able to trust each other with power of attorney. If you’re incapacitated temporarily, power of attorney means your spouse can legally handle your medical and financial affairs. You could technically compile one document to cover both areas, but that wouldn’t be advisable. Your financial advisor doesn’t need to know about your chronic medical conditions. When you establish “durable power of attorney for medical care”, it simply means your spouse is allowed to make decisions regarding your care. With a “durable power of attorney for finances”, you get to choose how much authority the other person has over your finances. The overall purpose is to let them handle financial transactions for you, when you can’t.
5. Separate or joint bank account?
Couples may feel a loss of financial independence with a joint bank account, particularly in the first few years of marriage. Joint bank accounts can produce lots of issues related to pre-existing debt. If one partner brings debt into the relationship and uses the joint account to pay some of it off, that may lead to some confusion and disappointment. Also, if (God forbid) the relationship ever ends, some contentious drama could possibly leave the other with much less. However, most couples in the United States use joint bank accounts due to their convenience and simplicity. It makes sense to charge toilet paper or groceries to a shared account since both parties share the use of those items. So, the rationale is often, “We should have one”. Whichever type of setup you both agree on, it’s paramount that both parties consider it to be fair.
6. What about insurance?
Both of you probably have several types of insurance. Does anything change now that you’re married? For car insurance, definitely! You can reliably expect to receive slightly lower rates if you designate yourself as “Married”. The same goes for home insurance since married couples tend to behave more cautiously and make fewer claims. For health insurance, you have three options: keep your separate plans, join your spouse’s plan or your spouse joins your plan. This will be one of the trickiest decisions you make. You’re going to need to compare premiums, coverage, and deductibles for all options. Employers often provide variously different coverage. However, it’s often less expensive to add a spouse to a group health plan than it is to maintain separate coverage.
There are a lot of financial topics to cover early in your marriage. Spend plenty of time researching how to optimize your taxes. If you don’t file certain pieces of paperwork soon, you could experience some challenges in the future. Why are these topics so important? Well, it avoids a lot of long-term marital stress. It’s always a good idea to communicate frequently and transparently about your finances.
This report is a publication of Demand Wealth. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author as of the date of publication and are subject to change.