Marriage & Money

Financial issues are one of the leading causes of in the U.S. The risk that any marriage will end in divorce is about 45 percent, and given the various financial complications, it’s crucial to air and resolve financial disagreements beforehand.

Create A Few Simple Plans in the Beginning of Your Relationship

It’s tough to find someone who has the same financial priorities as you—you may value , while his priorities are on saving for a . The two of you must address your money situation and come up with a plan for dealing with the finances that you bring to the table—good or bad. You must also talk to your partner about whatever financial issues are important to you. Developing a financial strategy must be at the top of the discussion list before getting married.

Create A Household Budget You Can Both Live With

You both need to sit down and figure out how much you’re bringing in each month, how much goes out—and where it’s going. Setting up a budget is a must for two people living together.

How much you’re bringing into your household each month should include your take home pay, and any other sources of income both of you may have—add it all up, even the money you make selling items during or at your part-time businesses. If it varies, average it out over the year so that you get a complete picture of what you have.

Next, take the time to figure out what you’re spending your money on. You should look over your recent and card statements to see where it’s going, and then track your spending over the next month or two. You’ll be surprised by the amount of money most people waste each month. Especially on the seemingly “small” purchases we make every day. This is a great way to curb your spending and stay on the budget the two of you agree upon.

Here is what your budget should look like:

• 15% Savings
• 35% Housing
• 15% Transportation
• 15% Debt
• 20% Other

Pay Down Any Debt Accrued Before You Got Married

Starting a new marriage with a huge debt load can be burdensome. Debt is the leading cause of family strife during the first few years of marriage. Make sure you have an honest and calm discussion about debts to get a clear picture of the situation. Clarify the amount of debt each person is bringing to the relationship, as well as the type of debt—mortgages, personal loans, auto loans, credit cards, —the repayment amounts and the interest rates.

Learn the Do’s and Don’ts of Marriage & Money

• DO break your bad spending habits—impulse purchases can hurt your budget.
• DON’T delay paying off credit cards completely.
• DO communicate honestly about your purchases.
• DON’T abuse your credit—personal bankruptcy filings hit 1.4 million last year, up 32%.
• DO stay informed about your debt situation—check your credit often.

Start Saving for Your Future Together

Starting a family or might seem like a long way off, but it pays to start planning early. Saving and investing is an essential part of your financial game plan—and it means more than just putting a few dollars in a savings account. Your savings game plan should include:

• Emergencies: It’s essential to have cash on hand. Build an emergency savings fund equal to three to six months of living expenses.
• Short-Term Goals: Save up for things like , summer vacation, , and big-ticket expenses—it’s better to pay cash than get locked into high interest credit card debt.
• Child’s Education: If you plan to start a family, it’s a good idea to think about education as well. With annual tuition at a 4-year public university topping $7,000, starting early makes a big difference.
• Retirement: 30% of workers haven’t saved a dime for retirement and nearly 3 out of 5 middle-class retirees will run out of money if they maintain their pre-retirement lifestyles and don’t reduce spending. You must start saving and investing now, because Social Security can’t do it all. In fact, the average Social Security benefit check was only $1,177 at the beginning of 2011. What’s the point of working all your life, and then have to struggle off that?

Plan for the Unexpected

When you’re married, you may depend on your spouse’s income to help pay the mortgage and other living expenses. No one wants to think about tragedy or loss, but you should discuss with your spouse a game plan if something unexpected should happen.

While nothing can replace the loss of a spouse, a Term Life insurance policy protects your family if something should happen. Depending on your expenses or if you have children, you may need a policy that covers between 8 and 10 times your income.

In addition to considering a Term Life insurance policy, it’s important to talk about each other’s wishes if one of you should die. A Will gives legally binding instructions for the distribution of your property and the care of your children if you pass away.

Create A Total Financial Game Plan

Having a financial game plan is a big part of reaching your goals. Start off by creating a list of the things the two of you wish to achieve in one, five, and 10 years, then sit down with a financial professional who’ll create a Financial Needs Analysis (FNA) for you. The FNA gives a detailed overview of your current financial situation and suggests a personalized game plan for your financial future. The FNA can help you with:

• Debt Elimination: Discover strategies for paying off credit cards and loans in the quickest and most efficient manner possible.
• Education Funding: Estimate the actual costs for sending your child to a specific school and find out how to fund your child’s education.
• Retirement Solutions: Receive a detailed analysis regarding the amount of money you need to live the retirement of your dreams.
• Income Protection: Find out what you need to do to ensure your family's financial future should you die prematurely.

Many financial services companies offer an FNA, but the majority of them charge a substantial fee to produce one. There are a few companies that offer their clients complimentary FNA’s and I recommend you seek those companies out. I believe an FNA is the tool that will not only help you get where you want to go—it’ll help you get there faster.