By Mahari A. McTier
In marriage, as in life, there are few guarantees, and one of them is this: You will have to address your finances together, and in some depth. Whether you get married in your 20s or your 60s, you may suddenly find yourself privy to someone else’s credit-card debt, child-support commitment, student loans, foreclosure history, or you may involve your spouse in your own financial baggage.
Romantic? No. But it’s a fact of modern marriages. Even if you have no monetary skeletons in your closet, marriage links you to someone else financially in a way that requires, at minimum, some thoughtful decisions. Who will pay the bills? How will you divide expenses? Will you combine everything? Nothing? Some things?
Another guarantee: If you don’t talk about money now, you will be talking about it later, and perhaps not quite as calmly.
• Talk about it.
Start by practicing saying this phrase: “Let’s talk about it.” Unfortunately, many couples leave financial discussions for some future time when they become unavoidable. They often wait until a crisis, or when someone makes a major purchase solo, or when long-buried debt suddenly comes to light.
This can be an awkward topic, but it must be addressed. Statistics show that the number one cause for divorce is financial matters. Set aside a few hours a week with a note pad and be proactive in addressing money matters and get your marriage started on the right path.
• Insure Yourself.
This can sometimes be a tough conversation, because no one wants to have a discussion that includes his or her untimely death. You must face this reality, because as the saying goes there are only two things certain in life; death and taxes.
You don’t need to make a big thing of it. There are just two documents that should be produced in order to protect your spouse from potentially damaging financial repercussions: a will and sufficient life insurance. Preparing a will makes it clear who will inherit your estate, and life insurance helps ensure your spouse doesn’t find him – or herself unable to meet your formerly joint financial obligations if you’re gone.
We all have things that are important to us and desires we want to see fulfilled in life and in the case of an untimely death. Some include money for college for their kids, money to pay off the mortgage, or simply money to replace the lost income for the family to maintain their same quality of life. Whatever your desires may be, take action and plan accordingly.
• Save for Later
When we get married we are in marital bliss and the road ahead appears so bright. Unfortunately, there is a thing called life that steps in. With unemployment exceeding 8 percent in some communities and the threat of a potential financially draining health condition, a couple saving for a rainy day is more important than ever.
Those who find themselves without a cushion can end up in really hot water if one or both spouses’ jobs disappear, or if a health emergency arises.
Putting money aside is a necessity. An emergency fund should hold at least six months’ worth of living expenses, and preferably more. This kind of cushion can be the difference between serious, long-term debt and a temporary setback.
An emergency fund, though kept in an interest-bearing account is just one of the necessary recipients of the money you set aside. If you plan to buy your own home, you’ll need to start building up that down payment as soon as possible. There’s also retirement, which may seem pretty far off now but can really sneak up on you. One of the worst surprises couples can face is an unfunded retirement, and most experts recommend putting 10 percent of every paycheck, or else whatever you can afford, starting now, into a tax-deferred retirement fund to make sure you’re not caught off guard in a few decades.
• Disclose Everything
Hopefully, you and your new spouse tell each other everything, or just about. And hopefully you at least tell each other all of the important stuff and will continue to do so.
Guess what: Near the top of the list of “important stuff” is what you do, have done and will do with your money.
It is important to have a clear understanding of your spouse’s view about money. Are you a spender? A saver? What is your risk tolerance? Have you ever filed bankruptcy? What is your credit score? Are you in debt?
Remember, it is imperative to disclose skeletons, disclose them completely, and right away. If your spouse loves you unconditionally, you will not be judged negatively for things that are revealed that would be considered unfavorable.
It’s not just an issue of honesty in your relationship, though. There are steps you can take in your new situation to make money matters more manageable. Be teammates and strategically address all issues head-on in an effort to put your family in a better place in the future.
You don’t have to figure it out alone. It is recommended that you partner with a qualified Estate Planning Attorney and Financial Planner to help you get your financial house in order.
(Mahari A. McTier is a Financial Advisor with Tier 1 Advisors, LLC and he can be reached at maharimctier.tier@gmail.com.)
