If you're getting married or are newly married, get ready for a whole new set of rules.
By Ric Edelman
Congratulations! You're married -- or about to be. And with all the incredible changes that it brings, some of the most important involve money.
Because money is one of the leading causes of divorce, your marriage's success could well be determined by the financial rules and habits that you and your spouse establish. While this topic may seem mundane, seemingly innocuous questions such as who pays the cable bill are fraught with emotional charges, reflections of your upbringing and definitions of masculinity, femininity, power and self-respect, and therefore carry incredible implications for your marriage.
With the two of you sitting at the kitchen table, write down the answers to these questions. When you're done, exchange answers.
- How much and what kind of debts do you have? Make a list of all your debts, including for each:
a) The name of the creditor;
b) The amount of money you owe each creditor;
c) The minimum monthly payment for each debt;
d) The term of each loan
(meaning when it will be paid off); and
e) The interest rate each loan is charging you.
- Are you behind on any payments? Have you ever missed a payment? Have you ever been turned down for credit? If yes, explain.
- Has a creditor ever contacted you? If yes, provide details.
- What is your annual income?
- Do you plan to work full-time until retirement age? If not, and if you are working full-time presently:
a) What changes do you plan to make?
b) When do you plan to make them?
c) What will it cost to execute these changes?
d) How will you pay for it?
Specific and detailed answers are required.
- Do you expect your partner to work full-time until retirement?
- What percentage of the family's total household income do you expect to contribute?
- Which of the two of you will have the responsibility for paying the bills each month?
- How much of your income are you willing to devote to the household's monthly bills? Express your answer in both a dollar amount and as a percentage of your income.
- How much of your partner's income should your partner devote to the household's monthly bills? Express your answer in both a dollar amount and as a percentage of your partner's income.
- How much of your income are you willing to devote to savings and investments? Express your answer in both a dollar amount and as a percentage of your income.
- How much of your partner's income should your partner devote to savings and investments? Express your answer in both a dollar amount and as a percentage of your partner's income.
- How much in credit card debt do you think is acceptable?
- Would you be willing to use your income and assets to pay off the debts that your partner accumulated prior to the marriage? If yes, what percentage of your partner's debts would you be willing to pay?
- Should your partner be willing to use his or her income and assets to pay off the debts that you accumulated prior to the marriage? If yes, what percentage of your debts should your partner be willing to pay?
- Do you plan to maintain a bank account in your name only?
- Does it matter to you if your partner maintains a bank account in his or her name only?
- Should the two of you maintain a joint checking account? If yes:
- Should money be contributed to it by you, by your partner, or both?
- In what amounts, and how frequently, should you or your partner contribute? Be specific with your answers.
- Do you have or plan to obtain credit cards in your name only? If yes:
- How many cards?
- What is or would be your total credit limit?
- Does it matter to you if your partner maintains credit cards in his or her name only?
- Should the two of you maintain joint credit card accounts? If yes:
- Which of you will use these accounts?
- Will the money to pay the charges made on these accounts be contributed by you, by your partner, or both?
- In what amounts, and in what frequency will these contributions be made? Be specific with your answers.
- How many children do you want to have?
- How soon do you want to have your first child?
- When your first child is born, will you or your partner leave the workforce to be a full-time parent? If yes: For how long? Which one of you will do this?
- Are you willing to relocate to another city?
- Is it your intention to relocate to another city?
- If you got a windfall of a "significant amount of money," how much would that be?
- What would you do with that windfall? Be specific.
Don't bother looking for a key to provide the correct answers; there isn't one. In fact, there are no "correct" answers - except maybe for Question #13. No, what's much more important is that your and your partner's answers match. Don't be surprised if they don't at first. That's expected. But, hopefully, your answers will not be so far apart that, through conversation and compromise, you can't reach understanding and agreement.
Don't worry if your agreements, which sound perfectly natural to the two of you, seem unconventional to others. Among my firm's large number of clients, I have seen hundreds of systems in use -- from the couple who invests 100% of her paycheck, using his to pay for all of the family's expenses, to the couple whose husband abdicated complete control of the family's finances to the wife ("I tell him what I'm doing with the money, he gets mad and won't talk to me for two days, and then we both forget all about it -- and we've been doing that for 42 years." -- I can assure you that the system that's best for the two of you is the system that works for the two of you.
How do you define "what works"? Your system is working if:
- The bills are being paid on time.
- You are not increasing your debts, and ideally, you are reducing them.
- You are saving money regularly.
- Neither of you feels that you have been given undue responsibility for the family finances.
- Neither of you feels that the other is failing to live up to their financial responsibilities.
One thing that you're likely to discover as you begin to meld your finances together is one immutable fact: You are going to have to change how you handled your finances before you got married. Being married is very different from being single, and this wondrous lifestyle change demands an equally tremendous change in how you approach personal finance.
So, be aware of this: Being unwilling to change will prove deadly to your marriage. If you can't agree on these important questions, or if these questions provoke anguish, dismay or conflict, then it's highly likely that there are serious matters afflicting your relationship. It's something you might want to think about.