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This is a guest post from Todd Christensen over at Money Fit by DRS, Inc.
Isn’t love grand? Falling in love is such an exciting time for creating dreams, sharing hopes, and focusing your emotional energies on building a lasting relationship! Who wants to spoil all the fun by talking about money, credit, debt, and spending? No one, which is why so many couples return from their honeymoon to a financial nightmare that increases the stress that naturally begins to build in relationships that might stifle openness and hide fear.
Earlier generations made the mistake of believing discussions of money were impolite, rude, and even crass. In public, such discussions may still generate similar reactions, but inside a home and between couples, money talks should be not only frequent but the norm.
If you or your spouse (or spouse-to-be) tend to steer away from money topics, consider the following thoughts and ideas for starting conversations that can lead to sincere sharing of goals, fears and hopes surrounding personal finance. If you find this topic a bit scary, keep in mind the frightening alternatives of hiding income and spending from each other, growing apart due to diverging financial goals, and the stresses of over indebtedness.
Financially Preparing for the Wedding
While the cake, the dress and the reception band add to the beauty and thrill of the wedding day, the two of you need to discuss your financial priorities when it comes to your big event. ValuePenguin.com found in 2019 that the average wedding in the US costs nearly $30,000, ranging from $13,000 in Mississippi and Utah to nearly $90,000 in New York (Manhattan). By far, the largest wedding-day expense is the venue and catered food, far outstripping the engagement ring, the wedding dress and the photographer.
Without meaning to discourage any couple from having the wedding of their dreams, it must be noted that a 2014 study found a strong association between costly weddings and high divorce rates. The study concluded that couples who spend less on their wedding ceremonies report significantly less marital stress and actually stay married longer on average.
Making Post-Wedding Plans Together
As you discuss together the hopes and dreams you have for your future, keep in mind that many of those wishes will require money or financing to become a reality. Create a list of five financial goals the two of you would like to work toward. Examples might include home ownership within three years, family-related expenses such as children and vacations, and ideas and thoughts about long-term retirement.
Creating this list of mutually agreed upon hopes and wishes while planning the wedding can help both fiancé(e)s to stay grounded and focused on their most important goals. After all, an entire industry has sprung up in the past two generations to urge couples to go into more and more debt to create their “perfect” day. A written list of common financial goals can make it easier to decide whether you want to hold your wedding ceremony at a far-flung exotic location with 25 of your best friends, in your back yard with homemade soup and sheet cakes, or somewhere in between.
Financially Preparing for the Honeymoon
As you approach discussions about where to spend your honeymoon and how long you want it to last, share your thoughts about consumer debt and, more specifically, credit card debt. As you make plans for your honeymoon, keep in mind the importance of minimizing debts and the power credit card debt has to eat into your future financial goals thanks to average interest rates in the 15% to 17% range.
Still, using a credit card while traveling, especially internationally, tends to be a better choice security-wise than a debit card. If you lose your card or have it skimmed at a foreign ATM, you are less likely to be out any of your own money. After all, with the law on your side, you are liable for $50 at most if you report suspicious or fraudulent activity promptly to your credit card company.
If you take a credit card on your honeymoon, make sure to have enough cash saved up ahead of time to afford to pay off the credit card in full upon your return. Whether you have been married two weeks or two decades, coming home from a trip with a massive credit card bill is a sure way to increase stress and possibly even drive a wedge between you two.
Credit Cards and the Rollercoaster Analogy
Think about paying for your honeymoon like you would a favorite roller coaster at popular theme park. Most park visitors are willing to wait upwards of 60 minutes or more to ride a two-minute coaster. While waiting in line, you are discussing what the ride will be like, enjoying the thrill of the anticipation. After the ride, you share your experience positively with others you waited in line with. If, on the other hand, you had the opportunity to ride the roller coaster immediately, without waiting ahead of time, and were then required to stand in a “post-ride” line for the same 60 minutes, you would experience no anticipation whatsoever. Instead, the same 60 minutes would feel like punishment, leaving you frustrated and irritated.
