Planning to walk down the aisle this year? No doubt you're making all kinds of critical decisions for your wedding day.
But even more important than your color scheme or caterer are the decisions you and your future spouse make now about marriage and money.
“Money issues” were cited among the top three motivators for marriage breakups in a survey of financial analysts specializing in divorce.
So, whether it's your first time or you've made a trip to the altar before, here are some money tips to help you get off on the right foot.
- Talk about financial values. What financial goals does each of you have, short-term and long-term? Donating regularly to a charity, religious congregation or important cause may be a priority for one of you, while the other dreams of buying into a high-end neighborhood and taking a luxury vacation every year. Write down your priorities separately, then compare lists and discuss where your goals overlap and where you can compromise.
“Many marriages don't survive the wealth-planning and building phases because only one, or neither, of the spouses is totally committed to a shared wealth management plan,” says Paul DeLauro, head of wealth planning for City National Bank.
- Assess your individual financial situations. Before you combine your money, get your own house in order. How much do you have in monthly income and your savings account (if you have one)? What's the total on your credit card or student loan debt? What are your monthly expenses and how will they change once you are married?
“Especially with so many young people coming out of school with a lot of debt, it's important to decide together how you'll deal with it,” says Joseph Hahn, a wealth strategist at RBC Wealth Management-U.S. “Is it going to be the individual’s debt or the couple’s debt?”
- Make a savings plan. It takes discipline to postpone gratification to get to a more certain future. This could be especially tough for Millennials, who on average spend about 2 percent more than they earn, according to the Moody's Analytics.
“‘The Millennial Marriage Survival Guide,’” should it ever be written, should start with: Save a minimum of 10 percent of every dollar you earn in a long-term, untouchable account,” DeLauro says. “You can get more detailed if you like, such as max-funding your 401(K) plan at work if you have one, or max-funding your Traditional IRA or Roth IRA, but it is the conceptual commitment that matters most.”
- Be transparent. Particularly if you're getting remarried, or have a long financial history as a single adult, you must be willing to open the books and share all the details with your intended. No one wants to start a life together with an unhappy revelation about past financial troubles or debt. Hahn advises couples to have a regular “money date” where they talk openly about finances once or twice a month.
“It's like dieting or exercise. Once you establish a routine it gets much easier,” Hahn says. “Never leave even a dollar in secret. I've seen too many situations where secrets - large or small - come back to haunt a couple. Sunshine is the best disinfectant.”
- Have the tough conversations. The two most financially devastating life events are divorce and unexpected death. Even when you're first starting out, it's important to think about protecting your assets, particularly if you come into a marriage with substantial resources.
Most people understandably don't want to think about those unfortunate circumstances coming to pass, so they don't talk about them. But doing so - whether by having a will or trust drawn up or a pre-nuptial agreement in place - can be lifesaving in a worst-case scenario.
“At least have a financial and health care power of attorney filled out, so someone else can make decisions on your behalf if you're unable to. We're all mortal and we never know what can happen,” Hahn says.
What if this is your second marriage and you've covered this ground before? At first glance, things may appear a bit easier.
Sometimes, however, money matters are more complicated for older, more mature people getting re-married. “People getting married at older ages have pre-existing personal finances in place, fine-tuned to each spouse's personal lifestyle preferences.
Abandoning the freedom, and privacy, of your personal financial situation can be difficult, but is important if a marriage is to succeed,” DeLauro says.
Banking products and services are offered or issued by City National Bank, an affiliate of RBC Wealth Management, a division of RBC Capital Markets, LLC, Member NYSE/FINRA/SIPC and are subject to City National Bank's terms and conditions. Products and services offered through City National Bank are not insured by SIPC.
RBC Wealth Management, a division of RBC Capital Markets, LLC, Member NYSE/FINRA/SIPC.