Valentine’s Day is often a time to reflect on your relationship, and consider the next step. If your relationship is heading toward joint finances, it’s essential to talk about it first – openly and honestly.
A 2014 survey (http://www.nefe.org/press-room/news/financial-infidelity-poses-challenge-for-couples.aspx) by the National Endowment for Financial Education (NEFE) found that 13 percent said they had failed to share information about their personal debt or income, which had “an effect on the relationship.”
This year, consider thinking beyond the roses and candlelight dinners to a potential future of merged finances. Here are five key questions that should drive your conversation:
Where are you financially as individuals? Take time to talk about your household debt – including student loans, credit cards, mortgage and medical bills, and share your credit reports from the three major credit reporting agencies (Equifax, Experian and TransUnion). Each can be obtained once a year for free (https://www.annualcreditreport.com/index.action). It’s also important to discuss assets – not only the savings and investments you hold, but also how future job or education plans can improve the marriage or family’s financial health.
What are your money personalities? This is a personal finance question that many financial planners still ask to get a sense of your money management habits. It’s intended to identify which person in the relationship is the spender or the saver. It’s particularly important to ask each other whether you save or spend to make sure you’re on track to achieve your long-term goals.
How do you want to live? This question is about shared financial and personal goals and how you will achieve them together. Discuss how you’ve been living thus far, and what you might change. Be honest about where you want to live, what kind of home and family you want to have, what kind of career or retirement you want and start discussing concrete ways you both will get there.
How will you handle everyday spending? Determine how you will share accounts, pay bills, budget, save for the future and bank – jointly, separately or both. Figure out how will you jointly manage credit and the smartest ways to save for retirement. If you want a family, decide how you’ll plan for kids financially. Finally, work together when problems come up. As with all issues in a relationship, ongoing communication is key.
What if you need help? There are options if you or your partner doesn’t know where to start. Licensed financial and tax professionals can provide guidance on issues from basic budgeting (http://www.practicalmoneyskills.com/personalfinance/savingspending/budgeting/) to prenuptial agreements. Friends and family are a good resource for recommendations. Also keep in mind that some religious denominations actually offer solid financial planning advice as part of premarital counseling and the NEFE has a quiz (http://www.smartaboutmoney.org/Tools-Resources/LifeValues-Quiz.aspx) for potential spouses. For debt issues, the National Foundation for Credit Counseling is a good independent resource that can offer advice on improving credit issues as a couple. The earlier you can put together an advisory team that fits your needs, the better.
Bottom line: If you and your sweetheart are considering tying the knot or expanding your family, don’t ignore money issues. It can be a difficult conversation to initiate, but it’s an important one to start planning your financial future together.