While 88 percent of US couples say it’s a good idea to discuss finances before walking down the aisle, only 51 percent actually do. Even more surprising, only 41% reveal their annual salary to their future partner, and only 36% share the amount of debt they bring to the marriage.
In my experience, when (or if) couples approach the topic, they typically stay within the realm of how much they will pay for the wedding, how much money they have for the honeymoon, and where they will live. In other words, when discussing finances before marriage, couples don’t consider how they will pool funds and create a shared financial plan but instead discuss what they can spend with their combined incomes.
Like all of these couples, you probably dream about your future lifestyle, but it’s time to think about your future wealth style. With US couples citing financial stress as one of the top reasons for divorce, taking time for three important financial conversations can keep you and your future partner on the right side of those statistics.
Conversation #1: Let’s talk about a financial plan
Every engaged couple should work together to establish a short-, mid-, and long-term financial plan. The first step in making this plan is deciding on a North Star.
Your North Star is the total amount of wealth you aim to accumulate as a couple. It is the amount that will allow you to retire when and how you want to, and shows you where you are going as a unit.
Once you agree on your North Star, you can discuss the financial goals that will get you there and what you need to do to achieve those goals. That North Star is critical in guiding every financial decision you make together, the culture in your household, and how you will raise your children.
Conversation #2: Tell me about your credit report
Every couple should exchange credit reports before marriage. These reports reveal many details about a person’s spending habits and relationship with money.
Examining the report, the first thing to determine is how your soon-to-be life partner funds their lifestyle. Does the report reveal a high number of new credit cards and/or high balances?
After marriage, everyone has two options for the money coming through the front door: either use it to build their lifestyle or build their wealth style. If one person is a spender and the other is a saver, it is bound to cause financial stress.
The report will make it clear whether your partner lives life based on YOLO or FOMO. Some say, “I will only live once, so I plan to spend, have fun, and worry about tomorrow, tomorrow.” Others say, “I want to do the right thing now so I don’t miss out on my dreams for the future.”
Another critical factor to check is the amount of debt your partner will bring into the relationship, which is why transparency is paramount. Many people can hide debt while they are dating, but once they marry, it becomes a shared problem.
The credit report will also show whether or not your partner has been late when paying monthly bills. It reflects how seriously they take their financial responsibilities and, overall, is a good indication of how likely they are to stay on top of their finances and how vital those finances are to them.
While your future partner’s credit score is essential, a low score is not necessarily detrimental. When young, a person’s credit score may be low because they do not yet have any credit. In this case, they need to get a line of credit and begin using it responsibly.
Looking at your future partner’s credit report shows much more than just a number. It reveals their financial value system. If they’re consistently late when making payments, accumulating mounting debt, and opening credit cards at multiple stores, that’s alarming.
If you discover problems while looking over credit reports, take the opportunity to meet with a credit counselor and make improvements. Anyone can improve their credit, but they have to want to improve it. Many people make poor financial decisions because they don’t know the impact those decisions have on their credit. However, you owe it to yourself to find out whether the person you intend to spend your life with is willing to listen, learn, and change.
Conversation #3: Let’s find out if we want the same things financially
Not everyone has the same view on how they will handle money. Deciding whether you and your future partner are compatible financially involves several tough but necessary conversations.
After a divorce, so many clients tell me, “I knew how they were about spending and money management going into the marriage, but I just thought it would change. I thought we could handle it.”
Talk together about when you want to retire, how long you want to work, and how committed you are to the goals that will enable you to retire early. The fact is that today, you don’t have to do it like your grandparents did — you don’t need to work for 45 years and retire in your 60s — you can retire a decade earlier if you start planning now.
Happy couples work toward shared long-term financial goals, so you must decide early on whether you want to build wealth or live paycheck to paycheck like everyone else. Those decisions will form the foundation of your relationship.
A financial wellness training class can empower you to walk into marriage with confidence and competence to have these money conversations, but you both must be involved and willing to learn. If you enroll in a financial wellness planning session, you can hash out these conversations early and spare yourself heartache down the road.
