Newlyweds Need to Agree on Money Matters
Sandy and Tom got married last summer in a beautiful garden ceremony that set them back more than $7,000. They paid for the wedding themselves, so they spent considerable time examining and whittling down expenditures. They were proud to report that the wedding went off without a hitch--and on budget.
Things didn’t go as smoothly when they returned to their jobs, bills and debts after the honeymoon. Sandy wanted to pay off their loans immediately. Tom was willing to pay more than the minimum payments, but not so much that it would hamper their lifestyle.
Although generally happy together, they argued about bills, credit balances and continued spending until they finally sought financial counseling.
Sandy and Tom, who asked that their full names not be used, are not unusual.
“Few couples talk about money before the marriage,” says Robin Leonard, author of “Money Troubles: Legal Strategies to Cope With Your Debts.” “Often--even if the couple has been living together--they don’t even know if the other person has credit card bills or a huge tax debt. Many people keep all this private until after the wedding.”
Partly as a result, financial friction is common among newlyweds, experts say. Indeed, in past surveys, more than half of divorced couples cited money problems as a significant factor in their split.
The good news is that it’s never too late to get your joint economic life together, says Kathleen Stepp, a Kansas City-based financial planner who heads Citibank MasterCard and Visa’s Money Matters for Newlyweds education program.
Now, as roughly 500,000 summer newlyweds are settling into their married lives, is a good time to start.
How do you do it? The keys are communication and compromise, Stepp and others say. Newlyweds need to sit down and open their checkbooks, tax returns, billing statements and brokerage accounts and talk over what they have and what they want. Here are a few tips on where and how to start.
* Discuss goals. Many couples find their biggest money troubles come from having conflicting goals. One wants a retirement account and the other wants a boat, for example.
“Disagreements about money are really disagreements about priorities, because money is finite,” says Stepp. You’ll need to find common ground, which may not be as tough as it sounds.
In Sandy’s and Tom’s case, it turned out that their goals were similar. They just differed on when they expected to attain them. Sandy wanted to own a house in three years. Tom expected to buy one within 10 years. They’re now trying to save enough for a down payment in five to seven years.
* Budget. Open up your checkbooks and start tallying how much money you’ve got coming in and where it’s going out. Then figure out where you’d like to economize and whether it’s possible. It’s likely that your budget is significantly different now that you are married, Stepp notes.
* Check your credit status. Equifax, TransUnion and TRW can provide each of you with updated copies of your credit reports. It’s important to do this early in your marriage, because the results can determine how well you handle your finances going forward, says Leonard.
If one spouse has money troubles, for instance, you may want to draft and sign a “nuptial agreement.” This is an after-the-ceremony legal document that stipulates how you’re going to handle money. It might say, for example, that you are keeping your property separate in order to shelter the spouse with good credit from the other’s credit problems.
If either spouse applies for additional credit later, it should be stated on the form that, although he or she is married, the application is based only on the individual’s income and credit history. The other spouse will not be responsible for the account. Keep a copy of the application in case this comes up later, Leonard suggests.
* Get together on fringe benefits. Two-income couples need to take a second look at their employee benefits to see if they can save money by eliminating overlapping coverage. You may also want to change the beneficiary designations on life insurance policies and consider whether additional coverage is necessary, as it might be if you plan to have or already have children.
* Keep some money separate. While it’s fine to have joint checking and savings accounts, it’s also advisable to keep some money separate, says Stepp. That way, neither spouse must “ask permission” to spend, and neither can complain about how the other spends discretionary funds.
* Discuss details. Who is going to pay the bills? How will a two-income family handle child care after the birth of a baby? Who will stay home when the baby--or the baby-sitter--is sick? These may seem trivial issues, but they can cause fights. Again, compromise and communication are the keys.
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Whoever has to do the family bookkeeping should be exempt from cleaning the bathroom, Leonard suggests. Mother and father may take turns staying home when a child is sick, Stepp adds. Or the parents may make another arrangement based on whose career--or income--is more likely to be jeopardized by absences from work. The main thing is to talk it out and agree on a solution.
If you follow these steps and still have serious disagreements about money, consider talking to a financial adviser. One or both of you may have some misconceptions about money that are making it difficult to compromise. An independent financial adviser should be able to point those out and help you find common ground.
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Kathy M. Kristof welcomes your comments and suggestions for columns but regrets that she cannot respond individually to letters and phone calls. Write to Personal Finance, Business Section, Los Angeles Times, Times Mirror Square, Los Angeles, CA 90053.
