Baby boomers have a high divorce rate, so that means they may be walking down the aisle again.
For those taking the plunge, it’s important for the couple to discuss their current financial situations and determine how finances will be handled during marriage.
Joshua Kadish, registered financial consultant with RPG-Life Transition Specialists, said that while some financial factors may seem personal in nature, it’s best to share information so couples are on the same page.
“Few people speak about the link between finance and relationships, yet money often acts as a major contributing factor to divorce,” said Kadish. “Understanding how to navigate through financial challenges and preparing for the future will allow you to build a strong financial foundation for your relationship.”
He offers this list of 10 financial topics couples should discuss before saying I do:
- Credit score: A recent survey by credit-rating agency Experian found that credit scores are the number one issue couples fail to discuss before the wedding. Poor credit may indicate that one person has money management issues. To improve bad credit, discuss financial mistakes and work together to change bad money habits, such as not making payments on time. Failure to improve a poor credit score can delay achieving financial goals such as qualifying for a mortgage.
- Yearly income: If the relationship is serious enough to discuss marriage, then salary is no longer off-limits. Annual incomes should be discussed, as it will determine what luxuries the couple can, or can’t, afford, where they’ll live, and how bills are paid.
- Savings: It’s important for the couple to know how much each person has saved to determine their financial stability. If one partner is living paycheck to paycheck, develop a plan that sets aside money in an emergency fund. The couple should have six months salary in the bank for a financial cushion.
- Debts: If one person is bringing substantial debt to the marriage, it’s important he or she doesn’t attempt to hide it. Getting married could mean the other spouse will share the responsibility of the debt. Be upfront and develop a plan for paying off the balance.
- Bank accounts: Determining whether bank accounts will be separate or joint before the wedding can prevent financial fights later. Many couples opt for a combination of both. A joint account could be used for family expenses such as the mortgage, utilities, and groceries while an individual accounts can be used for personal spending.
- Health insurance coverage: After marriage, decisions about insurance and estate planning need to be made. Are you both covered under separate plans through your employers? You may want to look at which health insurance policy is the most beneficial and take advantage of the special enrollment period for the other spouse to join the better plan.
- Budgeting: Creating a family budget is an important task. Evaluate the couple’s combined cash flow and determine how bills will be paid, money will be saved, and finances will be allocated. Reaching a mutual agreement on spending will prevent financial problems from occurring later.
- Work benefits: Consider how marriage may affect the couple’s employment benefits and insurance policies. Check to see if the employers’ plans allow a spouse to be added, as some plans don’t allow double coverage. Also review the employers’ pension plans. For example, many employers provide 401k plans for employees, so the new spouse will need to be added as a beneficiary.
- Retirement accounts: If the couple hasn’t started saving for retirement, take advantage of accounts that will help their financial situation. IRA’s, pensions, and other retirement plans should be evaluated along with other resources the couple may have. Be sure the new spouse is included as beneficiary on these accounts so the assets will be dispersed appropriately if an accident or death occurs.
- Financial goals: Consider short- and long-term financial goals as a couple. The couple should have similar ideas about buying a home, retirement, and investing. Map out a plan that will help the couple reach shared financial goals.