This same principle applies to vacations and honeymoons. Saving up for the trip in advance creates a feeling of shared anticipation, whereas the debt resulting from a lack of preparation creates disappointment and even dissatisfaction and frustration with the experience. If you don’t have the financial means to pay for the vacation of your dreams as part of your honeymoon, consider a more affordable experience while setting a goal to save your exotic travel until your fifth or tenth anniversary. Besides the financial discipline, you will build the shared anticipation that brings couples closer together rather than pushing them further apart.
Financially Committing to Each Other after the Honeymoon is Over
While these suggestions should happen after your return from the honeymoon at the very latest, you may also consider putting them into place before the wedding. Each of these recommendations is, first and foremost, a commitment. Don’t think of these recommendations as committing to doing something for someone else’s benefit. Rather, they are commitments you make to each other, to your relationship and to your shared future.
The Weekly Financial Huddle
Commit to a meeting once a week for five to fifteen minutes on the same day and at the same time to hold a “financial huddle.” Come to the huddle with your checking account balanced so you can quickly review your short- and long-term financial goals.
Discuss upcoming bills, who will pay them, and what methods you will use to pay them (e.g. cash, check, online, debit card, autopay). Finish by returning to your goals to figure out what you can do the following week to accelerate your progress toward each one.
A Household Banking System that Works for You
Commit to setting up and using a household banking system that works for you as a couple. If you choose to keep your finances completely separate, be prepared for the possibility of feelings of inequality in the relationship, suspicion or even of being used or neglected. While keeping finances separated can work for some couples, consider combining household accounts into a single bill-paying account and multiple short- and long-term savings accounts for shared goals
The real key is having a separate account for each spouse with an equal amount of fun money. Each spouse can spend his or her monthly fun money however he or she so chooses, with no need be accountable to the other for that spending. So long as its legal and ethical within your relationship, each spouse can spend his or her “fun money” without fear of feeling guilty or irresponsible.
Creating a Household Spending Plan
Commit to creating and living within a household spending plan (aka budget) that maps out how to save for emergencies and your goals, to invest in the future, to pay your bills, and to have some fun. Consider the various forms of budgets available, from the traditional to the percentage-based to the account-based. Choose a spending plan you are both comfortable with and can both believe in.
Insuring Your Future Together
Commit to insuring your present and your future together. Choose an insurance company you are both comfortable with so you can consider combining your vehicle insurance and your renters insurance policies, taking advantage of multiple-policy discounts.
Building Your Credit Together
Commit to keeping (or getting) your credit ratings in great shape. You do not have to aim for 800 (top 10%), but 750 or up will not only get you the best interest rates on your future mortgage and other loans but will typically mean lower car and homeowner insurance premiums, increased likelihood of positive job interviews, lower utility security deposits, and even getting you into the apartment complex of your choice. If either of you struggle with a poor credit rating, find 17 tips for improving it here.
If your spouse comes into the marriage with terrible credit, take comfort in the fact that his or her pre-marriage credit will have no effect on your rating. Only accounts opened jointly (commonly after the wedding) will change your credit score, for better or for worse. Rather than joint credit card account, you may want to consider adding your spouse to your credit card account as an authorized user to avoid any harm to your credit rating.
Creating a Debt Elimination Strategy
While debts incurred prior to your marriage will not affect each other’s credit rating and will not legally bind the other spouse to the debt obligation, keep in mind that your individual goals will tend to give way to your couple goals. Done right, this is not a loss of individual freedoms or the surrender of your personality to the “greater good” but the building of something that is greater, more beautiful and more enjoyable than the sum of its parts. Creating a debt elimination plan might involve slow and steady debt payments to credit card companies, student loan service providers, car loan companies, and others.
If you can afford to repay your debts together without turning to an outside party, look at these four methods of accelerating your debt freedom day as painlessly as possible, including the debt avalanche, snowball, landslide and cascade methods.
Third-party Debt Elimination Options
If you need to turn to a third-party, look first to a nonprofit credit counseling agency that belongs to a national trade association such as the FCAA. Such agencies work with your creditors to lower your interest rates and get you out of debt within 5 years or less. They are likely to have fees, but any fees will be capped and regulated by your state of residence.
In a few cases, working with your creditors to negotiate a less-than-balance-owed payoff might be an option. This method, known as debt settlement, will have long-lasting negative effects on your credit rating, but if debt elimination is the goal above credit building, it may be something to investigate.
