I Love You….Can We Talk About Our Finances?
Deciding to merge your financial lives can be scary. Each of you probably has things that happened in your past that you would rather never remember, except that they continue to show up on your credit report. But working together, you can create a fresh start on your finances, no matter whether you just got engaged, or have been married for 20 years.
First, be honest about what you have and what you owe. You may need to create a safe way to do this. Some people trust each other enough to do it over the kitchen table. Others may need to do it with a therapist or financial planner on hand to ease some of the tension. But if you don’t start with a foundation of trust and honesty, it will be hard to move forward together.
The second thing to do is talk about your goals. If you’re young, goals might include paying off your student loans and buying a house. If you’re older, they may be a comfortable retirement that is debt-free and college for your kids. If it’s a second marriage, you may want to leave an inheritance for your own children while making sure your new spouse is provided for. Each of you should have a chance to share your goals and have them be included in your future plans.
Now comes the hard part – moving from wherever you are to being able to accomplish your joint goals. Some couples can work together to see the steps they need to take, work together to stay on track, and feel a real partnership while they do it. Others will need outside help.
A fee-only personal financial planner can help you prioritize your goals and teach you the aspects of money management that will move you forward. They often consult about how much to save, which debts to pay off first, how to use tax deductions to your advantage, how you might structure your estate, and what kinds of insurance you need. You can find one in your area through www.Napfa.org.
An attorney can draft the legal documents you need, including wills and durable powers of attorney. If it’s a second marriage, you may want a revocable living trust to divide your estate between your children and your new spouse. If you are engaged, but concerned because one of you brings substantial assets to the marriage while your intended does not, you may want to think about a pre-nuptial agreement. Find the right attorney using the Lawyer Referral Service at your state bar association website.
An insurance agent can help you buy the right amount and the right kind of life insurance to protect your loved ones from your premature death. If you are older, you may want to talk about long-term care insurance. And be sure you have the right car and house insurance. It’s harder to get a list of local insurance agents, so you may have to ask friends and family for a referral.
If you feel you have too much debt that you are having trouble repaying, a non-profit credit counseling service can teach you how to create and use a budget. But beware if the first option offered is to reduce your debts or to consolidate your bills. That should be a last resort if you can’t make progress after some counseling and education. Your state consumer protection agency may help you find a reputable agency to use.
And if you find one of you sabotaging your partner’s efforts to save money, budget, or pay down debt, you may benefit from working with a therapist who specializes in money issues. Often, money represents power, status, or control in a relationship when it should just be a tool to acquire and pay for goods and services. Keeping secrets about what you spend or how much you owe can undermine trust in a marriage. Learning how to change your view of money can help reduce or eliminate fighting about money. But it’s hard to do that without outside help. You may look for a referral from your doctor, your church, or a local therapist who likely knows who in your areas specializes in money issues.
The truth is that many couples have problems agreeing on finances, so you shouldn’t feel it is unique to your relationship. But ignoring the problem won’t make it go away. And whether you are 25 or 65, have $20,000 or $20 million, you can learn how to improve your financial confidence by self-study, seeking out experts, or taking some classes. It’s never too early or too late to start!
Prepared by Faye Kathryn Doria, EA, CFP® of Financial Guidance Associates, Inc.