June is the favorite month for weddings, accounting for more than 10 percent of the 2.3 million marriages in the United States each year.
Along with all the discussions about flowers and venues and who to invite, couples also should be talking about every aspect of their finances, according to the American Institute of CPAs. If they don’t cover this important aspect of their coming life together, they risk being part of the approximately 50 percent who will end up in divorce court.
Financial decisions are a source of relationship tension for the vast majority (88 percent) of adults 25 to 34 who are married or living with a partner, according to an institute survey of 500 couples in that age group. Financial decisions are a daily source of tension for one in five couples, the survey says.
When Americans in the survey were asked to list the most important attributes for choosing a life partner, not surprisingly, personality and physical attraction came in one and two. Coming in third? Having a similar approach to spending and saving, the institute says. A financial advisor can help couples navigate these discussions.
The institute’s Financial Literacy Commission put together a list of financial conversations people should have with their partner before they tie the knot. Following are the institute’s suggestions and an explanation by AICPA of why each is important.
1. Paint the whole (financial) house.
Have an open an honest discussion about your financial goal, but more importantly, talk about where you are today. This is important because partners can be apprehensive and potentially feel judged about openly sharing their financial misgivings. The conversation allows both parties to be aware of what they’re getting into. Whether it is good debt (mortgages) or bad debt (unsecured credit), do not avoid sharing the details of your financial situation. Let this conversation set the tone for future open and honest discussions and don’t let it be a one-time talk. Be sure to regularly check-in and share your thoughts and financial progress with your partner.
2. Yours, mine or ours?
Discuss whether to combine everything or keep some independent resources for each person. If there are step-kids involved, discuss before marriage how expenses for the kids will be handled. Does that come out of the joint money or does it come out of one spouse’s money? If you plan to combine finances, talk about ground rules for what purchases should be discussed first. That $800 watch or $1,200 bike on the joint credit card bill, if not discussed in advance, can be the source of some tense conversations.