Are you soon to be married or recently married? Did you know that money is cited as one of the root causes of divorce? Following these financial planning tips may help you avoid money traps in your relationship.
1: Create a Written Financial Plan. Acquire a financial plan, perhaps an eFinPLAN financial plan. Having a plan gives you the road map to help you figure out your present financial condition and to plan your future goals. People don’t plan to fail—they fail to plan. Getting married is the perfect opportunity to create a plan for you to follow together for the rest of you lives. Dream together and make it fun.
2: Inventory Assets and Debt. When you marry and combine households, inventory your household goods and sell or give away duplicate items. Similarly, create a joint inventory of the assets and debt that each of you brings into the marriage. This is a good starting point before you embark upon debt reduction and wealth accumulation strategies. It is good for communication, too, to avoid surprises later.
3: Create a Debt Reduction Plan. If either partner brings debt into the marriage, consider strategies to reduce credit card and consumer debt. Then commit to keeping debt at a minimum for the rest of your married lives. Low debt is healthier financially and will help you avoid the added marital stresses that a heavy debt burden brings.
4: Understand Different Spending Patterns. If the spending habits within a relationship differ greatly, this may be one of the more difficult adjustments to make together, but if you can identify each person’s spending patterns initially and establish strategies for compromising, marital harmony will abound.
Some people are impulse buyers and others are misers, never wanting to spend any money, and then only if the item to be purchased is on sale. Regardless of how far apart you are, agreeing to work on it together early in marriage is a lot easier than agreeing later—after the disagreement has festered.
Younger couples might need to remember that once you are married your lifestyle may change. You may have become used to a certain lifestyle that was either afforded to you because of your parent’s hard work or as a result of your single state. However, just starting out, your standard of living may well change. If you accept this before you get married, you may be able to avoid debts you might otherwise incur.
5: Create Future Goals: Together and Individually. Following a written financial plan can save you from a lifetime of mistakes and failures. It is important on many levels that you create goals that you want to achieve both together and individually. Understanding these goals early and developing plans that complement each other instead of fostering competition will go a long way towards marital harmony.
6: Update Wills and Beneficiary Arrangements. Make sure you create new wills when you get married, and change beneficiary arrangements on life insurance policies, retirement accounts, and transfer-on-death accounts.
7: Equal Assets? Blended Family? If either partner brings substantial assets into the relationship and/or if there are other children from previous relationships, you should discuss premarital agreements and estate planning with your attorney and financial advisers. Financial planning is more complex if these apply to you; therefore, careful planning may be warranted.
8. Create a Monthly Cash Flow Budget. A monthly budget coupled with your financial plan will enable you to accomplish the goals you have for debt reduction and for saving for home purchases and things such as retirement. In addition, a budget helps control overspending and imprudent use of debt.
9: Use Advisers. Life is complex, and the only way to sort through the confusing maze is to utilize experts. Find and use trusted professional advisers for legal, tax, insurance, investment, and financial advice.
10: Increase Financial Literacy. Commit to learning about all areas of financial planning, including investing, insurance, debt, and budgeting. It is important for you to be in control and informed. Ultimately, you are in control of your finances. The better informed you are, the better decisions you will make.
Summary: The beginning of your marriage is a wonderful opportunity to plan your future together. Planning will go a long way toward helping you lay the foundation for a successful marriage with harmony in your financial decisions.