Bankruptcy as the Last Option
If the debt is so overwhelming that it prevents you for providing for your basic needs, you may want to consider bankruptcy. Filing a bankruptcy petition in federal court is nobody’s idea of a walk in the park, but it can afford much needed relief in cases of wage garnishments, threats of foreclosure or repossession, and the feeling of hopelessness in the face of life-long debts, whether by choice (e.g. credit card), by medical necessity (medical bills and collection accounts), or unexpected financial hardships (e.g. job loss and divorce).
While bankruptcy will significantly harm your credit rating for seven to ten years, studies show that filers with protected retirement accounts are generally able to catch back up financially with the rest of their demographic cohort. You should keep in mind, when considering bankruptcy, that financial obligations such as student loans, child support, taxes, and criminal fines are not usually forgivable in court.
Turning your Savings Commitment into Your Most Important Monthly Bill
Commit to saving something – anything – from every paycheck, every tax return, every gift, and every unexpected amount of income to put toward your mutual goals. Consider a deposit into your savings accounts to be your first and most important household bill. Pay no one else before yourself. It does not have to be much, but consistency will trump amount in the long run.
Building your Happily Ever After One Dollar at a Time
Once the dust has settled and the two of you begin to feel settled into your married lives, make sure you continue to work together on your financial future. Additional tasks to address together will include the following:
- Work toward your retirement hopes and plans. Consider visiting with a certified financial planner or a chartered financial analyst to make sure you are taking advantage of all financial tools you have available to you, such as a 401(k)/403(b) and Individual Retirement Accounts, to get you rolling down the path toward financial independence.
- Determine what your home ownership goals are. Do you want to own sooner, later, never? Make sure you understand the long-term value along with the obligations that homeownership brings. If you choose to work toward homeownership, set up a down payment account to which you will automatically make deposits each month. Most new homeowners fail to realize that, beside the down payment, they will often need $5,000 to $10,000 or more to furnish their new home with furniture, appliances, window treatments, in addition to landscaping.
- Do you and/or your spouse have additional education and professional training goals? Discuss the possibilities of saving for related expenses and compare those possibilities with taking out student loans. Make sure you understand the limitations of borrowing and the dangers of overborrowing compared to the possibly beneficial impact of reasonable student loan debt to increase your potential lifetime earnings.
- Regularly discuss your views of household transportation needs and wants. Financial counselors regularly notice large car or truck payments as a common overspending habit in households going through bankruptcy. Make sure the two of you are on the same page when it comes to your transportation needs versus your transportation wants.
- When it comes to saving for the education costs of a child or children you might have, discuss the importance of education with your child while also considering how human nature tends to value those things we invest our own resources in. Having “skin in the game,” so to speak, can inspire your child to focus on completing his or her education. Your priority as a couple, though, should always be your own retirement. After all, while your child can take out student loans for their education, there are no “retirement loans” you can take out to live on after turning 67.
- Make it a habit to attend free financial education programs, whether in person or online as opportunities arise. Avoid paying for programs that charge, since you are paying for celebrity and hype more than content. gov offers a great list of resources to start with.
- Finally, consider making “Generosity First” a way of life. While it seems counterintuitive, committing to give away a percentage of your income right off the top to charities, churches or causes close to your heart can benefit you financially in the long-term. Think of it this way: If you commit to giving $100 or $500 a month to a charity or church helping the homeless, you will be a better steward of your remaining money because your understanding of your needs and wants will be much more clearer and brighter than couples who care only for looking out for themselves. Instead of justifying extravagant lifestyles and fashionable purchases, you will be more likely to put your financial resources toward the short- and long-term goals you have identified as most important to the two of you. You will have greater strength to resist the American way of life that prioritizes the accumulation of possessions above relationship-building experiences. Discuss as a couple whether you will automate a specific amount or a specific percentage of your income, while talking about the cause most important to you as individuals and your new family unit.
As you approach or commence this exciting new stage of life’s journey, take advantage of the honeymoon period where very few topics are off limits to discussion, and where the sharing of ideas, hopes and dreams is accepted and considered by your partner. Finances may never be the most exciting topic to you in this life, but financial stability and success will breed emotional security and a closeness between the two of you that no amount of money will ever be able to buy. Financially stable love truly is grand!
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