Money and Finances Before the Wedding

Understanding each others’ views about money and investing

Unless you and your bride or groom have spent a significant amount of time discussing how you plan
to handle finances after the honeymoon, you may be setting yourselves up for a rough go — at
least in the beginning and maybe for your entire time together.
Studies have shown that money is a frequent topic of arguments in many marriages.
One of the reasons may be that couples don’t spend enough time talking about money
before the “big day.”1795533_m
Marriage is a many-splendored thing, but when you begin to peel away the layers, one important thing you find is a business arrangement — that’s just one reason why it’s called a marriage “contract.” And as with any business arrangement, in a marriage you have money flowing in and money flowing out. As long as the inflow exceeds the outflow, the arrangement usually works. But a marriage isn’t a typical business —there’s an emotional aspect to everything, including the couple’s finances.To help get the discussion started, here are some issues couples should address before walking down the aisle. I Tie The Knots offers you the following insight.
Combining accounts
Many engaged individuals — especially those who are older — already have their
own savings, checking and brokerage accounts. The question is whether to combine
everything into joint accounts or keep them separate. Having separate accounts lets
each individual feel independent, knowing that he or she can tap his or her finances
whenever the need arises. On the other hand, joining accounts helps unite the couple’s
goals and can help create a more effective investment program.
One solution to consider: Keep separate accounts and have a joint account that both
individuals contribute to for covering household expenses.
Housing
Because each individual may already own a home, older couples often face issues glasses
with housing, including:
• Will the couple live in one spouse’s home, or sell both homes and purchase a
new one together?
• What will be the likely tax consequences of selling — especially if the sale will
result in substantial capital gains?
Financial goals
Prospective spouses need to talk about financial goals and priorities. Do they want to dine out often, or eat in and save? How much do they want to spend on traveling, buying and decorating a home, leasing a car, etc.?

It’s important to set aside money for emergency expenses or in case of sickness or disability. Experts recommend saving three to six months’ living expenses, and in somecases, even more. For example, if only one spouse is a wage earner,   a larger cushion maybe a good idea. (It’s also important to address the need for disability insurance.)
As a couple, assess your current life insurance coverage and how it may need to change.
Depending on whether you are just starting out, or combining a household that already
includes children, you should answer the question: how much life insurance do we
need? As your family grows, you may need to revisit this question multiple times
through the coming years.

Finally, consider how your combined finances affect the long-term financial goals, risk
tolerance and other investment objectives you want to achieve together. Work with
a Financial Advisor to create or update an Envision® profile so you can answer the
question: “how are we doing?”

Budgeting
Some say that the key to financial success is to spend what you have after saving, rather
than saving what’s left after spending. Many couples find themselves in the latter
position because they lack a budget to control their expenses, often leaving them with
nothing to save. It’s usually better for a couple to sit down and list their monthly income
and expenses. Then it becomes a matter of determining how they will control expenses
so they can set money aside to help achieve their goals.
For example, a couple may want to purchase a home within a few years. If so, they can
create a “fund” that they contribute to so they can accumulate a sizable down payment,
which will help reduce the size of their mortgage and, in turn, their monthly payments.

Debt
Debt can be a touchy subject. Some people are raised to never borrow money unless
it’s absolutely necessary. Others are taught that it is acceptable to take out a loan — even
if it’s for a luxury item. Reconciling these positions in a marriage can be challenging.
It’s usually a good idea for couples to discuss their attitudes toward borrowing in an
attempt to reach a compromise they both can live with.
In addition, it’s important to know before the wedding what, if any, debts each spouse
is bringing to the marriage. If there is debt, the couple must decide whether to combine
it or to keep separate credit histories and records. Many advisors recommend that each
individual retain his or her own credit cards and credit history. Doing so helps ensure
financial independence and provides greater flexibility if either spouse finds himself
or herself alone at some point in the future. Also, if one spouse has a poor credit history,
it may be advisable not to commingle debt in order to retain the other spouse’s better
credit rating.

Name change
The couple should discuss whether the bride will use a different last name after
the wedding. If the bride decides to change her last name, she should notify both her
employer and the Social Security Administration.

There will be an instruction sheet in marriage license materials to assist you.

If you have further questions, ask I Tie The Knots for guidance.

For information on how to inform the Social Security Administration, go to ssa.gov.

Prenupital Agreement
Discussing a prenuptial (also known as premarital) agreement can be one of the
more difficult topics for a couple to address. It suggests the possibility that the
marriage may not last, which is not pleasant to contemplate when planning a wedding.
But from a different perspective, a “prenup” may actually boost each individual’s sense
of independence while protecting the wealth each brings to the relationship. If children
from a previous marriage are involved, a prenuptial agreement may be an appropriate
means to provide long-term security for the entire family.
It’s better to bring up the idea of having a prenuptial agreement fairly early in a
relationship, instead of suddenly producing one on the eve of the wedding. Although
it’s a difficult topic to raise, talking about a prenuptial agreement can actually facilitate
discussions about attitudes toward the partnership in general and money in particular.
If you determine that a prenuptial agreement may be in your best interests, consult
an attorney.

Estate planning
Here’s another tough topic. No matter how young or old the couple, addressing estate
planning is vital. However, because there’s really never a “good” time to discuss issues
involving death and disability, couples tend to put off estate planning — sometimes
until it’s too late.

When two people decide to take responsibility for each other, it’s appropriate to talk
about how they want to provide for an orderly transfer of assets. Included in the
discussion should be considerations of the financial implications of life insurance and
what would happen if a wage earner or work-at-home spouse were lost.
It’s important to pay particular attention to beneficiary designations on life insurance
policies, IRAs and 401(k) plans. These designations will supersede instructions for
distributing assets included in a will or trust. Each provider — insurance company,
financial institution or plan administrator — needs to be contacted to update the
beneficiary designations on these valuable assets. This step is particularly important
in the case of a second marriage.

Armed with these tenets — and your ability to communicate freely about your finances — you
and your betrothed can begin to confidently build the financial security you desire.
And CONGRATULATIONS from I Tie The Knots!