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| The Basics | Are your finances as strong as your marriage?
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Many people starting out set a limit of how much they can spend without consulting the other. Working out a budget of how much is to be spent on groceries, clothes, household items and other sundries each month can also help avoid fights. Allowances, of course, are yet another option.
It was fountain pens, of all things, that led to our decision to try allowances. My artist husband fell in love with one expensive pen after another. Since I couldnt tell a $175 Namiki Falcon from a Bic, the amounts that kept popping up on our charge card were driving me slightly batty.
At the same time, Hubby was feeling a distinct lack of privacy. With a joint account and joint credit cards, he couldnt buy me a present without my knowing exactly where he bought it and how much it cost -- often within a day, since our personal finance software is so efficient at tracking transactions.
So now we have the pittance system -- and a lot more money harmony. I get surprised with lovely gifts, and he gets to have his lovely pens, with no guff from The Wife.
Who will be responsible for paying bills?
In most couples, one person becomes the chief financial officer, responsible for most money matters. This is probably the most efficient approach, but the partner whos not handling day-to-day bills shouldnt be left in the dark. Regular business meetings, where finances are discussed, are essential, planners say.
You should know whats going on, Fernandez says. If something happens (to the CFO), youre going to need to step in and take over.
Credit and debt
Like it or not, your credit histories, like your finances, are probably going to be intertwined after marriage.
Technically, you could try to keep things separate. But if you apply for a mortgage together, add each other to your credit cards or even buy stuff that benefits you both, your partners credit sins can become your own. If one or both of you has bad credit, improving it should be a priority.
Thats why its important to know each others debt situation early on -- whether you're marrying for the first time or a second time. Then, make plans to deal with it.
What do our credit histories look like, and how can we make them better?
You're entitled to a free yearly copy of your credit report from each of the three major credit bureaus: Experian, Trans Union or Equifax. You can also obtain a credit report through MSN Money.
You can also get a copy of your report and your credit score, a three-digit number that lenders increasingly use to evaluate your creditworthiness, at this page or by visiting My FICO.com. Talk about what you see on the reports, make plans to correct any errors and read the information at MyFico.com about ways to improve your creditworthiness. Paying bills on time, reducing debt and applying for credit sparingly are all ways to improve your ability to get credit when you need it.
What do we own, and owe?
Totaling up your assets and your liabilities in whats known as a net worth statement is the first step in financial planning. It gives you a snapshot of where you are now -- and can help point where you need to go.
Use this balance sheet as a starting point for discussions about your goals. Do you want to retire early? Have kids? Buy a home? Travel the world? Figure out together whats important to you, and prioritize your goals. Then you can use personal finance software like Microsoft Money or Quicken to start planning for those goals, or you can consult a financial adviser.
Whats our plan for paying off our debt?
Not many people come to marriage without some financial baggage, often in the form of credit-card debt, car payments and student loans.
Each dollar you spend on interest, though, is a dollar you dont have for your other goals. And debt is often a signal that youre living beyond your means, which could mean never achieving your dreams.
Creating a debt repayment plan will require that you first find out how much you spend, and determine a realistic budget for future spending. This is a joint effortnot something either one of you can do alone.
Legally, youre probably not required to pay off your spouses student loans or credit cards if the debt was run up before you said I do, said divorce expert Violet Woodhouse, an attorney and financial planner in Newport Beach, Calif., who co-authored Divorce & Money. Some insist that payments for pre-marriage debts be made from separate accounts, rather than the joint account. Others take a more all-for-one approach, reasoning that theyre a team now, and whatever benefits the team financially is the right thing to do. Discuss which way you want to handle it.
Debts incurred during marriage, of course, are a whole different matter. Youre often on the hook for a spouses spending, whether you knew about it or not. Thats why honesty and continued communication is so important, financial planners say.
(By the way, if you really want to keep things separate, talk to a lawyer. There are ways to create a his-and-hers financial situation, but they typically take a lot of work and some detailed legal agreements. If you dont have a lot of assets to protect, its probably not worth the bother.)
Final thoughts
Your financial obligations to your spouse dont end at death. And should you die prematurely, you could be leaving behind a real mess.
If both of your incomes are needed to pay the mortgage, for example, you both should have life insurance. Otherwise, your mate could end up homeless.
You should also check -- and usually change -- the beneficiaries of any existing life insurance policies as well as beneficiaries for all your bank, brokerage and retirement accounts. Ive received letters from parents who wound up with life insurance proceeds after their adult children died -- because the children forgot to change the beneficiaries on their policies when they got married.
In most cases, the parents wanted to give the money to the surviving spouses. But this often created gift tax problems for the parents. This is not the legacy you want to leave behind.
Heres the checklist of what to talk about:
- Do we need a will? Typically, the answer is yes. Otherwise, your state will distribute your assets, and its plan might not gibe with your wishes. Wills become particularly important if you have minor children and you both die together. If you havent named a guardian, you could be setting up a devastating court battle over custody.
- Do we need life insurance? If your spouse depends on your income, or vice versa, the answer is yes. MSN Moneys Life Insurance Estimator is a tool you can use to determine how much.
- Are all our beneficiary designations current? Call your brokerage, your bank and your life insurance agent, if you have one, to update their files. Your human resources department at work can help you check and update the beneficiary for any company-provided life insurance or retirement accounts.
As you can see, a lot of work lies ahead. But calm discussion and a workable plan can help head off lots of money conflicts later. The time you spend taking care of these issues is an important investment in your marriage.
Liz Pulliam Weston's column appears every Monday and Thursday, exclusively on MSN Money. She also answers reader questions in the Your Money message board.
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