Make Plans with your Future Spouse for your Financial Dreams
If you’re considering making your relationship with your significant other a permanent fixture in your life, you may not already know that arguing about money with your future spouse is the #1 predictor of divorce. While this is a sobering statistic, you can think of the engagement period as an opportunity to discuss your financial future, how it fits into your significant other’s life plans, and where you both are in terms of debt and spending habits.
Do You or Your Future Spouse Have Significant Debt?
When you are planning on getting engaged, your mind might be filled with wedding plans, honeymoon wishes, and imagining a lifetime of happy experiences in your future. Practical questions and concerns about finances, including existing debt that you and your spouse have accumulated, often go out the window. Here are two questions to consider when approaching the subject of debt with your future spouse.
Where Is the Debt Coming From?
Everybody has been taught different things about money, and everyone comes from a different financial background. It is not wise to ignore any preconceived notions about finances and debt when getting engaged. Some debt can be unnecessary and at times crippling. If you or your spouse has a habit of maxing out credit cards, you may need financial counseling to dig yourselves out of this hole.
Not all debt is bad, though: Accruing temporary student loan debt for a graduate degree like medical school or a Ph.D., which you plan to pay off as soon as possible, is often the only way to advance a career. You need to be smart about keeping track of your student loan debt as well as how you pay it off, though. Similarly, a mortgage on a house can be considered a debt, but owning a house builds equity over the years. Also, there aren’t too many people (especially young people) who can buy a house with cash, so a mortgage can be thought of as a necessary debt.
Do You Have a Plan To Pay It Down?
Credit card debt and personal loans can come with hefty monthly payments and mountains of accrued interest, so it’s best to talk with your future spouse about paying these down as your budget allows, and as quickly as possible to avoid paying a lot of interest over the years. If you feel that you and your spouse are on the same page when it comes to paying down debt, that's great. If not, you want to have a serious discussion with your spouse about this matter. Try to approach financial matters with a cool head, and remember that you’re in this together.
Will You and Your Spouse Have Joint or Separate Banking Accounts?
If you’re getting married, you’ll surely have joint accounts, right? While most couples opt to combine their finances shortly after tying the knot, a significant number of couples actually keep their separate checking accounts after getting married. This choice is highly dependent on:
- Whether you got married at 21 or 41: Young couples may find that combining accounts feels natural, while older couples who are used to managing their own money may balk at suddenly sharing access to a banking account. Neither way is right or wrong.
- How your personal financial habits differ from your spouse’s: If one person spends and the other likes to save extra money, having separate accounts if both of you work can be a great idea to avoid one spouse spending a large portion of the other’s paycheck by mistake.
- How many accounts you plan to maintain: Some couples keep one account for bills and household expenses and one for personal expenses like clothes and takeout meals.
What Are Your Dreams for the Future?
Do you and your spouse want to have children? When and how far apart will these kids be born? Do you want to save for many years so that you can be financially stable before you have children? Will one of you quit working full-time to care for the child after he or she is born? While these might sound like remarks from a nosy mother-in-law, it can be best to wade through the tense waters of planning for your future family (if you want to have one) well before you start trying for a baby. Even if you and your spouse are exactly on the same page when it comes to your future family, your job, and your living situation, you need to develop a budget and a financial plan to help your family achieve these financial goals.
Money matters can lead to emotional conversations, and at times, disagreements and fights. Cut down on the financial drama between you and your future spouse when you get engaged by talking about money, debt, and budgets well before you say "I do.” For more information on planning a smart financial future, contact LoanConnect today.